Lawmakers criminalize kickbacks and concealing records at condo, homeowners associations

Florida lawmakers boosted repercussions against community association board members and managers who go rogue, including criminalizing kickbacks and hiding records. 

This session, the House and Senate passed two condo and homeowners associations bills. They require Gov. Ron DeSantis’ signature to become final. 

Aside from criminalizing various types of wrongdoing, the bills target issues that residents at communities governed by associations have alleged for years. This includes opaque financial records, steep assessment hikes and retaliation against those who speak out. 

The homeowners associations legislation, or House Bill 1203, is a “direct response” to the issues at the Hammocks community in West Kendall, said attorney William Sklar, an HOA and condo law expert. 

At the Hammocks, home to about 18,000 residents and one of Florida’s biggest HOAs, four former board members and the spouse of one of the board members were charged in 2022 over a massive scheme to divert funds from association coffers. Although criminal investigators originally outlined a roughly $2 million fraud, forensic accounting by the Hammocks receiver alleges a much deeper fraud of at least $4 million. The five arrested have pleaded not guilty. 

The condo legislation, House Bill 1021, includes stricter rules on management firms for recordkeeping, and mandates they disclose to the association conflicts of interest with vendors. 

Some of the criminal penalties in the two bills are identical: 

• It is a second-degree misdemeanor if a board member or manager does not turn over requested records or fails to maintain them for seven years with the intent of harming the association. This applies to repeat offenders who violate records requirements at least twice in a 12-month period.  
• It is a first-degree misdemeanor to intentionally deface and destroy accounting records and to not create and maintain these documents with the intent harming the association. 
• It is a third-degree felony if an association resident “willfully and knowingly refuses to release or otherwise produce association records with the intent to avoid or escape detection, arrest, trial, or punishment for the commission of a crime, or to assist another person with such avoidance,” the bill says. 
• It is a third-degree felony for a board member or association manager to solicit or accept a kickback. 

Florida lawmakers passed the bills after they stripped a different set of proposed legislation aiming to strengthen oversight and impose criminal penalties during last year’s session. Last year’s bills were watered down following lobbying by trade organizations representing association managers, according to a South Florida Sun Sentinel report. 

This year’s bills didn’t suffer the same fate, said Sklar, of Carlton Fields. 

“There’s teeth to it [the bills] and it’s enforceable, and there are penalties,” he said. “That is very significant.” 

Here is a deep dive into the new bills: 

HOAs 

At the Hammocks, the Miami-Dade State Attorney’s Office alleges the arrested board members’ pushback to records subpoenas slowed the investigation. After providing one set of documents, the board eventually decided to stop turning over more records, claiming it wasn’t paid for the first batch. The bill says HOAs have to provide subpoenaed records within five business days. “An association must assist a law enforcement agency in its investigation to the extent permissible by law,” the legislation says. 

The bill also explicitly says board members and association managers who use HOA debit cards for spending other than what is legally allowed commit theft. 

Association managers, which are firms hired by HOAs under agreements for a flat fee and, sometimes with additional charges for extra work, now must provide copies of their contracts upon request and include the contracts in associations’ governing documents. Aside from a 10-hour annual continuing education course needed to renew their state license, management firms now also have to complete a five-hour course every two years specifically on HOAs, including three hours on recordkeeping. Within 90 days of being elected, board members have to complete a state-approved educational course, including on financial literacy and transparency, fines, recordkeeping and meeting notices. Directors of HOAs with fewer than 2,500 homes have to complete four hours of continuing education annually, and directors of HOAs with more than 2,500 homes have to complete eight hours annually. 

The bill says that HOAs have to maintain records, including board meetings’ minutes, ballots, tax returns and vendor contracts, for at least seven years. By Jan. 1, HOAs with at least 100 homes have to post records on their websites or an app, including governing documents, vendor contracts, the lists of bidders for work at the communities, budgets, current insurance policies, and income and expense statements that will be considered at an upcoming meeting. Board meeting agendas have to be posted at least 14 days in advance, and contracts the board will vote on must be posted at least seven days in advance. 

