Condominium Regulations – Setnor Byer Insurance & Risk

Condominium Governance: Navigating Florida’s New Emotional Support Animal Law

Florida’s new emotional support animal law makes it unlawful to discriminate in the provision of housing to a person with a disability or disability-related need for an emotional support animal. As of July 1, 2020, a person with a disability or a disability-related need for an emotional support animal must, upon the person’s request and approval by the housing provider, be allowed to keep such animal as a reasonable accommodation without having to pay extra compensation. Condominium associations engaged in conduct covered by the federal Fair Housing Act are considered “housing providers” under this new law.

It’s important to note that the new law applies to emotional support animals, not service animals trained to do work or perform tasks for an individual with a disability. Service animals are covered under a separate statute. An “emotional support animal” is an animal that does not require training to do work, perform tasks, provide assistance or provide therapeutic emotional support by virtue of its presence which alleviates one or more identified symptoms or effects of a person’s disability. However, an emotional support animal registration of any kind, including one obtained from the Internet, is not by itself sufficient to reliably establish a person’s disability or disability-related need for an emotional support animal.

If a person’s disability is not readily apparent, a housing provider may request reliable information that reasonably supports that person’s disability, which may include a determination of disability by a federal, state or local government agency or information from a licensed health care practitioner who is eligible under the statute to provide such information. If a person’s disability-related need for an emotional support animal is not readily apparent, a housing provider may request reliable information that reasonably supports the person’s need for the emotional support animal being requested. However, a housing provider may not request medical records relating to the disability or information that discloses the nature or extent of disability. Board members should be aware that another new statute makes it a crime to falsify or provide fraudulent information or documentation, or to knowingly and willfully misrepresent a disability or a disability-related need for an emotional support animal.

Unless otherwise prohibited by law, a reasonable accommodation request may be denied if the emotional support animal poses a direct threat to people or property that cannot be reduced or eliminated by another reasonable accommodation. Under the new law, a person with an emotional support animal is liable for any damage or injury caused by the animal. They must also comply with applicable licensing and vaccination requirements.

The consequences for mishandling a request for an emotional support animal can be severe. Board members should proceed cautiously and seek legal guidance when necessary. Setnor Byer Insurance & Risk can help associations and board members identify, manage and insure their unique risks. Clients enjoy access to various risk management services, including our Unit Owner Report Line and Division-Approved New Board Member Education.

May I Install Hurricane Shutters? A Loaded Question for Condominium Association Boards

In the State of Florida, what right does a condominium board have to prohibit a unit owner from installing hurricane shutters?

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When determining a condominium board’s right to limit or otherwise restrict a unit owner from undertaking a specific activity, the usual starting place is the condominium’s documents, such as the declaration or the bylaws. This is because condominium associations are generally left to their own devices when it comes to directing the manner in which they govern themselves. However, in the context of installing hurricane shutters, the Florida legislature believed legislative intervention was necessary.

By virtue of their location, condominium communities may be susceptible to various risks that may not exist in other geographic areas. In Florida, it is the risk of hurricanes that ordinarily take center stage.

Florida’s expansive coastline is reason enough to place hurricane damage at the top of the list of risk exposures. The extensive, and ever increasing, residential development along the coast serves to increase the concern. Moreover, the reluctance of an already diminished pool of insurance companies to sell affordable wind insurance policies to coastal residents without hurricane shutters, as well as the increasing difficulty experienced by many unit owners seeking board approval to install hurricane shutters, underscored the need for legislation.

Thus, in the context of hurricane shutter installation, Florida’s Condominium Act (the body of statutes governing Florida condominiums), rather than a condominium’s documents, controls the process.

Specifically, the Condominium Act requires each condominium board to adopt hurricane shutter specifications for each building, which shall include “color, style, and other factors deemed relevant by the board.” Moreover, the Act provides that notwithstanding any provisions to the contrary in a condominium’s documents, “if approval is required by the documents, a board shall not refuse to approve the installation of hurricane shutters by a unit owner conforming to the specifications adopted by the board.”

