“Competitive Bidding Explained,” News-Press

“Competitive Bidding Explained,” News-Press

Q: When does a condominium association have to get bids for repair work and does the association have to hire the company with the lowest bid? (K.R., via e-mail)

A: Contracts for legal, accounting, architectural, engineering, and landscape architectural services are not subject to the competitive bid requirements. Contracts for employees who work directly for the association are also exempt from competitive bidding, as are contracts for needed products or services in the event of an emergency.

Generally speaking, all other contracts for the purchase, lease, or renting of materials or equipment, or for the provision of services, which require payment by the association that exceeds five percent of the total annual budget of the condominium association, including reserves, are subject to competitive bidding. The law also requires such contracts to be in writing.

The statute only requires two bids, not three as some think is the case. The law does not require the association to accept the lowest bid.

Q: What is a “recreational lease?” I am considering buying a condominium unit and was advised that there is a recreational land lease in place. (M.K., via e-mail)

A: A “recreation lease” is the generic term for an instrument by which a condominium developer retains ownership of land containing recreational amenities, like swimming pools, golf courses, clubhouses, etc., and leases the land to a condominium association or the unit owners for a set period of time in exchange for lease payments. The most common duration of such a lease is 99 years. A land lease is a similar arrangement whereby the actual condominiums are constructed on leased property.

These leases were a common developer practice in the 1970s and led to a tremendous amount of litigation and legislative reform. They have for all intents and purposes been outlawed by the statute, and many (perhaps most) of these leases have been “bought out” by the associations operating the community.

I would recommend that you consult with a real estate attorney who is also familiar with condominium law to understand the obligations under the lease, its expiration, and other material terms.

Q: Can my homeowners’ association increase its budget (and as a result, the regular assessments) by more than 10 percent? (C.C., via e-mail)

A: Under the Florida Homeowners’ Association Act, a board of directors is not prohibited from adopting a budget with any particular increase in regular assessments. However, your homeowners’ association’s governing documents, may contain specific rules on raising assessments.

Similarly, the Florida Condominium Act does not limit the ability of the association to adopt a budget that exceeds the previous year’s budget, but some condominium documents contain limitations on the amount that the budget can be increased year to year without membership approval. In addition, Section 718.112(2)(e) of the Florida Condominium Act states that if the budget adopted by the board requires assessments against the unit owners which exceed 115% of the assessments from the preceding budget year, the unit owners have the right to put forward a substitute budget. The statute outlines the process for the unit owners to propose a substitute budget and hold a meeting to approve it. The statute excludes reserves and non-recurring expenses from the percentage calculation. While this procedure has existed in the law for at least 40 years, I have rarely seen this statute successfully invoked.

Joseph E. Adams is a Board Certified Specialist in Condominium and Planned Development Law, and an Office Managing Shareholder with Becker & Poliakoff. Please send your community association legal questions to jadams@beckerlawyers.com. Past editions of the Q&A may be viewed at floridacondohoalawblog.com.