The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Community Affairs
BILL: CS/SB 1490
INTRODUCER: Community Affairs Committee and Senator Pizzo
SUBJECT: Investments by Condominium Associations
DATE: March 25, 2021 REVISED:
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Oxamendi Imhof RI Favorable
2. Paglialonga Ryon CA Fav/CS
3. RC
Please see Section IX. for Additional Information:
COMMITTEE SUBSTITUTE - Substantial Changes
I. Summary:
CS/SB 1490 authorizes condominium associations, including multicondominium associations, to
invest association funds. The bill provides relevant procedures and requirement an association
must follow when investing.
To invest association funds, the association board of directors must obtain prior approval by a
majority vote of the unit owners at a duly called meeting of the association. Furthermore, the
board must develop a written investment policy statement, which must be annually approved by
association members during a budget meeting. The investment policy statement must address
specified investment criteria.
The bill also requires the board to select a registered investment adviser if the association opts to
invest funds in an investment product other than a depository account.
The investment adviser may not be related by affinity or consanguinity to any board member or
unit owner. The investment adviser must comply with the prudent investor rule in s. 518.11, F.S.,
act as a fiduciary to the association, annually provide the association with a written certification
of compliance with the requirements in the bill, and submit monthly, quarterly, and annual
reports to the association prepared in accordance with investment industry standards.
Investment portfolios managed by the investment adviser may contain any type of investment
necessary to meet the objectives in the investment policy statement, but may not contain stocks,
BILL: CS/SB 1490 Page 2
securities, or other obligations that the State Board of Administration or state agencies are
prohibited from investing in.
The association must have at least 36 months of projected reserves in cash or cash equivalents
available at all times. Additionally, any principal, earnings, or interest in the investment portfolio
must be available at no cost or charge to the association within 15 business days after delivery of
the association’s written or electronic request.
Under the bill, an association’s investment policy statement is an official record of the
association that must be available to unit owners for inspection and copying.
The bill takes effect July 1, 2021.
II. Present Situation:
Condominium
A condominium is a “form of ownership of real property created under ch. 718, F.S.”1
Condominium unit owners are in a unique legal position because they are exclusive owners of
property within a community, joint owners of community common elements and members of the
condominium association.2 For unit owners, membership in the association is an unalienable
right and required condition of unit ownership.3 A condominium is created by recording a
declaration of the condominium in the public records of the county where the condominium is
located.4 A declaration is similar to a constitution in that it:
[S]trictly governs the relationships among condominium unit owners and
the condominium association. Under the declaration, the Board of the
condominium association has broad authority to enact rules for the benefit
of the community.5
Condominium associations are creatures of statute and private contracts. Under the Florida
Condominium Act, associations must be incorporated as a Florida for-profit corporation or a
Florida not-for-profit corporation.6 Although unit owners are considered shareholders of this
corporate entity, like other corporations, a unit owner's role as a shareholder does not implicitly
provide them any authority to act on behalf of the association.
A condominium association is administered by a board of directors referred to as a “board of
administration.”7 The board of administrators is comprised of individual unit owners elected by
the members of a community to manage community affairs and represent the interests of the
association. Association board members must enforce a community's governing documents and
1
Section 718.103(11), F.S.
2
See s. 718.103, F.S.
3
Id.
4
Section 718.104(2), F.S.
5
Neuman v. Grandview at Emerald Hills, 861 So. 2d 494, 496-97 (Fla. 4th DCA 2003) (internal citations omitted).
6
Section 718.303(3), F.S.
7
Section 718.103(4), F.S.
BILL: CS/SB 1490 Page 3
are responsible for maintaining a condominium's common elements which are owned in
undivided shares by unit owners.8 In litigation, an association's board of directors is in charge of
directing attorney actions.9
The Division of Florida Condominiums, Timeshares, and Mobile Homes (division) within the
Department of Business the Professional Regulation has limited regulatory authority over
condominiums.10
Reserve Accounts
Condominium associations are required to prepare an annual budget detailing the annual
operating revenues and expenses for the fiscal year.11 The association must provide members
with a copy of the proposed annual budget and the adopted annual budget.12
In addition to annual operating expenses, the budget must include reserve accounts for capital
expenditures and deferred maintenance.13 Reserve funds and any accrued interest must remain in
the reserve account or accounts, and may be used only for authorized reserve expenditures unless
their use for other purposes is approved in advance by a majority vote at a duly called meeting of
the association.14
All funds collected by an association must be maintained separately in the association's name.
