By Alex Costopoulus
In 2022, the Florida Legislature enacted a series of laws affecting many legacy timeshares. These laws make the buildings safer, but also make them more expensive to operate and maintain, and can result in personal liability for board members who fail to fully comply.
The Surfside Condominium collapse in 2021 and the extensive damage caused by Hurricanes Ian and Nicole in 2022 raised significant concerns regarding resident safety and compelled many insurers to abandon Florida altogether. Those remaining massively inflated their premiums. To address these dual concerns, the Florida Legislature enacted a series of laws applicable to Florida condominiums and cooperatives including timeshare condominiums and cooperatives.
These new laws require most condominiums and cooperatives three stories or higher to perform milestone inspections of certain structural components. These milestone inspections are required at 30 years of age and every 10 years thereafter—unless the buildings are within three miles of the coastline. Then, the inspections are required at 25 years of age and every 10 years thereafter.
Additionally, Florida condominiums are required to conduct a Structural Integrity Reserve Study every 10 years and to fully fund reserves established for those structural components. Associations may not vote to waive or reduce those reserves.
Fiduciary duty
Generally, board members owe a fiduciary duty to the associations they serve. This means a board member is legally responsible to act in the best interest of the association using care, loyalty, good faith, and confidentiality. A breach of that fiduciary duty can result in personal liability for the board member. This means the board member can be personally sued for damages resulting from such a breach. Your own personal bank account and property may be at risk.
When board members rely on professional advice from their attorneys and accountants and act in accordance with that advice, they are protected against personal liability by the Business Judgement Rule. Additionally, most boards carry “directors and officers” insurance to protect them in case of simple errors, omissions, or negligence. However, determining what is in the best interest of an Association can be a matter of interpretation. With regard to these new laws, the Florida legislature has taken extraordinary steps to make it clear that they want compliance, not interpretation.
The law expressly provides that if the officers or directors of an association required to have a milestone inspection willfully and knowingly fail to have that inspection performed, that constitutes a breach of fiduciary duty.
Likewise, if the officers or directors of an association required to complete a Structural Integrity Reserve Study fail to have that study performed, that too constitutes a breach of fiduciary duty. Individual board members can be personally liable for breaches of fiduciary duty. The high pressure isn’t limited to board members. To encourage property managers to comply, the legislature added language emphasizing the potential liability of managers as well.
Comply to protect
How can board members protect themselves? In a word: Comply.
If there is any chance at all these new laws might apply to your resort, get a legal opinion. Err on the side of caution. If they do apply, work with your management and legal teams to approve and adopt the necessary schedule and budget, hire the experts, file the reports, and fund the reserves.
This is not the time or place to get creative or hope the law gets “fixed” before you get caught. Protect yourself—comply!
Alex Costopoulus is the in-house attorney at FantasyWorld Resort Lake Buena Vista South in Kissimmee, FL.