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1.  Can a Florida homeowner’s association or condominium association require a prospective tenant to submit a credit report?

There is no conclusive case law which either prohibits or permits credit checks on prospective tenants. A federal court of appeals has held that the Fair Credit Reporting Act does not give a creditor the right to obtain the credit report of a consumer unless a debt can arise out of a transaction for which the consumer actively sought credit. A credit transaction involves a person or entity providing goods or services to another with the expectation to be paid at a later date. Since a community association can collect rent directly from a tenant of the landlord who is delinquent on his or her obligation to pay assessments, the association could be part of credit transaction. Because there is no law permitting or prohibiting a Florida community association from conducting credit checks on prospective tenants, a community association is likely permitted to require a credit check so long as there is authority to deny a tenant based on poor credit in the governing documents of the association and so long as the association obtains the informed consent of the prospective tenant.

2.  Can a Florida homeowner’s association or condominium association require a “crime-free” lease addendum?

The standard for determining whether or not a restriction in a governing document of a community association is enforceable is:  (1) whether the restriction is arbitrary in its application; (2) whether the restriction violates public policy; and (3) whether the restriction abrogates a fundamental constitutional right.  Chapter 83.52 of the Florida Statutes permits a landlord to evict a tenant if a tenant destroys, defaces, damages, impairs, or removes any part of the premises belonging to the landlord or conducts himself or herself in a manner which unreasonably disturbs the tenant’s neighbors or results in a breach of the peace. Many community association documents prohibit a tenant from damaging the common area or common elements of the association and prohibit an owner and his or her tenant from engaging in noxious or offensive activity.  Because a “crime free” lease addendum is not arbitrary in its application, does not violate a public policy, and does not abrogate a fundamental constitutional right, such restriction would likely be upheld.

3. Can a Florida homeowner’s association or condominium association charge a fee for tenant screening?

A community association can charge a fee for tenant screening if the association, by its documents, is required or authorized to approve a tenant and the fee is provided for in the governing documents.  For condominium associations, the fee is capped at $100.00 per applicant (husband and wife and children are considered one applicant).  For homeowner’s associations, there is no cap on the amount that an association can charge, however, the amount must be reasonable.

4. Can a Florida homeowner’s association or condominium association collect a security deposit from the prospective tenant which is in addition to the security deposit to the landlord?

A community association can collect a security deposit from the prospective tenant if the authority to do so is provided for in the governing documents.  The purpose of the security deposit is to protect the common elements and common area of the association.  In the case of condominium associations, the deposit is capped at 1 month’s rent.  For homeowners associations, there is no cap on the amount of security deposit that an association can collect, however, the amount is subject to the rule of reasonableness.  The Florida Condominium Act (Chapter 718, Florida Statutes) requires the payment of interest, claims against the deposit, refunds, and disputes regarding the deposit to be handled in the same way as deposit disputes under Chapter 83, Part II of the Florida Landlord/Tenant Act.  The Homeowners Association Act (Chapter 720, Florida Statutes) does not have the same requirement.

5. Can a Florida homeowner’s association or condominium association charge a buyer a transfer fee?

With respect to transfer fees charged by an association upon a sale or lease, the rules for condominiums are different from the rules for HOAs. Condominium associations are not permitted to charge a transfer fee that exceeds $100 per applicant, and a husband and wife are considered one applicant. Also, there must be a requirement in the association documents for the condominium association to approve the sale or transfer of the property and the fee must be provided for in the declaration, articles of incorporation, or bylaws of the association.  Conversely, there is no such statutory limitation for HOAs. The amount of the transfer fee in an HOA is regulated by the association’s documents, and the HOA membership can amend the documents to increase or decrease the amount of the fee. It is important to remember that these fees must be authorized by the association documents. If the management company in your HOA is charging a transfer fee on every sale without clear authority in the governing documents, then the HOA board needs to consult with its legal counsel.

6. Can a Florida homeowner’s association or condominium association charge a buyer a capital contribution fee?

The Condominium Act, specifically Section 718.112(2)(i) of the Florida Statutes provides that no charge may be made by the association in connection with the sale, mortgage, lease, sublease or other transfer of a unit unless the association is required to approve such transfer and a fee for such approval is provided for in the declaration, articles or bylaws. These fees are to be used for screening and transfer approval only not for capital contributions.   On the contrary, there is no such statutory limitation for HOAs. Many developers charge a one-time capital contribution when the developer sells a home to the first purchaser. In some cases, this money is set aside and delivered to the HOA at turnover so that the community has start-up funds. After turnover from the developer, the HOA as controlled by the members can continue to charge a capital contribution fee on resales. The amount of the capital contribution fee in an HOA is regulated by the association’s documents, and the HOA membership can amend the documents after developer turnover to increase or decrease the amount of the fee. It is important to remember that these fees must be authorized by the association documents.  If the management company in your HOA is charging a capital contribution fee on every resale without clear authority in the governing documents, then the HOA board needs to consult with its legal counsel.

7. Can a Florida homeowner’s association or condominium association pass new rules which would create a cap on the amount of rentals in the community?