By implementing an express policy, and requiring adherence thereto, condominium boards are unable to rely on arbitrary, inconsistent, or unknown standards when considering a request to install hurricane shutters, thereby removing unreasonable obstacles often encountered by unit owners seeking to protect their property from potentially devastating hurricane losses.

In addition to protecting a unit owner’s right to install hurricane shutters, the Condominium Act also protects unit owners from being double-billed in the event they choose to protect their unit from hurricane damage. Thus, if a condominium association decides to install hurricane shutters for the entire community, the cost of which is to be borne by the entire community via an assessment, then those who have previously installed their own hurricane protection shall receive a credit equal to the pro rata portion of the assessed installation cost assigned to each unit. Without such a credit, unit owners would essentially be charged twice for electing to install hurricane shutters on their own.

Clearly, the State of Florida has a vested interest in reducing the risk of damage caused by hurricanes. Protecting the rights of unit owners to install their own hurricane shutters, and eliminating the potential financial penalties that such owners were previously susceptible to, ensures the State’s interests are protected in this regard.

And, since the legislature made protecting these rights a priority, prudence demands that condominium boards do the same. Any board decision denying a unit owner’s request to install hurricane shutters should be viewed cautiously. Otherwise, the board may find itself on the wrong side of a lawsuit.

To learn more about unit owners’ rights and condominium boards’ obligations, check out our catalog of State of Florida approved Condominium Management courses.

Condominium Associations Cannot Afford to Mishandle Service Animals

Condominium associations are often approached by unit owners or tenants requesting an accommodation to have a service animal, even though the animal itself, either because of its species or size, violates an association’s pet policy. Though it’s not always easy to tell the difference between a service animal and a pet, condominium associations cannot afford to make this kind of mistake. Since the law does not treat service animals like pets, neither can condominium associations.

The rights of an individual with disability to use a service animal is protected by federal and Florida law. For example, Florida’s Fair Housing Act prohibits discrimination in the sale, rental or availability of a dwelling, including any associated services or facilities, because of a person’s disability. Discrimination includes the refusal to make reasonable accommodations to rules, policies, practices or services that may be necessary to give a disabled person equal opportunity to use and enjoy a dwelling. Cases involving service animals typical allege a failure to provide a reasonable accommodation.

However, Florida has another law that specifically protects the use of service animals in housing accommodations. Florida’s service animal law, which was amended on July 1, 2015, states that an individual with a disability who has or obtains a service animal is entitled to full and equal access to all housing accommodations. Though this law prohibits charging extra compensation for a service animal, owners are liable for any damage caused by their service animal.

Florida’s service animal law protects individuals with physical or mental impairments that substantially limit a major life activity. Recognized mental or psychological disorders, including posttraumatic stress disorder (PTSD) and emotional or mental illnesses, are generally considered mental impairments under the law.

The law defines a service animal as an animal trained to do work or perform tasks for an individual with a disability. The work done or tasks performed must be directly related to an individual’s disability, and may include:

Guiding a person who is blind or visually impaired;

Alerting a person who is deaf or hard of hearing;

Assisting with mobility or balance;

Alerting and protecting a person who is having a seizure;

Helping a person with a psychiatric or neurological disability by preventing or interrupting impulsive or destructive behaviors;

Reminding a person with mental illness to take prescribed medications; and

Calming a person with PTSD during an anxiety attack.

Florida’s service animal law makes it a second degree misdemeanor for a housing accommodation to discriminate against an individual with a disability. However, as of July 1, 2015, a person using a service animal who knowingly and willfully misrepresents herself or himself as being qualified to use a service animal is also committing a second degree misdemeanor. If found guilty, this person must perform 30 hours of community service for an organization that serves individuals with disabilities or another organization determined by the court.

The consequences of mishandling a request for a service animal can be severe. Board members must recognize that service animal requests must be treated differently than other requests, and proceed cautiously to avoid unlawful conduct on the part of the association, seeking guidance or counsel, if necessary.

Setnor Byer Insurance & Risk is available to discuss ways to identify, manage and insure the risks facing condominium associations and their board members.

