Greetings to all of our community association managers and a belated welcome to 2024. I would like to start our monthly newsletters for this year with a Legislative Alert concerning Community Association Estoppel Certificates.

What you should know:

Senate Bill 278 has financial impacts on community associations. The original filed bill would have prohibited associations from charging any fees for the preparation of certificates of assessment (estoppel certificates) which would have been terrible for community associations. There was a great deal of input criticizing the original language and it has since been modified and I feel is beneficial to associations in its present form.SB 278 was passed by the Senate and is in messages to the House.

The following language is from the Senate Bill Analysis:

The Florida Senate BILL ANALYSIS AND FISCAL IMPACT STATEMENT (This document is based on the provisions contained in the legislation as of the latest date listed below.)

BILL: CS/SB 278 INTRODUCER: Fiscal Policy Committee and Senator Martin

SUBJECT: Estoppel Certificates

DATE: January 19, 2024

Summary: If CS/SB 278 passes:

It restores the limits on fees for preparation of an estoppel certificate by a condominium, cooperative, or homeowners’ association to $250, which was the maximum allowed in law before July 1, 2022, and repeals the future automatic increases mandated by current law. The bill provides that any fee in excess of that authorized by statute is void. The deadline for completion and delivery of an estoppel certificate is reduced from 10 business days to 5 business days, and the option to charge an extra fee for expedited 3-day service is repealed. An association board of directors must annually establish the authority to impose a fee and the amount of such fee. Payment of the estoppel certificate fee is changed from the time that the certificate is ordered to the time of the closing. The effect is that closing agents will no longer have to advance the fee but can pay it from the closing proceeds. If the closing does not occur, the property owner must pay the estoppel certificate fee to the association. The bill prohibits a community association manager or firm from including in their management agreement a provision requiring the association to indemnify the manager for errors or omissions in an estoppel certificate. The bill also adds the following offenses that may lead to professional discipline against a community association manager or firm: charging or attempting to charge a fee related to an estoppel certificate in excess of statutory limits, failing to timely furnish an estoppel certificate, or failing to fully complete an estoppel certificate form. The bill is effective July 1, 2024.

Present Situation: Estoppel Certificates In general, an estoppel certificate is a legal document that stops someone from later claiming different facts or terms regarding an agreement.1 It is sometimes referred to as an estoppel letter. In regards to real estate, estoppel certificates are typically used to confirm amounts of moneys owed that attach to a certain piece of property, such as mortgage debt, condominium association fees, homeowners’ association fees, and outstanding claims or deposits due to tenants. Estoppel certificates are sought prior to closing on a real estate transaction as part of the closing agent’s due diligence. Closing agents rely on estoppel certificates to determine proper amounts due as part of the settlement process, and real estate purchasers rely on such certificates to warrant that old charges or violations will not appear after closing. Where the property being transferred is subject to a condominium association, cooperative association, or homeowners’ association, a closing agent will solicit an estoppel certificate from the association to determine if any past due monies are due the association, determine the proper allocation of current assessments between the seller and buyer, and certify whether there are any unresolved violations of the covenants and restrictions. The forms of these estoppel certificates are provided in the statutes. The forms that apply to condominiums, cooperatives and homeowners’ associations are nearly the same.

Completing the form requires time and skill:

The association risks a financial loss should it incorrectly calculate monies due and thereafter is unable to collect; and the association risks difficulties in enforcing its covenants and rules if a current violation is overlooked. The applicable statutes allow an association up to 10 business days to furnish the certificate, and waive the fees if the certificate is furnished after the deadline. An association may charge an additional fee if an estoppel certificate is requested on an expedited basis and the certificate is delivered within 3 business days. The authority to charge a fee, and the amount of the fee, for preparation and delivery of an estoppel certificate must be established by a vote of the board of directors of the association. To account for the time and risk of production, current law allows the association to charge up to $299 for a single unit or parcel, plus $119 for expedited service (3 business days rather than 10) and an additional $179 should the owner’s account be delinquent at the time.2 A sliding scale applies to a certificate covering multiple units.3 The fees were originally set in 2017 at $250 base fee, $100 additional for expedited service, plus $150 if the owner is delinquent.4 The current fees were set in 2022 by administrative action by the Department of Business and Professional Regulation pursuant to a required inflationary adjustment, and are scheduled for inflationary adjustment again in 2027 and every 5 years thereafter.

Practical Considerations:

While some smaller associations are self-managed, most associations employ a licensed community association management firm who employs one or more community association managers. Some associations keep estoppel certificate fees as additional income, but most give some or all of the estoppel certificate fee to the management firm as additional income to account for the added work and related assumption of liability. Statutory changes to the estoppel certificate fees which occur during the term of a management agreement may impact community association managers, associations, owners, and their respective reasonable contract expectations. Statutory changes to the fee may also impact association budgets and may require mid-year amendments to association budgets.

It is reported that some associations are effectively charging fees in excess of those authorized by the statutes. They do so by adding additional fees that are designated by other titles, such as “convenience fee,” “archive fee,” “service fee,” “processing fee,” or “third party fee.” 8 Current law implies that such add-on fees are not authorized, but does not specifically prohibit such add-on fees.

Effect of Proposed Changes:

The bill makes the following changes regarding the preparation and delivery of an estoppel certificate by a condominium, cooperative, or homeowners association:

• The deadline for completion and delivery of an estoppel certificate is reduced from 10 business days to 5 business days, and the option to charge an extra fee for expedited 3-day service is repealed.
• The inflationary adjustment provisions are repealed, thereby restoring the previous limits that were changed by administrative action effective July 1, 2022. Accordingly, the fee for an estoppel certificate regarding a single unit or parcel may not exceed $250, plus, if applicable, an additional fee of up to $150 if the owner is delinquent. The tiered fees related to a multiple unit or multiple parcel closing are also restored to those in effect June 30, 2022.
• A condominium, cooperative, or homeowners’ association board of directors must annually establish the authority to impose a fee and the amount of such fee.
• The time for payment of the estoppel certificate fee is changed from the time that the certificate is ordered to the time of the closing. The effect is that closing agents will no longer have to advance the fee but can pay it from the closing proceeds. The ability of a closing agent to seek a refund if the closing does not occur is repealed as unnecessary, and replaced with a duty of the property owner to pay the fee to the association if the closing does not occur. If the owner does not timely pay the association, the amount due may be collected as an assessment against the property.
• Fees or charges in any form that are in excess of those authorized are considered void and may be ignored.

The bill amends the statutes regulating community association managers and management firms (CAM) to add that:

• A contract between a CAM and an association may not require an association to indemnify a CAM for errors and omissions related to the preparation or provision of an estoppel certificate.
• A CAM may be disciplined by the Department of Business and Professional Regulation for charging or attempting to charge an estoppel certificate fee in excess of the fees authorized by statute.
• A CAM may be disciplined by the Department of Business and Professional Regulation for failing to timely prepare and deliver an estoppel certificate, or for delivering an incomplete estoppel certificate.

The bill takes effect July 1, 2024, if passed by the House and signed by the Governor.

I would like to acknowledge and thank Jeffrey Rembaum with the firm Kaye Bender Rembaum for his newsletter, “Rembaum’s Roundup” issued in December, alerting many of us to the proposed legislation.

Please let us know your thoughts and comments by clicking HERE.

Thank you for considering and/or using our services.

Warm regards,

Fred and Suzanne Gray and everyone at Gray systems, Inc.

GraySystems.com