Currently, there is no case law which addresses rental caps.  The standard for determining whether or not a restriction in a governing document of a community association is enforceable is:  (1) whether the restriction is arbitrary in its application; (2) whether the restriction violates public policy; and (3) whether the restriction abrogates a fundamental constitutional right.  Rental caps may be necessary to stabilize property values in the community or to encourage mortgage lenders to lend money to prospective purchasers in the community.  Because rental caps would not violate a public policy or abrogate a fundamental right, the cap is likely permissible unless it is enforced arbitrarily and capriciously.  An association must maintain proper records to show that it is applying the rental cap consistently and uniformly.  For condominiums, an amendment to the governing documents implementing a rental cap would not be binding on existing owners unless the existing owners agree to the rental cap.  For homeowners associations, the amendment would be binding on all owners as of the date the amendment is adopted.

VIII.  What happens to an existing tenancy when the property goes into foreclosure?  Who refunds the tenant’s security deposit if the existing tenant is evicted?

In May 2009, President Obama signed into law the Protecting Tenants in Foreclosure Act (“PTFA”).  The PTFA protects tenants from eviction as a result of foreclosure on the properties they occupy. The PTFA required an immediate successor in interest, including a mortgage lender, to assume the interest of an existing bona fide lease.  Under the PTFA, the successor in interest was required to give the tenant 90 days’ notice to vacate the property upon taking title to the property at the foreclosure sale.  Tenants were authorized to stay in the property and finish out the remainder of the lease unless the new owner was going to use the property as his or her primary residence or there was no lease or the lease was terminable at will.  The PTFA, which took effect on May 20, 2009, was originally set to expire on December 31, 2012 but later was extended to December 31, 2014.  On December 31, 2014, the PTFA expired and was not extended by the legislature.  On July 1, 2015, the Florida legislature enacted a version of the PTFA titled “Termination of Rental Agreement upon Foreclosure.”  The Florida law, codified in Chapter 83.561 of the Florida Statutes, replaced the expired PTFA.  However, unlike the PTFA, Chapter 83.561 does not require the successor in interest or new owner to honor any existing lease agreement with the tenant.  Under the Florida law, the new owner can give an existing tenant a 30 days’ notice to vacate the property or the new owner can either assume the terms of the existing lease or negotiate a new lease with the existing tenant.  If a tenant is evicted by the new owner, the tenant must sue the former owner for a refund of the security deposit.

9. What are some of the community association issues that come up in a purchase situation and how to deal with those issues?

First and foremost, obtain a complete and current set of the governing documents of the association including any amendments.  The governing documents of the association include the declaration of covenants and restrictions, articles of incorporation, bylaws, rules and regulations, and architectural review guidelines. A community association is required to make available to its members a complete copy of the governing documents.  The seller, as a member of the association, either has the documents or is entitled to request the documents from the association.  Make sure that the buyer reviews all the governing documents before purchasing the property.  Advise the buyer to consult with an attorney knowledgeable in community association law regarding the interpretation of the documents and the effect of the restrictions on the buyer’s purchase.  The buyer can uncover restrictions in the documents regarding pets, vehicles, parking, rental restrictions, noise and flooring requirements in condominiums, investor limits, and many other issues that may affect a buyer’s purchase.  Keep in mind that the rules and regulations of an association contain many use restrictions on the property which are not usually recorded in the public records.  Second, obtain a copy of the past year’s minutes of the board of director meetings, annual meeting of the members, and any special meeting of the members.  You can learn a lot about the community association and its inner workings from the meeting minutes.  By reviewing the meeting minutes, the buyer may be able to uncover an upcoming assessment or impending major repair project or pending litigation which the seller may not have disclosed or been aware of.   Third, obtain a copy of the association’s financials and make sure the buyer reviews them.  Some associations barely cover their monthly expenses because they have a high rate of foreclosure for delinquent assessments.  Some associations don’t have enough money in the reserve budget to repair or replace major items for which the association is responsible.  A review of the financials will help a buyer determine the overall financial health of the community.

10. Who regulates community association management companies and what happens if a community association management company acts in an unethical or unprofessional manner?

Many community associations hire a professional management company to properly and effectively manage the associations’ day-to-day operations, perform ongoing maintenance duties, communicate with the owners, and execute all Board of Director decisions.  The management company does not set any policies or rules pertaining to the community, nor does it determine the penalties for non-compliance of the rules and regulations of the association.  Rather, the management company’s responsibility is to enforce the community policies and regulations established by the Board of Directors on behalf of the association.  The role of the management firm as well as the scope of its duties is defined in the contract between the association and the management company.  The Department of Business and Professional Regulation licenses community association management firms.  Pursuant to Section 468.4334(1) of the Florida Statutes, a community association manager or a community association management firm is deemed to act as agent on behalf of a community association as principal within the scope of authority authorized by a written contract or by law.  A community association manager and a community association management firm must discharge duties performed on behalf of the association loyally, skillfully, and diligently; dealing honestly and fairly; in good faith; with care and full disclosure to the community association; accounting for all funds; and not charging unreasonable or excessive fees. Pursuant to 61E14-2.001, Florida Administrative Code, during the performance of community association management services, a licensee shall: (a) comply with the requirements of the governing documents by which a community association is created or operated; (b) only deposit or disburse funds received by the community association manager or management firm on behalf of the association for the specific purpose or purposes designated by the board of directors, community association management contract or the governing documents of the association; (c) perform all community association management services required by the licensee’s contract to professional standards and to the standards established by Section 468.4334(1), F.S.; and (d) disclose a potential conflict of interest and obtain authorization or approval.  Any violation of these requirements would be reported to the Board of Directors of the association and to the Department of Business and Professional Regulation.

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