By Attorney John C. Goede
Q: Our community charges a transfer fee of $800 per sale. Our board wants to accomplish two goals: 1) increase the fee; 2) provide some exceptions to the fee. What is the best way to accomplish these goals?
A: The answers to both questions is highly dependent on the language contained in your governing documents. As a general rule, the ability to levy a transfer fee (or resale contribution as often termed) depends on whether the governing documents specifically allow a transfer fee in the first place. Assuming this is the case, then these provisions can greatly vary depending on the drafter and board.
Some provisions simply state that the fee shall be $800 per transaction. If this is true, then you would need to pursue an amendment to your governing documents to increase the amount. Some provisions state that the fee shall be $800 per transaction or as otherwise determined by the board from time to time. If this is true, then you could increase the amount of the assessment by a board resolution at a duly noticed board meeting. Some provisions state that the fee shall be $800 per transaction or as otherwise determined by the members. If this is true, then you would need to conduct a membership meeting to vote to increase the amount and the board’s ability to increase the fee would be subject to the owners’ approval. Thus, as you can see, it is possible to increase the amount, but each circumstance depends on your specific covenants.
Next, many communities want to create exceptions to the transfer fee. If the governing documents do not provide any exceptions, the fee would be triggered on every conveyance for any purpose. That being said, many communities find it equitable to exempt transfers between spouses resulting from divorce, transfers to trusts or LLCs for estate or tax purposes, transfers through probate or trust as the result of the death of the owners, transfers to a master association pursuant to lien foreclosure, or when existing owners purchase a new home in the same community. You are not required to provide exceptions to the transfer fee, but if you want to provide these exceptions, it must be specifically authorized in the governing documents. In other words, if your Declaration requires the transfer fee on every transfer for any purpose, then the board alone could not adopt a policy allowing for exemptions due to death or divorce, for example. On both questions, I would recommend you consult a licensed Florida attorney to determine what your governing documents provide today, and how you can best accomplish these two goals.
Thus, although best practices may dictate that you obtain competitive bids for engineering services and most associations would, even though the service is exempt, the statute does not require the association to obtain competitive bids for engineering services.
Q: Our high-rise condominium has a tennis court and pavers above the garage. There are extensive leaks, and the roof needs to be waterproofed. The tennis courts are never used, and the board wants to turn the tennis courts into a social area. Is this possible?
T.L., Marco Island
A: Most likely, no, the board alone could not pursue this alteration. The default rule in Florida is that a condominium association may not materially alter the common elements without a vote of the membership. The default statutory threshold to make alterations is 75 percent of all unit owners even though many condominium documents can, and do, provide for a lower threshold. We have written a number of articles addressing questionable material alterations but converting a tennis court into a social area would constitute a material alteration irrespective of whether the tennis courts were crowded or empty.
As a result, the association should review its governing documents to determine what threshold of the membership must approve the alteration. I should note that some condominium documents also provide that certain alterations below a certain dollar threshold are within the board’s discretion, but the cost of this conversion would likely exceed most thresholds I have seen for this exemption.
Q: Our condominium dues are going up in 2021 by a lot. The budget is increasing 25 percent because the board did a reserve study and it shows we need to put more money away for roofs and windows. I was told that the board could not increase the budget by this much. Is this true?
P.R., Bonita Springs
A: Sort of. This is a very misunderstood provision of the statute. Many owners believe that the board cannot increase the budget more than 15 percent per year and this assumption is not correct. In a condominium, the general rule is that the board has full discretion over the budget. One statutory caveat is that the membership is provided an opportunity to veto a board-adopted budget when the proposed budget exceeds 115 percent of the previous year’s budget.
One critical point is that many expenses are excluded from the 15 percent calculation. Specifically, any increase for 1) reasonable reserves for repair or replacement of the condominium property; 2) anticipated expenses of the association which the board does not expect to be incurred on a regular or annual basis; and 3) betterments to the condominium property, are excluded from the calculation.
Thus, in your question, if the increase only represents reasonable increases in reserves, then the 15 percent threshold is not applicable. As a result, the board likely has the authority to adopt this budget with the increase.
Now, let’s assume for a moment that the increase represented the board’s desire to hire additional full-time staff because the board wanted to indefinitely provide valet car service, janitorial services, and complimentary car washes. If these recurring expenses caused the budgetary increase and the proposed 2021 budget is now 125 percent of the 2020 budget, then the statutory threshold could be met. If so, Florida Statutes Section 718.112 provides that the board must conduct a special meeting of the unit owners where owners can propose a substitute budget and the members can vote to approve the substitute budget. There are other procedural requirements, but it is important to note that there is no statutory cap on the board’s ability to increase the budget, but rather certain increases can trigger a special meeting where the unit owners can potentially propose and approve an alternative (and presumably lower) budget.