Additionally, clients of Setnor Byer’s Condominium Program enjoy access to various risk management services, such as Setnor Byer’s Risk Management Group and Unit Owners’ Report Line, as well as our affiliate’s Condominium Board Member Education Certification, which has been approved by the Division of Florida Condominiums, Timeshares, and Mobile Homes.

You can also receive additional information by subscribing to our weekly Risk Management Newsletters.

Finding the Right Manager for Your Condominium Association

Condominium boards often hire community association managers to help manage and oversee their association’s affairs. However, since community association managers often handle critical and complex matters, it’s important to choose the right one. The first step to confirming the qualifications and experience of a community association manager is to make sure they are properly licensed.

In Florida, community association managers must be licensed to perform specific functions for condominium associations with more than 10 units or with an annual budget of over $100,000. Importantly, a 2014 statutory amendment expanded the types of functions that can only be provided by a licensed community association manager. In addition to controlling or disbursing association funds, preparing financial documents and assisting in the meeting process, a license is required if a community association manager:

Determines the number of days required for statutory notices
Determines and collects amounts due to the association before the filing of a lawsuit
Calculates the votes required for a quorum or to approve a proposition or amendment
Completes forms that have been created by statute or by a state agency
Drafts meeting notices and agendas
Calculates, prepares and responds to requests for assessment and estoppel certificates
Negotiates contracts
Drafts pre-arbitration demands
Coordinates or performs maintenance and other related routine association services
Oversees compliance with the association’s governing documents and the requirements of law

New professional standards were placed upon Florida community association managers in 2014. For example, community association managers cannot charge unreasonable or excessive fees and must account for all funds. Community association managers, acting as an agent on behalf of the association, must also discharge their duties:

Loyally
Skillfully
Diligently
Honestly
Fairly
In good faith
With care and full disclosure to the association.

To satisfy their fiduciary obligation, condominium boards must make an effort to hire a qualified community association manager. Beyond confirming that a community association manager is properly licensed, board members must make sure that the individual has a thorough command of all the administrative and financial tasks associated with the job, strong communication skills and absolute integrity. Multiple candidates should be interviewed and references should be checked.

Setnor Byer Insurance & Risk’s Condominium Program provides clients with access to various risk management services, such as Setnor Byer’s Risk Management Group and Unit Owners’ Report Line, as well as our affiliate’s online Board Member Education, which has been approved by the Division of Florida Condominiums, Timeshares, and Mobile Homes to satisfy Florida’s new board member education training.

If you would like to discuss how Setnor Byer Insurance & Risk can serve you and your condominium association, please contact us.

A New Right of Access for Condominium Associations

Sometimes a condominium association needs to enter an owner’s unit, which is why Florida’s Condominium Act gives associations an irrevocable right of access. This right of access may only be used during reasonable hours to perform needed maintenance and repairs or to prevent damage to the common elements or to other units. However, Florida’s Condominium Act was amended on July 1, 2014 to expand an association’s right to access units that have been abandoned.

Under the new law, an association may enter an abandoned unit to:

Inspect a unit and adjoining common elements;
Make necessary repairs to a unit or to the common elements serving the unit;
Repair a unit if there is mold or deterioration;
Turn on utilities for a unit; or
Otherwise maintain, preserve or protect a unit and adjoining common elements.

When is a unit considered abandoned? Unless a unit owner provides the association with written notice to the contrary, a unit is presumed to be abandoned if:

The unit is the subject of a foreclosure action and no tenant appears to have resided in the unit for at least 4 continuous weeks; or
No tenant appears to have resided in the unit for 2 consecutive months, and the association is unable to contact or determine the whereabouts of the owner after reasonable inquiry.

Except in cases of emergency, an association must wait 2 days after giving the owner notice of its intent to enter the abandoned unit. This notice must be mailed or hand-delivered to the owner’s address of record and may be given electronically if the unit owner previously consented to receive electronic notices from the association.

