New Laws Designed to Help Property Owners

May 01, 2010
Author: Florida Association of Realtors Report

Help for condo owners - and ways to spur sales. At the beginning of the session, there were at least 50 bills addressing everything from fire sprinkler retrofits to enticing investors in an effort to move excess condo inventory. At the end, there was a single 103-page bill encompassing many of these reforms: SB 1196 by Sen. Mike Fasano (R-New Port Richey). It includes the Florida Realtor-supported "bulk buyer" language that seeks to reduce inventory levels by encouraging investors to purchase blocks of condo units. This is accomplished in part by protecting bulk buyers from some of the liabilities faced by condo developers. Other provisions in SB 1196accomplish the following:
• lower the cost of condo ownership by repealing the requirement that owners purchase individual unit owner insurance coverage;
• remove the requirement for mandatory retrofits of sprinkler systems in condos over 75 feet high;
• require lenders to pay more in past-due assessments on foreclosed properties;
• allow associations to deny owners or occupants the use of common areas and recreational amenities when the owner is more than 90 days delinquent in paying financial obligations due to the association; and
• allow associations to divert tenant rents to pay for delinquent assessments owed by unit owners.

Oversight of Appraisal Management Companies (AMCs). Realtor and state Rep. Matt Hudson (R-Naples) championed legislation supported by Florida Realtors that subjects AMCs to state oversight. The number of AMCs - companies that administer networks of independent appraisers to fulfill appraisal assignments on behalf of lenders - has grown in the last several years, particularly as a result of the Home Valuation Code of Conduct that went into effect in 2009. HB 303 requires AMCs to register with the Department of Business and Professional Regulation, and establishes application requirements (including background checks), qualifications for registration and standards for disciplinary actions. The bill also allows the Florida Real Estate Appraisal Board to adopt rules to institute requirements for the protection of appraisers' signatures.

Repeal of the windstorm mitigation disclosure. This disclosure is one of the last remnants of the My Safe Florida Home program, which expired in 2009 due to a lack of funding. Effective Jan. 1, 2011, sellers of homes located in windborne debris regions would have been required to provide buyers with the building's hurricane resistance rating and three improvement plans, including costs. It is widely believed that the inspection process was rife with fraud and provided buyers with inaccurate information. For sellers of many coastal properties, repeal of this disclosure via HB 545 by Rep. Pat Patterson (R-Deland), saves money in two ways. First, sellers will no longer have to obtain a wind inspection in order to obtain the home's windstorm mitigation rating. The cost of the inspection typically ranged from $150 to $250. More importantly, sellers won't have to negotiate with buyers seeking a lower home price based on the cost of the improvement plans.

Tax relief for homes with tainted drywall. HB 965 by Seth McKeel (R-Lakeland) requires property appraisers to adjust the assessed value of single-family residential properties affected by tainted drywall. If the home cannot be used for its intended purpose without remediation or repair, the value of the property must be assessed at $0. To qualify, a home must have imported drywall that causes a significant impact on the just value of the property. Also, the buyer may not have been aware of the presence of the tainted drywall at the time of purchase.

Another attempt to stabilize the property insurance market. Despite four years without a major hurricane, many of Florida's private property insurers are not building the capital reserves experts say is necessary to protect the homes and businesses they cover following a major hurricane or series of storms. At the same time, large national insurers have reduced their exposure in Florida, leaving state-run Citizens Property Insurance Corp. the largest insurer with billions of dollars more in exposure than it has in reserves or reinsurance. SB 2044 by Banking & Insurance Chairman Garrett Richter (R-Naples) seeks to shore up the market by raising the capital requirements for insurance companies and reducing fraudulent claims by public adjusters. The bill also allows for rate increases due to inflation and reinsurance costs.

Doc stamp taxes on short sales: Current practice now law. The wave of short sales over the past several years brought up an interesting question when it comes to collecting documentary stamp taxes: Should the amount be based on the purchase price or on the amount of the outstanding mortgage balance? The Florida Department of Revenue ruled in September 2008 that doc stamp taxes should be based on the sale price, and legislation was drafted during the 2009 session to codify the DOR ruling into law. But the bill failed after being used as a vehicle for last-minute amendments. This year, the short sale/doc stamp bill, HB 109 by Rep. Evan Jenne (D-Ft. Lauderdale), passed with no such controversy.

Guidelines for appraising commercial waterfront properties. In 2008, voters approved a constitutional amendment directing property appraisers to base the assessments of marinas, fisheries, boat builders and other "working waterfront business" on their current use, not their "highest and best use." SB 1408 by the Senate Finance and Tax Committee implements this amendment by defining the types of businesses that constitute a working waterfront property and providing appraisers with a methodology to calculate the "current use" value of the property.

Cost vs. benefit: Taking the long-term view on legislation. Senate President-designate Mike Haridopolos' (R-Melbourne) priority bill this session changes the way state economists calculate the financial impact of certain bills. SB 1178 allows presiding officers to request that state economists look at both the "cost" and "benefits" of certain bills that have the potential to impact our state's economy. At its January business meetings, the Florida Realtors Board of Directors voted to support legislation allowing what's known as "dynamic scoring." "If dynamic scoring was allowed this session, legislators may have had a different view of our enhancements to Amendment 3," says Sebree. "The fiscal impact assigned to our Amendment 3 ($36 million in 2011), was based on money a local government would lose because of the additional tax break provided to property owners. This new law will allow the Legislature to consider the return on investment of future home sales or the cost-benefit of the proposal."

Payoff for property owners who go green. HB 7179 by Rep. Steve Precourt (R-Orlando) allows local governments to loan money to residential and commercial property owners for energy and storm-resistance improvements. The loan would be repaid via non-ad valorem assessments. To ensure buyers don't pay twice for the improvements - a higher sales price and the assessments - sellers participating in the program will have to provide a disclosure at or before contract informing buyers of the assessment.

Septic tank inspections approved. Included in Sen. Lee Constantine's (R-Altamonte Springs) big water clean-up bill, SB 550, is a provision that requires inspection of Florida's 2.6 million septic tanks every five years beginning in 2011. The Florida Department of Health, which regulates septic tanks, will inspect about 500,000 tanks a year. Property owners are responsible for the inspection fee, which cannot exceed $30. The legislation also creates a grant program for low-income homeowners whose septic tanks need repairs.

Comprehensive DBPR package. HB 713 by Rep. Ritch Workman (R-Melbourne) impacts many professions and includes two provisions of interest to Realtors. One allows real estate and appraiser instructors and school permit holders to serve on the Florida Real Estate Commission and the Florida Real Estate Appraisal Board. The other specifies who will be grandfathered into the home inspector licensing program that takes effect July 1, 2010.

Finally, the state budget allocates the following:
• $2 million to continue studying ways to reduce the amount of nitrogen released from conventional septic tank systems. The study will also determine if passive septic tank systems are a viable alternative, based on cost and performance.
• $400,000 to combat unlicensed activity.