Trustee (Non-Judicial) Foreclosure of Timeshare Interests Is Poised to Be A Reality in Florida . . . and Other Significant Timeshare, Condominium, Cooperative and Homeowner Association Provisions Pass the Florida Legislature

The Florida legislature passed two important pieces of legislation during the 2010 session that affect timeshare, condominium and cooperative projects, as well as homeowners’ associations. The first bill (HB 1411), amending the Florida Vacation Plan and Timesharing Act, which was backed by the American Resort Development Association, provides for trustee (non-judicial) foreclosure of timeshare interests. In addition, this bill clarifies that the business judgment rule applies to officers, directors and agents of a timeshare association, and expands the availability of the current exemption from licensure under Florida’s real estate broker law for timeshare owners referring prospective purchasers. The second bill (SB 1196) provides for several changes to Florida’s Condominium Act, Florida’s Cooperative Act and Chapter 720, Florida Statutes, concerning regulation of homeowners’ associations. Both of these bills are currently waiting on the Governor’s signature before becoming law.

HB 1411

  • Trustee (non-judicial) foreclosure: The bill creates Section 721.855, Florida Statutes, providing for trustee foreclosure of timeshare assessment liens and Section 721.856, Florida Statutes, providing for trustee foreclosure of timeshare mortgage liens outside of the court system. For assessment liens, the process applies to any default giving rise to the imposition of an assessment lien which occurs after the effective date of the law. However, for mortgage liens, the process applies only to mortgages executed after the effective date of the law and that contain specific disclosure language, and to pre-existing mortgages only if the specific disclosure language is added to the mortgage with the consent of the borrower. In addition to providing for the specific procedures necessary to initiate and conduct a trustee foreclosure action, which procedures include requirements to deliver notice of the initiation of the process to an affected timeshare owner, the bill provides the timeshare owner with the right to opt-out of the trustee foreclosure process in favor of the judicial foreclosure process for any reason and at any time prior to the issuance of a certificate of sale by the trustee. In addition, lienholders may not proceed against the timeshare owner for any debt deficiency resulting from the trustee sale of the foreclosed timeshare interest. The bill also provides for the payment of a $50 fee for the recording of the trustee’s deed upon completion of the trustee sale. Attorneys who are in good standing with The Florida Bar and have been licensed to practice law in Florida for at least 5 years and title insurance companies authorized to conduct business in Florida for at least 5 years are authorized by the bill to provide trustee services.
  • Applying the business judgment rule: Similar to a provision for the benefit of condominium associations already contained in Chapter 718, Florida Statutes, the bill creates subsection 721.13(13), Florida Statutes, providing that officers, directors and agents of a timeshare owners’ association must discharge their duties in accordance with the "business judgment rule." Specifically, the business judgment rule provides that officers, directors and agents must discharge their duties in good faith with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in the best interests of the association. Provided that they do not act in bad faith or in their own personal interest, such officers, directors and agents will be exempt from liability for monetary damages by following the business judgment rule in the same manner as provided in Florida’s not-for-profit law contained in Chapter 617, Florida Statutes.
  • Referrals without Chapter 475 licensure: Currently, Section 721.20(2), Florida Statutes, exempts any timeshare purchaser who refers no more than 20 prospects each year to a developer from the licensure requirements of Chapter 475, Florida Statutes, Florida’s real estate broker law. The bill expands this exemption by providing that the prospects may be referred to a managing entity of a timeshare plan, as well as to a developer. This change will benefit timeshare owners’ associations that are seeking to sell off timeshare interests acquired by the associations through assessment lien foreclosure or otherwise.

SB 1196

The provisions of this bill affect condominiums, timeshare condominiums, cooperatives and homeowners’ associations. The more significant changes to Florida law in the bill include:

  • The ability of a condominium association to delay retrofitting its elevators to meet certain elevator safety requirements.
  • An extension to 2019 of the deadline to meet the requirement to retrofit fire sprinklers, and a removal of the prohibition against the ability of the association to waive the retrofit with a majority vote.
  • An exemption from installing a manual fire alarm system for condominium buildings of less than 4 stories in height that have a corridor providing an exterior means of egress.
  • The right of owners to amend the declaration of condominium to reclassify common elements as limited common elements.
  • An exemption for timeshare owners’ associations from the Condominium Act’s prohibition against co-owners of a unit from serving on the board of directors at the same time and from the Condominium Act’s limitations on director terms.
  • A requirement that each new director must, within 90 days after being elected or appointed, certify that he or she has read the condominium’s governing documents and will uphold the provisions of those documents.
  • A requirement that a director vacate office if he or she is delinquent in the payment of any amounts due the association for more than 90 days, and a disqualification of any unit owner from seeking election to the board if the owner is more than 90 days delinquent.
  • A limitation of unit owners’ rights to access association records to protect proprietary information and personal information of other owners and employees of the association.
  • A revision of the Condominium Act that will facilitate the purchase of condominium units in bulk to address distressed properties and bankruptcies by, among other things, statutorily recognizing assignments of developer rights and limiting the liabilities for bulk assignees and buyers. It also provides that in order to be classified as a bulk assignee or bulk buyer, the related condominium parcels must be acquired before July 1, 2012.
  • Allowing an association to suspend the unit owner’s voting rights and the unit owner’s or occupant’s rights to use common elements and recreational amenities if the unit owner is delinquent in the payment of any amounts due the association for more than 90 days.
  • Permitting an association to collect delinquent assessments directly from a tenant or to require the tenant to pay rent directly to the association when the owner of the tenant’s unit is delinquent.
  • An increase in mortgagee liability for unpaid assessments after taking title by foreclosure or deed-in-lieu of foreclosure from the current 6 months or 1% of the original mortgage balance, whichever is less, to 12 months or 1% of the original mortgage balance, whichever is less.
  • A requirement for separate accounting by the escrow agent of escrowed sales and reservation deposits. A revision to Florida’s Cooperative Act and Chapter 720, Florida Statutes, to regulate cooperative and homeowners’ associations in a manner similar to the regulation of condominium associations in certain respects.