Any expenses incurred by the association can be charged to the unit owner, and if a unit owner fails to pay, the association may use its lien authority to collect. An association may also ask a court to appoint a receiver to lease out an abandoned unit so that the rental income can be used to offset the association’s costs and expenses of maintaining, preserving and protecting the unit and the adjoining common elements, which can include:

The costs of receivership
Unpaid assessments
Interest
Administrative late fees and costs
Reasonable attorney fees

This expanded right of access to abandoned units applies even if the condominium documents, such as the bylaws or declaration, do not provide the authority to do so. Under the new law, the decision to enter an abandoned unit is at the association’s sole discretion. Nevertheless, associations should proceed cautiously to make sure all formalities are observed and to minimize the risk of a lawsuit by the unit owner.

If you would like to discuss how Setnor Byer Insurance & Risk can serve you and your association, please contact us.

Preparing an Association’s Financial Reports

For many condominiums and homeowners’ associations, the end of the calendar year is also the end of the fiscal year. This means that associations should be well on their way to completing their statutorily required financial reports.

Unless a different date is specified in the bylaws, Florida condominium and homeowners’ associations have 90 days after the end of their fiscal year to prepare and complete or hire someone else to prepare and complete the association’s financial report for the preceding fiscal year. Once completed, associations have 21 days to either provide a copy of the financial report to unit owners and members or notify them that they can request a copy free of charge. This entire process must be completed no later than 120 days after the end of the fiscal year.

Though all financial reports must be prepared in accordance with generally accepted accounting principles (GAAP), the manner in which a financial report is prepared usually depends on the association’s total annual revenues. Financial reporting requirements are determined by statutory revenue thresholds, which were changed in 2013. These thresholds are the same for both condominium and homeowners’ associations.

Associations with total annual revenues of less than $150,000 must prepare a report of cash receipts and expenditures
Associations with total annual revenues of $150,000 or more, but less than $300,000, must prepare compiled financial statements
Associations with total annual revenues of at least $300,000, but less than $500,000, must prepare reviewed financial statements
Associations with total annual revenues of $ 500,000 or more must prepare audited financial statements

Condominium associations with fewer than 50 units and homeowners’ associations with fewer than 50 parcels must prepare a report of cash receipts and expenditures, regardless of their total annual revenues.

Though associations may vote to change their financial reporting requirements, the process is technical and strict requirements must be followed.

To learn more about your obligations as a board member, take our affiliate’s recently updated online course Condominium Operations: A Primer for Board Members, which has been approved by the Division of Florida Condominiums, Timeshares, and Mobile Homes.

If you would like to discuss how Setnor Byer Insurance & Risk can serve you and your association, please contact us. Clients of Setnor Byer’s Condominium Program enjoy access to various risk management services, such as Setnor Byer’s Risk Management Group and Unit Owners’ Report Line, as well as our affiliate’s Board Member Education Certification.

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Condominium Association 2013 Legislative Update

The 2013 legislative session saw relatively little activity involving Florida’s Condominium Act. Nevertheless, laws have changed, and that’s always important. Here is a brief summary of some of the statutory amendments.

Insurance

The Condominium Act identifies property that must be insured by the association and property that is the responsibility of each unit owner. Unfortunately, the statute was not clear in distinguishing insurance obligations from regular maintenance and repair obligations. As a result, unit owners often believed that their association had an obligation to repair property (usually air conditioning units) because it was covered by the association’s insurance.

The 2013 amendment clarifies that the association is responsible for property covered by the association’s insurance policy if it was damaged by an insurable event, as opposed to regular wear and tear.

Financial Reporting

Condominium associations have annual financial reporting requirements. The type of financial statement an association must prepare depends on its total annual revenues. The 2013 amendment made the following changes to the statutory revenue thresholds used to determine an association’s financial reporting requirement:

Report of Cash Receipts and Expenditures: total annual revenues are less than $150,000 (was $100,000)
Compiled Financial Statement: total annual revenues are $150,000 or more, but less than $300,000 (was $100,000 – $200,000)
Reviewed Financial Statement: total annual revenues are $300,000 or more, but less than $500,000 (was $200,000 – $400,000)
Audited Financial Statement: total annual revenues are $500,000 or more (was $400,000)

Associations operating fewer than 50 units, regardless of annual revenues, must prepare a report of cash receipts and expenditures. Under the old law, this requirement applied to associations operating fewer than 75 units.

