House Bill 933

AN ACT TO REGULATE MANAGING AGENTS OF HOMEOWNERS' ASSOCIATIONS REGARDING THEIR DEPOSIT AND MANAGEMENT OF ASSOCIATION FUNDS; TO PROVIDE CERTAIN DEFINITIONS FOR THE ACT; TO REQUIRE TRANSFERS OF FUNDS ABOVE A CERTAIN AMOUNT TO BE AUTHORIZED BY PRIOR BOARD APPROVAL; TO PROHIBIT THE MANAGING AGENT FROM COMMINGLING THE FUNDS OF THE ASSOCIATION WITH THE MANAGING AGENTS OWN MONEY OR WITH THE MONEY OF OTHERS THAT THE MANAGING AGENT RECEIVES OR ACCEPTS; TO PROVIDE THAT CURRENTLY COMMINGLED FUNDS SHALL BE SEPARATED BY A CERTAIN DATE; TO REQUIRE THE MANAGING AGENT TO PROVIDE CERTAIN FINANCIAL INFORMATION RELATING TO THE FUNDS OF THE ASSOCIATION AT ALL REGULARLY SCHEDULED MEETINGS; TO AUTHORIZE SPECIAL OR REGULARLY SCHEDULED MEETINGS TO BE HELD BY ELECTRONIC TRANSMISSION OR BY OTHER MEANS OF REMOTE COMMUNICATION; TO REQUIRE HOMEOWNERS' ASSOCIATIONS TO MAINTAIN FIDELITY BOND OR COMPARABLE INSURANCE COVERAGE FOR ITS DIRECTORS AND OFFICERS; TO PROVIDE THAT THE BOND REQUIREMENT SHALL NOT APPLY IF A MAJORITY OF THE BOARD OF A HOMEOWNERS ASSOCIATION VOTE NOT TO HAVE IT; TO PROVIDE THAT THE MANAGING AGENT IS SOLELY RESPONSIBLE FOR ENSURING COMPLIANCE WITH THE PROVISIONS OF THIS ACT; TO PROVIDE THAT ANY BANK OR SAVINGS ASSOCIATION WITH WHOM A TRUST FUND ACCOUNT IS OPENED SHALL BE HELD HARMLESS FROM ANY LIABILITIES, COSTS, EXPENSES, OR FEES INCURRED BY SUCH BANK OR SAVINGS ASSOCIATION AS A RESULT OF ANY ACTION BROUGHT PURSUANT TO THIS ACT; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. (1) A managing agent who accepts or receives funds belonging to a homeowners association shall deposit those funds that are not placed into an escrow account with a bank or savings association or into an account under the control of the association, into a trust fund account maintained by the managing agent in a bank or savings association. All funds deposited by the managing agent in the trust fund account shall be kept in a financial institution and insured by the Federal Deposit Insurance Corporation, and shall be maintained there until disbursed in accordance with written instructions from the association entitled to the funds.

(2) At the written request of the board of the homeowners association, the funds the managing agent accepts or receives on behalf of the association may be deposited into a checking or interest-bearing account in a bank or savings association provided all of the following requirements are met:

(a) The account is in the name of the managing agent as trustee for the association or in the name of the association.

(b) All of the funds in the account are covered by insurance provided by the Federal Deposit Insurance Corporation.

(c) The funds in the account are kept separate, distinct, and apart from the funds belonging to the managing agent or to any other person for whom the managing agent holds funds in trust.

(d) The managing agent discloses to the board of the homeowners association the nature of the account, how interest will be calculated and paid, whether service charges will be paid to the depository and by whom, and any notice requirements or penalties for withdrawal of funds from the account.

(e) No interest earned on funds in the account shall inure directly or indirectly to the benefit of the managing agent or the managing agent's employees.

(f) Transfers of greater than Ten Thousand Dollars ($10,000.00) of an association's total combined reserve and operating account deposits shall not be authorized from the account without prior approval from the board of the homeowners association.

(3) The managing agent shall maintain a separate record of the receipt and disposition of all funds described in this section, including any interest earned on the funds.

(4) Before every regular meeting of the homeowners association and any other time upon request of the association, the managing agent shall provide to the association all of the information described in Section 2 of this act.

(5) The managing agent shall not commingle the funds of the association with the managing agent's own money or with the money of others that the managing agent receives or accepts. If the managing agent has commingled funds on July 1, 2022, the managing agent shall, no later than September 1, 2022, separate the commingled funds into separate accounts.

(6) The prevailing party in an action to enforce this section shall be entitled to recover reasonable legal fees and court costs.

(7) As used in this act, "association" means a homeowners association duly organized as a nonprofit corporation organized under the Mississippi Nonprofit Corporation Act, Section 79-11-101 et seq., and which is exempt from taxation under the federal Income Tax Code.

(8) As used in this act, "managing agent" is any person who, for compensation or in expectation of compensation, exercises control over the assets of a homeowners association. A "managing agent" does not include a regulated financial institution operating within the normal course of its regulated business practice.

SECTION 2. (1) Unless the governing documents of the homeowners association impose more stringent standards, at all regularly scheduled meetings, the board of a homeowners association shall review the latest account statements prepared by the financial institutions where the association has its operating and reserve accounts.

(2) Unless prohibited by the governing documents of the homeowners association, the board may hold any special or regularly scheduled meeting, or any special or regularly scheduled member meeting, by electronic transmission or other means of remote communication, or by a combination thereof.

SECTION 3. The review requirements of Section 2 of this act may be met when every individual member of the board, or a subcommittee of the board consisting of the treasurer and at least one (1) other board member, reviews the documents and statements described in Section 2 of this act independent of a board meeting, so long as the review is ratified at the board meeting subsequent to the review and that ratification is reflected in the minutes of that meeting.

SECTION 4. Notwithstanding any other law to the contrary, transfers of greater than Ten Thousand Dollars ($10,000.00) of a homeowners association's total combined reserve and operating account deposits shall not be authorized from the association's reserve or operating accounts without prior board approval. This section shall apply in addition to any other applicable requirements of this act.

SECTION 5. (1) Unless the governing documents of the homeowners association require greater coverage amounts, the homeowners association shall maintain fidelity bond or comparable insurance coverage for its directors, officers, and employees in an amount that is equal to or more than the combined amount of the reserves of the association and total assessments for the highest balance during the previous year. The association's coverage shall also include computer fraud and funds transfer fraud, which is not required to include cyber coverage.

(2) Notwithstanding the provisions of subsection (1) of this section, if a majority of the board of a homeowners association, at a regular or special meeting of the association, vote not to maintain fidelity bond or comparable insurance coverage for its directors, officers, or employees, the provisions of subsection (1) shall not apply to the association.

SECTION 6. (1) The managing agent shall be solely responsible for ensuring compliance with the provisions of this act, including those governing the establishment and handling of funds placed into a trust fund account with a bank or savings association as provided for herein.

(2) Nothing in this act shall be construed to create any additional requirements or liability for any bank or savings association with whom a trust fund account is opened, or any affiliates, officers, directors, employees or agents of such bank or savings association.

(3) Any bank or savings association with whom a trust fund account is opened, and any affiliates, officers, directors, employees, or agents of such bank or savings association, shall be held harmless on a trust fund account opened in accordance with this act from any liabilities, costs, expenses, or fees, including attorney's fees, incurred by such bank or savings association as a result of any action brought pursuant to this act.

SECTION 7. This act shall take effect and be in force from and after July 1, 2022.