As an investor in the Florida market what happens in the local legislative arena is as important to me as what happens in our nation’s capitol. According to Florida Realtors News there was plenty of real estate related activity in the legislative session that just ended. Property taxes, insurance rate adjustments and more. How does it affect the investor community, the real estate agent community or property owners in general? Just read on…
There was a newfound emphasis on fiscal accountability, thanks in large part to a nearly $4 billion budget deficit.
And unlike the previous two years, there were no federal stimulus funds to reduce the deficit.
BILLS THAT PASSED
The cap IS scrapped
It took five years and vigilant lobbying on the part of Florida Realtors and members of the Sadowski Housing Coalition, but the Legislature finally voted to remove the $243 million cap on the housing trust funds. This victory shouldn’t be taken lightly. Several times throughout the session, it appeared the trust funds would be eliminated altogether.
Ensuring that doc stamps will still be directed to affordable housing, their intended purpose, is a huge benefit to Florida families and the real estate industry. Credit goes to Rep. Gary Aubuchon (R-Cape Coral) and to Sen. Mike Bennett (R-Bradenton) for sponsoring HB 639 and SB 912.
This year, the Florida Housing Finance Corporation has $64 million for state and local housing programs.
Tax relief for non-homesteaders and first-time buyers
Since the 2009 legislative session, Florida Realtors has sought to lower the annual assessment cap on non-homestead properties from the current 10 percent approved by voters in Amendment 1. The vehicles this session were two proposed constitutional amendments: HJR 381 by Rep. Chris Dorworth (R-Lake Mary) and SJR 658 by Sen. Mike Fasano (R-New Port Richey).
On Day 58 of the session, HJR 381 by Rep. Chris Dorworth passed after contentious debate on the Senate floor, with opponents saying the measure would perpetuate the inequities inherent in Save Our Homes and negatively impact local coffers.
If approved by voters in November 2012, the proposal would reduce the yearly assessment cap on non-homestead property from 10 percent to 5 percent. It would also give anyone who hasn’t had a homestead exemption in Florida for three years a property tax discount of 50 percent of the home’s assessed value, not to exceed the median home price in that county. This additional first-time homestead owner exemption phases out for the property owner over five years while their Save Our Homes is phasing in.
The measure also allows the Florida Legislature to prohibit assessment increases when property values fall. Currently, the Legislature does not have the power to prevent local governments from “recapturing” the tax revenues that Save Our Homes shields during a rising real estate market.
Property tax relief for wounded veterans
Currently, disabled veterans who were Florida residents when they entered military service qualify for the combat-related disabled veterans’ ad valorem tax discount on homestead property. SJR 592 by Sen. Mike Bennett (R-Bradenton) goes before voters in November 2012 to extend this property tax benefit to any disabled combat veteran residing in Florida, regardless of where they lived when they entered military service.
Tax cut for small business
A $30 million tax cut for small businesses received little opposition, even gaining support from Democrats. HB 7185 by Rep. Steve Precourt (R-Orlando) boosts the exemption to the corporate income tax by increasing the exemption from $5,000 to $25,000. That amounts to a cut of roughly $1,100 per business. More importantly, many small businesses will not have to pay any corporate income taxes. Proponents praised the measure as a way to stimulate growth and create jobs, and as a step toward an even bigger rollback of corporate income taxes sought by the governor.
Easing the financial burden of challenging property tax assessments
So many property owners are challenging their assessments that a number of school boards have been unable to forecast their budgets. As a result, Rep. Ana Rivas Logan (R-Miami) filed HB 281 on behalf of the Miami-Dade School Board. As originally filed, this bill required property owners who appealed their assessment to pay 75 percent of the appraised value. Florida Realtors helped to amend the bill to allow owners to make a good faith payment during the appeal process if it extends beyond April 1 of the next year.
Another attempt to stabilize the insurance market
For nearly 20 years lawmakers have promised – some may say threatened – a significant overhaul of the property insurance system. That was certainly possible this session, as more than 24 bills were filed offering a range of solutions to the current insurance crisis – including a proposal to raise Citizen premiums by up to 25 percent.
In the end, the big insurance bill that passed, SB 408 by Sen. Garrett Richter (R-Naples), seeks to reign in the cost drivers that cause premiums to rise and discourage voluntary market insurers from doing business in Florida. Key provisions include:
- Insurers must continue to offer sinkhole coverage, but can limit coverage to homes and not other structures on people’s property, including garages and pools. Insurers may also call for an inspection of property before issuing sinkhole coverage.
- Defines structural damage as it relates to sinkhole loss.
- Allows insurers to initially pay actual cash value for repairs to dwellings. Florida is one of only a few states that requires insurers to pay replacement claims upfront regardless of whether the insured items are replaced or not.
- Insurers may require that repairs be made before fully paying a sinkhole claim.
- Claims for loss from sinkholes must be made within two years; for hurricanes, three years.
- Limits public adjuster compensation.
While this year’s “Consumer Choice” legislation failed to pass, SB 408 allows insurers to raise rates by up to 15 percent to cover their increases in reinsurance costs. State insurance regulators would still have to approve any increase.