Official Records

Unit owners have a right to inspect and copy the association’s official records. Associations are now required to let unit owners make electronic copies of these records with portable devices, including smartphones, tablets, portable scanners or any other technology capable of scanning or taking photographs.

Member Directories

The Condominium Act prohibits associations from disclosing unit owners’ personally identifying information. However, associations are now allowed to publish and distribute to unit owners a directory containing the name, address and telephone number of each unit owner. Unit owners can exclude their telephone number from the directory by making a written request to the association.

Elevator Safety

Condominiums covered by Florida’s Elevator Safety Act were exempt from having to comply with Elevator Safety Code updates until either July 1, 2015 or until the elevator is replaced or requires major modification, whichever occurs first. The 2013 amendment removed the July 1, 2015 deadline. Accordingly, covered condominiums will not have to comply with all updated provisions of the Elevator Safety Code until their elevators require major modification or are replaced.

Some of the other 2013 amendments address board member terms, suspensions from using common elements and board member recalls. It is important for those serving on their condominium board to become familiar with all of the 2013 statutory amendments.

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Don’t Let Service Animals Take a Bite Out of the Condominium Association’s Bank Account

Many condominium associations have policies that prohibit or regulate the ownership of pets. For the most part, associations have become adept at dealing with those having pets and those requesting permission to have a pet. However, as a recent lawsuit filed by the Justice Department in Utah shows, things are very different when the pet in question is a service animal.

Service animals perform tasks for people with disabilities, such as assisting the blind. With increasing frequency, service animals provide necessary assistance to those suffering from depression, anxiety, and Post Traumatic Stress Disorder (PTSD). Contrary to what many believe, service animals are working animals, not pets.

The lawsuit filed by the Justice Department involves a disabled combat veteran’s request for permission to keep his dog, a labradoodle, in the condominium unit he was renting with his wife. According to a prescription from a doctor at the Veteran’s Administration and a letter from his psychotherapist, the dog helps the veteran cope with the effects of depression and anxiety disorder.

The condominium association had a comprehensive policy for allowing pets, including additional procedures for processing requests for service animals. The veteran was required to provide proof that the dog was medically necessary, execute a medical release, obtain liability insurance, complete the pet registration forms, and pay a $150 pet registration fee.

The veteran steadfastly refused to pay the pet registration fee. Despite numerous communications among the parties, the condominium association refused to grant the veteran permission to keep the dog. The association also levied numerous fines against the owner of the unit.

The veteran’s lease was not renewed due to his refusal to pay the fees and fines. Though the association ultimately waived the fines imposed against the unit owner, the pet registration fee was deducted from the veteran’s security deposit.

The veteran filed a complaint with the Department of Housing and Urban Development (HUD). HUD, in turn, filed a Charge of Discrimination against the condominium association, the property management company, and the on-site property manager (Defendants), alleging:

The Defendants violated the Fair Housing Act (FHA) by discriminating against the veteran in the terms, conditions, or privileges of the rental of a dwelling, by refusing to make a reasonable accommodation to modify their pet policy, when such accommodation was necessary to afford the veteran an equal opportunity to use and enjoy the dwelling;
The Defendants violated the FHA by making housing unavailable to the veteran because of his disability;
The Defendants violated the FHA by imposing a fee and fines for the veteran’s service animal;
The Defendants violated the FHA by maintaining a discriminatory policy requiring those with certain disabilities to go through additional steps to obtain an accommodation necessary for equal enjoyment of the property;
The Defendants violated the FHA by insisting that the veteran consent to the release of his private medical information when it was not necessary to grant a needed accommodation; and
The veteran and his wife suffered damages, including relocation costs, loss of a portion of their security deposit, the cost of liability insurance, other miscellaneous costs, physical and emotional distress, anxiety, and inconvenience.

Upon receiving the Charge of Discrimination, the condominium association elected to have the case heard in federal court. Shortly thereafter, the parties entered into a consent decree, or settlement, requiring the Defendants to:

Pay the disabled veteran $20,000;
Attend fair housing training;
Implement a new reasonable accommodation policy that does not charge pet fees to owners of service or assistance animals or require them to purchase liability insurance; and
Comply with various notice, monitoring and reporting requirements.