Reserve funds may be commingled with operating funds of the association for investment
purposes only. Commingled operating and reserve funds must be accounted for separately, and a
commingled account may not, at any time, be less than the amount identified as reserve funds.15
Although current law permits reserve and operating funds to be commingled for investment
purposes, current law does not provide a process or requirements for the investment of
association funds.
Reserve funds and any interest accruing on those funds may be used only for authorized reserve
expenditures, unless the use for other purposes has been approved in advance by a majority vote
at a duly called meeting of the condominium association.16
In Fiscal Year 2019-2020, there were 2,011 complaints received by the Division of Florida
Condominiums, Timeshares, and Mobile Homes. Of those complaints 459 (22.82 percent) were
related to budgets, financial reports, and assessments. 17
8
Section 718.103(2), F.S.
9
Section 718.103(30), F.S.
10
See s. 718.501, F.S. See infra, the Present Situation for the proposed revisions to the division’s authority set forth in
s. 718.501, F.S.
11
Section 718.112(2)(f)1., F.S.,
12
Section 718. 112(2)(e), F.S.
13
Section 718. 112(2)(f)2., F.S.
14
Section 718. 112(2)(f)3., F.S.
15
Section 718.111(14), F.S.
16
Section 718.112(2)(f)3., F.S.
17
Division of Florida Condominiums, Timeshares, and Mobile Homes, Annual Report, Fiscal Year 2019-2020, at page 2,
available at SPTLLSC0420082413380 (myfloridalicense.com) (last visited March 13, 2021). The largest number of
complaints were regarding access to official records (508 – 25.26 percent).
BILL: CS/SB 1490 Page 4
Fiduciary Duty and Prohibited Acts
Officers and directors of a condominium association have a fiduciary relationship to the unit
owners, and may be sanctioned for breach of their fiduciary duty.18 An officer, director, or
manager may not solicit, offer to accept, or accept anything or service of value or kickback for
which consideration has not been provided for the benefit of such person (or immediate family
members) from any person providing or proposing to provide goods or services to the
association.19
Section 718.111(1)(a), F.S., provides that any officer, director, or manager who knowingly
solicits, offers to accept, or accepts anything or service of value or kickback is subject to a civil
penalty pursuant to s. 718.501(1)(d), F.S.,20 and, if applicable, a criminal penalty as provided in
s. 718.111(1)(d), F.S.21 An officer, director, or agent must discharge his or her duties in good
faith, with the care an ordinarily prudent person in a similar position would exercise under
similar circumstances, and in a manner he or she reasonably believes to be in the interests of the
association.22 An officer, director, or agent is liable for monetary damages as provided in
s. 617.0834, F.S., if such officer, director, or agent breaches or fails to perform his or her duties
and the breach of, or failure to perform, such duties constitutes:
 A violation of criminal law as provided in s. 617.0834, F.S.;
 A transaction from which the officer or director derived an improper personal benefit, either
directly or indirectly; or
 Recklessness or an act or omission that was in bad faith, with malicious purpose, or in a
manner exhibiting wanton and willful disregard of human rights, safety, or property.23
Investment Advisers
Investment advisors are defined as “any person who receives compensation, directly or
indirectly, and engages for all or part of her or his time, directly or indirectly, or through
publications or writings, in the business of advising others as to the value of securities or as to
the advisability of investments in, purchasing of, or selling of securities, except a dealer whose
performance of these services is solely incidental to the conduct of her or his business as a dealer
and who receives no special compensation for such services.”24 The term does not include:
 Any licensed practicing attorney whose performance of such services is solely incidental to
the practice of her or his profession;
18
Section 718.111(1)(a), F.S.
19
Section 718.111(1)(a), F.S., does not prohibit an officer, director, or manager from accepting services or items received in
connection with trade fairs or education programs.
20
Section 718.501(1)(d), F.S., authorizes the division to impose a civil penalty of not more than $5,000.