Deregulation of commercial insurance lines
In an effort to stimulate competition among commercial insurers – and in the process further lower rates that are already at an all-time low – the 2010 Legislature deregulated errors & omissions and other kinds of commercial insurance. HB 99 by Brad Drake (R-DeFuniak Springs) furthers the deregulation process by exempting five additional lines of commercial insurance, including non-residential property insurance, from the rate filing and approval process in current law.
Additionally, the bill allows insurers selling certain types of coverages to make pricing changes on an expedited basis, enabling them to avoid some of the expense incurred in a full rate filing and review process. Realtors should know, however, that current law prevents insurers from making rates excessive or discriminatory.
Protection for title insurance policyholders
HB 1007 by Rep. Mack Bernard (D-West Palm Beach) was introduced on behalf of the Department of Financial Services (DFS) to ensure that property owners continue to have title insurance coverage even if their underwriter is liquidated. When an underwriter is liquidated, as is currently the case, all other underwriters in the state pay an assessment to DFS, and this would be passed on – over a period not to exceed seven years – to new policyholders in the form of a surcharge of up to $25. DFS indicates that the surcharge resulting from the underwriter currently being liquidated would be significantly less than $25.
State oversight of growth management laws curtailed
HB 7129 by Rep. Ritch Workman (R-Melbourne) makes big changes to the state’s role in growth planning and oversight first laid out in the 1985 Growth Management Act. This includes empowering local governments to plan their own growth and development; changing “concurrency” rules so that local governments have more options when working with new projects, rather than forcing developers to plan first for schools, roads, parks and other amenities; and prohibiting local governments from enacting local “Hometown Democracy” growth-by-ballot proposals. Florida Realtors supported permit extensions included in this bill.
Additionally, the Legislature passed at least one other developer-friendly bill, HB 993 by Rep. Ken Roberson (R-Port Charlotte), which includes a provision changing the “burden of proof” for challenges to permits.
If signed by the Governor, as is expected, HB 993 will shift the burden of proof from the permit-holder to the person challenging the new development.
Licensure requirements of home inspectors
SB 396 by Sen. Mike Bennett (R-Bradenton) changes the initial requirements for certain persons acting as home inspectors today and removes language enacted last year that allowed Division 1 contractors to perform both the home inspection and make repairs.
You’re S.A.F.E. to move about the transaction
SB 1316 by Sen. Nancy Detert (R-Venice) codifies into the Florida S.A.F.E. Mortgage Licensing Act the same language contained in a federal act that allows Florida real estate licensees to list and sell short sales without having to first obtain additional licensure under Chapter 494.
Controls on state spending
Lawmakers approved a constitutional amendment to limit state government revenue and return excess monies to taxpayers. If approved by voters, CS/SJR 958 would replace the existing state revenue limit – which is based on personal income growth – with a new state revenue limit based on inflation (CPI) and changes in population. Proponents said the so-called Smart Cap curbs the ability of lawmakers to expand government in times of economic prosperity. Opponents challenged the need for the cap, noting that state revenues have never reached the cap established in 1994.
Sales associates catch business tax break
Sales associates who don’t currently pay a business tax (formerly known as occupational licenses taxes) at the local level should be happy with HB 311 by Kenneth Roberson (R-Port Charlotte). Local governments that were not collecting business taxes from sales associates on Oct. 13, 2010, may not do so in the future. Local governments that were collecting business taxes from sales associates on that date are not impacted.
Last year’s condo bill revisited
HB 1195 by George Moraitis, Jr. (R-Fort Lauderdale) seeks to fix aspects of last year’s big condo legislation. Provisions of interest to Realtors and property managers include:
- Clarifies that condos less than four stories high with exterior corridors are exempt from installing manual fire alarm systems.
- Clarifies that associations are permitted to install impact glass and other code-compliant windows for hurricane protection.
- Diminishes certain rights of unit owners who are delinquent in their association fees, such as use of common areas.
- Clarifies the process by which an association communicates with tenants of unit owners who are delinquent on association fees and dues.
Curbing adverse possession scams
Florida’s adverse possession law dates back more than a century and was created to let people pay taxes on property they don’t own, and eventually own it after seven years. It was meant to encourage people to take over abandoned property, reduce blight and generate tax revenue.
The number of foreclosures around the state has spawned a new kind of scam, however. Unscrupulous persons or companies scout for vacant homes and rent out the home – often without the knowledge of the property owner. Realtors or family members discover the property takeover when they find the home’s locks have been changed. When confronted, these scam artists claim ownership under adverse possession.
SB 1142 by Sen. Paula Dockery (R-Lakeland) establishes a number of requirements for persons and companies claiming adverse possession, as well as the county property appraiser. For instance, the property appraiser must provide notice to the owner of record that an adverse possession claim was made. The bill also gives priority to the title holder who resumes payment of property taxes, even if an adverse possessor already made a payment.
Local government’s ability to ban short-term rentals frozen
HB 883 by Rep. Mike Horner (R-Kissimmee) prohibits local governments from enacting a ban on short-term rentals after June 1, 2011. Local governments with existing rental ban ordinances are not impacted.
If you are a Florida realtor or investor these changes affect you and your customers. It pays to be informed!