This was a costly and humiliating loss to the Defendants. Fortunately, other condominium associations can benefit from this lawsuit by learning the same lesson without having to pay the same price.

Optimally, this lawsuit will compel association board members to become familiar with the laws protecting those in need of reasonable accommodation, such as service animals. At a minimum, however, board members must recognize that a request for permission to keep a service animal must be treated differently than other requests.

This recognition will alert the board to proceed cautiously and seek guidance or counsel to avoid unlawful conduct on the part of the association. Otherwise, the education of other condominium associations may come at the expense of your association.

If you have any questions about the information contained in this article, or if you would like to discuss how we can serve you and your association, please contact us.

Additionally, clients of Setnor Byer’s Condominium Program enjoy access to various risk management services, such as Setnor Byer’s Risk Management Group and Unit Owners’ Report Line, as well as our affiliate’s Board Member Education Certification, which has been approved by the Division of Florida Condominiums, Timeshares, and Mobile Homes.

Is Fear of Liability Why Your Condominium Community Does Not Have an Automated External Defibrillator (AED)?

According to the Centers for Disease Control and Prevention, approximately 785,000 Americans suffer their first heart attack every year, while another 470,000 experience their second. Unfortunately, the number of those who die from sudden cardiac arrest is equally disturbing.

Medical experts generally agree that the key to surviving a heart attack is timely implementation of the Chain of Survival, which is a metaphor often used to describe the elements of appropriate treatment in the case of a heart attack. An important link in this chain is defibrillation, which involves providing an electric shock to the victim’s heart.

Thousands of deaths could be prevented each year if heart attack victims receive prompt defibrillation. Automated external defibrillators, or AEDs, are designed to provide instant defibrillation to those in need. AEDs are portable devices that guide users through the process by audible or visual prompts without requiring any discretion or judgment.

Technological advances have increased access to AEDs, which are now found anywhere from the local gym to the neighborhood supermarket. Despite their benefit and increasing affordability, many condominiums do not purchase AEDs for fear of exposing their association to liability if something goes wrong. Though potential liability is always a legitimate concern, in the context of providing AEDs to condominium residents, various laws are in place to protect the condominium association.

In the Cardiac Arrest Survival Act of 2000, Congress found that limiting the liability of Good Samaritans and acquirers of AEDs in emergency situations may encourage their use and save lives. Since then, many states have enacted their own laws to protect those who use AEDs or otherwise make them available.

In Florida, civil immunity is available to those who cause harm when using or attempting to use an AED in a perceived medical emergency. Under certain circumstances, any person who acquired the device and makes it available for use, including condominium associations, may also be entitled to immunity. Additionally, Florida law provides that an association’s general liability insurance policy may not exclude damages resulting from the use of an AED.

Like Florida, Georgia provides civil immunity to those making AEDs available, and to those who provide emergency care or treatment with an AED. In North Carolina, a person providing care with an AED and the person responsible for the site where the AED is located are similarly immune from civil liability arising from the use of the AED.

Relying on these laws, condominium associations can provide the life-saving benefits afforded by AEDs without necessarily creating additional liability. However, the immunity afforded by these laws is not automatic or absolute. Rather, each state’s laws generally contain various, often unique requirements which must be met to enjoy the immunity.

For example, in Florida, immunity is only available if a qualifying AED is involved. To qualify for immunity in Florida, the AED must be a lifesaving defibrillator device that:

Is commercially distributed in accordance with the Federal Food, Drug, and Cosmetic Act;
Is capable of recognizing the presence or absence of ventricular fibrillation, and is capable of determining without intervention by the user of the device whether defibrillation should be performed; and
Upon determining that defibrillation should be performed, is able to deliver an electrical shock to an individual.

In North Carolina, immunity is lost if the injury or death resulting from the use of an AED was caused by gross negligence, wanton conduct or intentional wrongdoing on the part of the person rendering the treatment. In Georgia, the emergency care must be rendered gratuitously, in good faith, and without objection of the person to whom care or treatment is rendered.

