Q: We recently received an e-mail from our management company regarding the filing requirements of the Corporate Transparency Act. This is the first I’ve ever heard of it. Can you explain what this is? (M.M., via e-mail)
A: On January 1, 2021, Congress passed the Corporate Transparency Act (“CTA”). The CTA is intended to deter and detect financial crimes as part of the larger Anti-Money Laundering Act. The aim is to peel back the layers of anonymity associated with shell companies and other corporate structures. It is my understanding that one of the primary goals of the law is to stem money laundering by terrorist organizations.
Volunteer association board members must comply with the CTA. Failure to do so may result in both civil and criminal penalties. Not-for-profit community associations are required to comply, unless they are tax exempt, which most are not.
The CTA was found unconstitutional by one federal court, but the enforcement injunction in that case only applies to the parties to the litigation. The Community Associations Institute (“CAI”) is lobbying Congress to exempt community associations, but it is hard to predict whether that effort will be successful and if so, how long it would take. CAI also filed a lawsuit seeking an injunction against the application of the CTA to condominium and homeowners’ associations, but the requested preliminary injunction in the case was recently denied.
If you are interested in the “nitty-gritty” on the law, you can visit the page on my Firm’s website dedicated to this subject, found at https://beckerlawyers.com/the-corporate-transparency-act/. There, you can also find a link to our webinar on the topic.
The deadline to comply with the CTA is January 1, 2025. However, the deadline for eligible associations in certain hurricane affected counties has recently been extended to July 1, 2025. I am told that filling out the forms is relatively straightforward and basically requires a scanned copy of each Director’s driver’s license. Then, every time a new Director is added to the Board, an update needs to be filed.
The information is filed with the Financial Crimes Enforcement Network (FinCEN). The FinCEN website is located at www.fincen.gov.
Q: Can you explain what it means when a condominium is developed in “phases”? (J.D., via e-mail)
A: In principle, when a developer undertakes to build a large project, it wishes to limit the risk of what it has legally obligated itself to do in case of economic downturn, or a change in consumer preference for housing product types.
When a condominium is developed in true “phases,” legally created “units” are added to the condominium over time (in phases), rather than all at once. The plan of phasing must be detailed in the original declaration of condominium or an amendment to the declaration, which must be approved by all unit owners and unit mortgagees. The declaration must describe all anticipated phases, the impact of the subsequent phases on the initial phase, and the time period within which all phases must be added, which generally cannot exceed 7 years.
Not to be confused with a “phase” condominium is the concept of a “series” condominium or “multi-condominium.” In those scenarios, rather than creating one legally distinct condominium where all units share in costs of operating the project, a developer sets up a series of separate legally declared condominiums, all operated by the same governing association. In those situations, each condominium pays only for the maintenance and reserves of that condominium (instead of all buildings operated by the association) and all units in all condominiums share in general administrative costs. With few exceptions, these are much more complicated enterprises, particularly in the areas of budgeting, assessments, and reserves, basically requiring multiple sets of books and records.
Joe Adams is an attorney with Becker & Poliakoff, P.A., Fort Myers. Send questions to Joe Adams by e-mail to jadams@beckerlawyers.com. Past editions may be viewed at floridacondohoalawblog.com.