At the Hammocks, the arrested board members allegedly hired bogus contractors that did no work on the 3,800-acre property. When the HOA paid the contractors, some of those arrested diverted a portion of the funds to themselves, according to an arrest affidavit. In lawsuits and interviews, residents also have alleged the former board imposed a 300 percent assessment increase and retaliated against those who spoke out by, among other things, levying fines and suspending homeowners’ use of some amenities. The bill now targets these issues. 

Boards can’t issue a suspension, including for the use of amenities or of homeowners voting rights, for minor infractions such as leaving trash bins out 24 hours before or after the pickup time or leaving holiday lights up for longer than allowed under HOAs‘ governing documents. Also, fines for violations of the governing documents that are less than 1 percent of a home’s just value can only become a lien if 75 percent of homeowners approve. Under an appeals process for fines, homeowners also can dispute the “reasonableness” of attorney fees tied to fines, the bill says. Fines for traffic infractions and for violations of the governing documents related to lawns, landscaping and grass can’t become liens. 

HOAs can’t levy compound interest on overdue assessments. 

The legislature, however, scrapped a provision that would have capped year-over-year increases of regular assessments to 10 percent and of special assessments to 5 percent of the budgeted HOA expenses for a fiscal year.

Condo bill 

A common complaint among unit owners is that they are slapped with cease-and-desist letters and lawsuits accusing them of defaming board members. Residents argue that they merely questioned boards’ decisions and inquired about suspicious activity. 

In Florida, lawsuits aimed at silencing those who speak out against authority, or Strategic Lawsuits Against Public Participation, are banned. However, some courts have ruled that the SLAPP ban does not extend to associations. The bill extends the anti-SLAPP protection to condo associations and also bans retaliation such as discriminatory increases in assessments and defamation suits, as long as the resident who spoke out acted in good faith. Unit owners who can claim they are being retaliated against include those who participated in a residents’ organization, filed a complaint with law enforcement or a civil investigative authority, and made public statements critical of the day-to-day management. 

Although the HOA statute for years has criminalized voter fraud, the condo bill for the first time includes a similar provision for condos. The bill says that preventing a unit owner from voting, using threats to influence a vote, buying votes, and aiding voter fraud are now first-degree misdemeanors. Also, a board member charged with ballot forgery, embezzlement of association funds, obstruction of justice and destruction of records must be removed from office.  

The condo legislation also increases education requirements for board members. They have to complete a four-hour course, including on condo inspections, structural integrity reserve studies, elections, recordkeeping, levying of fines, financial literacy and transparency, and notice and meeting requirements. Board members elected prior to the approval of the bill have until June 30 of next year to meet the requirement and submit to the state their educational certification. 

Also, board members are to complete at least an hour of continuing education annually. This marks a higher requirement, as until now board members could have simply submitted a written statement that they read the governing documents and vow to uphold the policies. 

Tamara Reyes, who runs a South Florida organization that helps residents investigate association corruption, previously told The Real Deal that with the turnover of association managers, records could get lost, making it difficult to track spending and investigate fraud allegations. 

The bill aims to curb this issue. After a condo association management firm is terminated, it has to turn over all records it had in its possession pertinent to the property within 20 days. If the firm doesn’t provide the records, it creates a presumption, which the management company can dispute, that it didn’t provide the documents on purpose. The firm also could lose its license and face a $1,000 daily fine for 10 days if it fails to turn over the records. 

Other provisions in the bill include: Aside from the governing documents and other records associations have to maintain, they now also have to keep invoices, receipts and deposit slips. Meeting agendas have to include vendor contracts. Within 45 days of completing a state-mandated structural integrity reserve study, the association has to provide a copy of the study to each unit owner and also alert a state condo division that the study was completed. Associations have to notify unit owners their voting rights are suspended due to overdue fees at least 90 days prior to the election. 

By Jan.1, the state division overseeing condos has to create a database on its website of the associations that have completed their structural integrity reserve studies. The studies were mandated following the deadly Surfside condo collapse in the summer of 2021. 

The bill also allocates $7.4 million and 65 full-time employees, at a total salary of $3.2 million, in this fiscal year’s budget for the Florida Department of Business and Professional Regulation to implement the bill. The funding likely would be allocated to the Florida Condominiums, Timeshares, and Mobile Homes Regulation, an arm of DBPR that oversees condo associations. 

Correction: A previous version of this story misstated caps on HOA assessment increases.

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