Directors and officers answer to members
Q: I have a hard time with the concept that Florida condominium law is akin to no rules of parliamentary procedure, or even common sense. I find it fundamentally flawed that an inferior body, i.e., the board, can assume the powers of the main body, the members.
For example, suppose that you have a condo of 40 owners, and a board of five. This means that three activists on the board can pass whatever rules they think are a good idea. It goes against all tradition of parliamentary procedures, and fairness, that a board can empower the ideas of three such persons on the entire condo, with no recourse. I realize that the board can be recalled, or not re-elected, but it does seem that a special meeting of the owner members could vacate such board actions, although from what you seem to say they cannot.
If Florida condominium law does give this power to boards, please explain why and how. It does seem to be at the heart of many of the complaints of which people write to you.
A: I am sorry if I misled you to think that the board of directors "answers to no one." The board of directors is fully responsible, as per the statutes, for the maintenance and operations of the association. That does not mean that it does not answer to anyone. It must comply with the rules and regulations, the documents of the association, and conform to the statutes. In other words, it must operate within a box. Since the directors are elected by the members, they stand to answer to the members and can be recalled or voted out at the next election.
The final answer is that the members have the last word, and also the members must pay for any loss or injustice by the directors. Directors can establish operational policies and "house or board" rules, but they must be in compliance with the recorded rules, the documents, and the statutes. The directors elect the officers. The officers have duties as assigned by the directors, the documents and the statutes.
The key aspects to your question are responsibilities and duties. Responsibility is the highest obligation, while duty is the burden and liability to perform the assignments. The final part of the equation is that all parties have a fiduciary duty. This places a higher value of proper operations within the box. Thus, the directors and officers answer to the members. If they step outside the box? They can answer to a judge.
Statutes spell out rules on budgets, reserves
Q: When our condominium board voted to approve the budget, there was no vote on the reserves called for in the agenda. In January during our annual meeting, the agenda did not include a vote on the reserves by unit owners. When I questioned the president, I was told that since there was not a quorum of members, there would be no vote on the mandatory reserves. The answer I received was that the condominium act required the board to approve a budget, and the members had no vote to approve the budget and reserves. I tried to contact the Division of Florida Condominiums, but apparently the number had been changed. I would appreciate your opinion on this matter.
A: The statutes reflect that a responsibility of the board of directors is to create and approve an adequate budget with proper reserves each year. The board alone has the responsibility as such. If it fails to create and approve the budget and reserves, it is in violation of the statutes.
If the owners want to vote to reduce or eliminate the reserves, they must petition the board to add it to the agenda for the annual meeting. At the members' meeting, when the agenda item is called, then a member must make the motion to adjust or eliminate the reserves.
I recommend that no directors make the motion because they are responsible for the budget and reserve. If the members do not provide notice to the board in writing before the agenda is published, it is too late to vote at the meeting.
The state and the division are concerned about the association having proper reserves and put the burden on the board to calculate and approve proper reserves. Owners should be concerned about voting against such reserves, as it will cause a collections problem in the future when the funds are needed for repairs. To contact the Division of Florida Condominiums, Timeshares, and Mobile Homes, call (850) 488-1122 or visit myfloridalicense.com/dbpr/lsc.
Difference between FS 617 and FS 720
Q: Can you explain the difference between FS 617 (short title, Corporations Not for Profit) and FS 720 (short title, Homeowners' Associations)? You said the confirmation I need is FS 720 for our HOA operations and not FS 617 as primary operational statute.
A: All associations should be formed as a corporation per your articles. In Florida, the two types of corporations are for profit (FS 607) and not for profit (FS 617). FS 617 does not mean "nonprofit," and therefore tax-exempt, nor does it mean that under FS 617 the corporation cannot involve profit enterprises. Think of the way the corporations are formed and operate.
If you go back several years you will find that HOAs operated under FS 617.300 (plus), which meant that they were formed and operated within FS 617 statute. The state split the FS 617 into a separate statute and formed FS 720, the HOA Act. If you note that the first section of FS 720 starts with the 300 numbers, it only indicates that the HOA Act continues in the same form as before the splitting of the statute. All HOAs should operate within the requirements of both statutes.
Richard White is a licensed community associations manager. Write to him at 6039 Cypress Gardens Blvd., No. 201, Winter Haven, FL 33884-4115. Please include your name and city.