Nonresidential Condominium Bill Becomes Law

by Bilzin Sumberg
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Last week Governor Rick Scott signed into law SB 440, which became Chapter 2014-14 of Florida Laws. This bill removes the requirements imposed on residential condominiums under the Florida Condominium Act regarding elections and meetings, and makes it easier to structure a phased commercial development as a condominium.

The changes are summarized below:

A. Proxies. The Act did not permit general or limited proxies to be used in voting for the board of directors. CS/CS SB 440 now permits proxies to be utilized in voting for the board in a nonresidential condominium. In addition, in other voting actions by unit owners, regarding waiving or reducing reserves, waiving financial reporting requirements or amending the declaration or the articles or by-laws of the condominium association, general proxies can be used by unit owners in a nonresidential condominium. Under prior law, unit owners could only express their vote on these other matters by a voting ballot or by a limited proxy.

B. Election of Directors

1. The existing limitation on directors to a one or two year term (depending on the by-laws) has been lifted for nonresidential condominiums. Directors in such condominiums may serve for an unlimited number of terms or years.

2. If there is more than a single owner of a unit, all owners can serve simultaneously on the board of directors in a nonresidential condominium. Prohibitions on multiple owners of a single unit serving concurrently remain in residential condominiums.

3. The limitation on the manner of election, only by ballot or voting machine, no longer applies in a nonresidential condominium.

4. The "loyalty oath" required for any board member, a certification that the member is familiar with the condominium documents and will uphold the documents and discharge his or her duty as a fiduciary, is omitted for directors in a nonresidential condominium.

C. Arbitration/Mediation. The Act contains a provision requiring arbitration or mediation for disputes. The arbitration or mediation is handled by the state agency overseeing only residential condominiums, the Division of Florida Condominiums, Timeshares and Mobile Homes. However, no distinction was made between residential and nonresidential condominiums in the alternate dispute resolution provisions. Therefore, a dispute in a nonresidential condominium would have to be arbitrated or mediated before the Division, but the Division had no jurisdiction to conduct such arbitration or mediation. This Catch-22 has been remedied by excluding nonresidential condominiums from the arbitration and mediation requirements.

D. Hurricane Protection. The Act has elaborate provisions relating to the installation of hurricane shutters, impact glass or other hurricane protection. While this may make sense in a residential development, it makes little sense in a shopping center. Nonresidential condominiums are now excluded from the operation of these provisions.

E. Phased Development. Many projects are built in phases. The Act provides protection for owners purchasing in early phases by requiring that future phases must adhere to certain limitations on the manner of development. These limitations prevent a developer from being able to change the character of the development by building a different product in future phases. As an example, a purchaser in a low density condominium community could not be saddled with high-rise structures in future phases. While this generally worked well for residential developments, it put a straitjacket on commercial projects which may contain different types of uses in different phases. Almost all of the phased restrictions have been lifted for nonresidential condominiums.

The above changes will facilitate the development of more commercial condominiums which, up to now, had a very difficult time complying with some of the operating requirements of the Act.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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