21
The only crimes specifically referenced in s. 718.111(1)(d), F.S., are offenses relating to forgery of a ballot envelope or
voting certificate, theft or embezzlement of association funds, and destruction of or refusal to allow inspection or copying of
association records. Additionally, s. 718.111(1)(d), F.S., states that an officer, director, or agent shall be liable for monetary
damages as provided in s. 617.0834, F.S., if such officer, director, or agent breached or failed to perform his or her duties and
the breach of, or failure to perform, his or her duties constitutes a violation of criminal law as provided in s. 617.0834, F.S.
However, s. 617.0834, F.S., does not provide a criminal prohibition.
22
Section 718.111(1)(d), F.S.
23
Id.
24
Section 517.021(14)(a), F.S.
BILL: CS/SB 1490 Page 5
 Any licensed certified public accountant whose performance of such services is solely
incidental to the practice of her or his profession;
 Any bank authorized to do business in this state;
 Any bank holding company as defined in the Bank Holding Company Act of 1956, as
amended, authorized to do business in this state;
 Any trust company having trust powers which it is authorized to exercise in the state, which
trust company renders or performs services in a fiduciary capacity incidental to the exercise
of its trust powers;
 Any person who renders investment advice exclusively to insurance or investment
companies;
 Any person who does not hold herself or himself out to the general public as an investment
adviser and has no more than 15 clients within 12 consecutive months in this state;
 Any person whose transactions in this state are limited to those transactions described in s.
222(d) of the Investment Advisers Act of 1940. Those clients listed in subparagraph 6. may
not be included when determining the number of clients of an investment adviser for
purposes of s. 222(d) of the Investment Advisers Act of 1940; or
 A federal covered adviser.25
An investment advisor must be registered with the Office of Financial Regulation within the
Financial Services Commission26 to “sell or offer for sale any securities in or from offices in this
state, or sell securities to persons in this state from offices outside this state, by mail or
otherwise, unless the person has been registered with the office pursuant to the provisions of this
section. The office shall not register any person as an associated person of a dealer unless the
dealer with which the applicant seeks registration is lawfully registered with the office pursuant
to [ch. 517, F.S.]”27
III. Effect of Proposed Changes:
The bill creates s. 718.111(16), F.S., to authorize condominium associations, including
multicondominium associations, to invest association funds in one or in any combination of
investment products.
If an association invests funds in any type of investment product other than a depository account
described in s. 215.47(1)(h), F.S.,28 the board of the association must:
 Obtain prior approval by a majority vote of the unit owners at a duly called meeting of the
association;
Develop a written investment policy statement, which must be annually approved by association
members during a budget meeting, and must address liquidity, safety, yield short-term and
25
Section 517.021(14)(b), F.S.
26
Section 517.021(8), F.S.
27
Section 517.12(1), F.S.
28
Section 215.47(1)(h), F.S., authorizes the State Board of Administration to invest in savings accounts in, or certificates of
deposit of, any bank, savings bank, or savings and loan association. Such accounts must be insured by the Federal
Government or an agency thereof and have a prime quality of the highest letter and numerical ratings as provided for by at
least one nationally recognized statistical rating organization, provided such savings accounts and certificates of deposit are
secured in the manner prescribed in ch. 280, F.S., the Florida Security for Public Deposits Act.
BILL: CS/SB 1490 Page 6
long-term goals, authorized investments, the mix of investments allowed, and the limits of
authority relative to investment; and
 Select an investment adviser who is registered with the Office of Financial Regulation under
s. 517.12, F.S.
The investment adviser may not be related by affinity or consanguinity to any board member or
unit owner. The association may pay any investment fees and commissions from the invested
reserve funds or operating funds.
The investment adviser selected by the board must:
 Comply with the prudent investor rule in s. 518.11, F.S.,29 if the funds are not deposited in a
depository account;
 Act as a fiduciary to the association in compliance with the standards set forth in the
Employee Retirement Income Security Act of 1974 (ERISA);30
 Annually provide the association with a written certification of compliance with
s. 718.111(16), F.S.; and
 Submit monthly, quarterly, and annual reports to the association which are prepared in
accordance with investment industry standards.
At least once each calendar year, the association must provide the investment adviser with:
 The association’s investment policy statement;
 The most recent reserve study report or a good faith estimate disclosing the annual amount of
reserve funds which would be necessary for the association to fully fund reserves for each
reserve item; and
 The annual f