March 27, 2005 - Staff attached to the committees assigned to review a bill often analyze the bill to familiarize committee members with the legislation’s relevant impacts. HB 1229 was placed on the agenda for review by the Civil Justice Committee on March 23rd. It was, however, “not considered” on that date. Nevertheless, the House of Representatives Staff performed an analysis of the legislation’s impacts. This is what they found.
The substantive analysis classifies the effect of proposed changes as, “This bill creates new regulatory authority for the Department of Business and Professional Regulation (department) to regulate homeowners’ associations. The department estimates that there are 14,000 homeowners’ associations in Florida. Currently, the department’s Division of Florida Land Sales, Condominiums, and Mobile Homes enforces ch. 718, F.S. (condominiums), ch. 719, F.S. (cooperatives), ch. 721, F.S. (vacation plan and timesharing), and ch. 723, F.S. (mobile homes). The Division of Florida Land Sales, Condominiums, and Mobile Homes does not regulate homeowners’ associations. Section 720.302(2), F.S., provides, in part: The Legislature recognizes that it is not in the best interest of homeowners’ associations or the individual association members thereof to create or impose a bureau or other agency of state government to regulate the affairs of homeowners’ associations. The Division of Florida Land Sales, Condominiums, and Mobile Homes is involved in the mediation and arbitration provisions of law.”
In Section II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT, C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR, it points out that, “The Department of Business and Professional Regulation suggests that a ‘per home’ fee will have to be imposed on homeowners to cover the costs of regulation.” it also states, “Section 5 of the bill places requirements on condominium associations relating to guest parking. Condominium associations will have to pay the costs to comply with these requirements. The cost, if any, is unknown.”
In the same section, letter D speaks to some of the legislation’s fiscal impacts anticipated by the department, “Department of Business and Professional Regulation provided the following fiscal comments: The bill imposes regulatory responsibility and mandatory training for homeowners’ and condominium associations without providing appropriation or a revenue source. The department would not be able to implement the requirements of this legislation without adequate resources.” The analysis explains, “There are two areas that will have the greatest fiscal impact. First, the bill requires mandatory training for condominium and homeowners’ association board members. The number of current board members in the state is unknown, but with approximately 18,500 condominium associations and 14,000 homeowners’ associations, each with approximately 5 board members, the mandatory training will need to cover approximately 162,500 board members. The current education program provides education to 3,000 to 4,000 condominium unit owners and board members annually, and is funded at a rate of $100 per attendee, at this rate the mandatory training of condominium and homeowners’ association board members is estimated to cost $16.25 million. With current funding at $500,000, the net additional cost for the first year will be $15,750,000. The department has utilized the same contractor for the current condominium education program for the last three years. It is possible the cost could be less than the current rate per board member, however, the training of all board members statewide will be very labor intensive and the estimated cost has been projected using the current rate.
The second consideration is that the bill provides that the Division of Land Sales will enforce the provisions of chapter 720, F.S., related to homeowners’ associations and part VIII of chapter 468, Florida Statutes. However, the bill provides no new positions to carry out the required duties, and funding is limited to collection of penalties. In order to carry out the regulatory duties it is estimated that these programs will require 24 new investigative positions, 4 financial examiner/analyst positions, 5 administrative positions and 3 supervisor positions, detailed below. The estimated first year cost for this is $2,186,230. No growth factor has been assumed for future years.
The total fiscal impact to the department is $17,944,339 in FY 2005-2006, $9,679,843 in FY 2006-2007 and $10,102,968 in FY 2007-2008. The only revenue source the bill provides is from penalties the department may impose. The revenue from civil penalties is estimated to be $111,083 for Fiscal Years 2005-2006, 2006-2007 and 2007-2008.”
The department submitted the following relating to staffing issues raised by this bill. “Based upon the additional duties required by this bill and a projection of at least 14,000 homeowner associations, the department estimates that it could receive approximately 1,911 additional compliance cases, roughly the number of condominium/cooperative complaints received during FY 2003/2004. In order to handle the additional workload created by this bill, the department will require additional staff similar to the current makeup of the condominium compliance program: 22 Investigative Specialist II positions, 2 Investigative Specialist I positions, 4 Financial Examiner/Analyst [FEA] II positions, 3 Administrative Assistant I positions, 1 Administrative Assistant II position, 2 Investigation Specialist Supervisor positions and 1 FEA Supervisor in the Division of Land Sales. There will also be a need for more legal support as follows: 2 Senior Attorneys, 1 Staff Attorney, 1 Administrative Assistant II, and 1 OPS law clerk to handle the increase in case load from the anticipated investigations, complaints, declaratory statements, requests for variance and waiver, rulemaking, legal opinions, and disciplinary actions resulting from this legislation and this new regulatory program.”
The department goes on, “In addition, up to six positions may be necessary in the department’s Division of Service Operations. Based on the potential workload of this bill - 2 positions may be needed in the Customer Contact Center and 4 positions necessary in the Central In-Take Unit. The estimated expenditures for the Service Operations have not been included in the cost analysis. The investigative positions will travel frequently from their respective office locations; each will need typical office setups including desk, chairs, phone, computer, etc. The legal staff will also need full office setups and travel funds to appear at hearings and council meetings on disciplinary cases.”
In Section III. COMMENTS, C. DRAFTING ISSUES OR OTHER COMMENTS, the staff analysts expound on assorted contradictions and obstacles. “(1) Section 720.302(2), F.S., provides, in part: The Legislature recognizes that it is not in the best interest of homeowners’ associations or the individual association members thereof to create or impose a bureau or other agency of state government to regulate the affairs of homeowners’ associations. This bill arguably creates a ‘bureau or other agency… to regulate the affairs of homeowners’ associations.’
(2) Section 7 of the bill requires the department to notify condominium unit owners found to be in violation of ch. 718 and gives the owners 30 days to respond. The Department of Business and Professional Regulation submitted the following comment regarding section 7: It is unclear if the intent of this change is to authorize the Division to investigate violations of the statute and rules by individual owners. The Division does not presently investigate violations committed by individual owners except to the extent that the statute allows the Division to personally fine board members and officers of the association who willfully and knowingly violate the statute. If the intent is to authorize the Division to proceed against individual owners, clarifying language should be added, and this analysis must be changed to reflect the significant fiscal impact on the Division. If this is not the intent, the actual intent should be restated. Generally, the Condominium Act regulates the creation, sale, and operation of condominiums by developers and associations, not the conduct of individual unit owners. Unit owner conduct is generally a matter of association action under the governing documents or a matter for condominium arbitration.”