Despite similarities among many states’ statutes, there may be some very significant differences. Consequently, before electing to purchase an AED for their community, condominium associations must understand and ensure compliance with each and every applicable statutory requirement. Given the consequences of failure, condominium associations should consider seeking legal advice during the decision-making and implementation process.

Access to an AED may save a life. If a condominium association does not have an AED for fear of increased liability exposure, then a closer look at any applicable immunity laws should be considered. Despite these laws, however, condominium associations must maintain a healthy fear of liability to ensure compliance with any statutory requirements. Otherwise, the very immunity that initially compelled the purchase of an AED will be replaced with the liability exposure the condominium association always sought to avoid.

Clients of Setnor Byer’s Condominium Program enjoy access to various risk management services, such as Setnor Byer’s Risk Management Group and Unit Owners’ Report Line, as well as our affiliate’s Board Member Education Certification, which has been approved by the Division of Florida Condominiums, Timeshares, and Mobile Homes.

If you would like to learn more about controlling condominium association risks, or if you would like to discuss how we can serve you and your association, please contact us.

Rules Governing Condominium Association Contracts for Products and Services

Florida’s Condominium Act confers broad authority upon condominium associations to manage and maintain the communities they serve. Included within an association’s authority is the significant power to enter into contracts. This power, however, does have its limits.

As a general principle, an officer or director of a condominium association must discharge all of his or her duties: in good faith; with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and in a manner he or she reasonably believes to be in the interests of the association.

These general standards of conduct also apply in the context of entering into association contracts. However, since the process of contracting is rife with opportunity for mismanagement, malfeasance, and dishonesty, board members must adhere to various additional statutory requirements governing association contracts.

Contracts for the purchase, lease, or renting of materials or equipment that will not be fully performed within one year from the date of the contract must be in writing. Contracts for the provision of services, regardless of their duration, must also be in writing.

Importantly, if any such contract requires a payment by the condominium association exceeding five percent of its total annual budget, including reserves, the association must obtain competitive bids before entering into the contract. However, the statute specifically provides that the association is not compelled to accept the lowest bid when entering into such a contract.

Not all contracts are subject to these additional requirements. For example, the statute excludes certain services from the foregoing requirements, including contracts with:

employees of the association;
attorneys, accountants, architects, and engineers;
community association managers and timeshare management firms; and
landscape architects.

The statute also contains additional safeguards designed to protect against potentially harmful conflicts of interest. Before an association can enter into a contract with a director of the association, or with any entity in which such director has a financial interest, various procedural steps must be taken, such as disclosing the potentially conflicting relationship, prohibiting the interested director from voting on the contract, or concluding that the contract is fair and reasonable for the association.

The disclosure of a potential conflict of interest and the manner in which it was handled must be included in the written minutes. As a final safeguard, the statute provides that the entire matter may be submitted for a vote of approval by the association members.

In some cases, a condominium association can enter into a contract without adhering to the foregoing requirements, such as in the case of an emergency or if the business entity with which the association desires to enter into a contract is the only source of supply within the county serving the association.

Finally, a condominium association with ten or fewer units may opt out of these statutory requirements if two-thirds of the unit owners vote to do so. The vote to opt out may be accomplished by a proxy as long as the proxy specifically states those requirements that the voter is rejecting by the proxy vote.

It should come as no surprise that those electing to serve their condominium community in a leadership capacity are held to a higher standard of conduct. This higher standard is clearly evident when it comes to entering into association contracts. Board members must not only do what is in the best interests of their community, but they must also understand and adhere to any additional requirements. Board members who fail in this respect may find that instead of serving their community, they have damaged it.

If you would like to learn more about condominium association contracts, consider our online course entitled Bidding and Contracting for Services: A Primer for Condominium Association Leaders.

Additionally, clients of Setnor Byer’s Condominium Program enjoy access to various risk management services, such as Setnor Byer’s Risk Management Group and Unit Owners’ Report Line, as well as our affiliate’s Board Member Education Certification, which has been approved by the Division of Florida Condominiums, Timeshares, and Mobile Homes.

If you would like any additional information, or would like to discuss how we can serve you and your association, please contact us.