Q: The board of my homeowners’ association wants to hire a management company. They say it is too much work. We are a small development with very little common property, and we have always been self-managed. A number of us feel that if the board is going to saddle us with this extra expense, it needs to be put up to a vote. What do you think? (J.S. via e-mail)
A: Board members have a fiduciary duty to see that the community is operated in a proper manner. That is no easy task, even for small associations.
The duties of an association include making provision for the maintenance of common areas, maintaining proper insurance, keeping official records available for member inspection as required by law, adoption of a budget, production of year-end financial statements, filing tax returns, and ensuring that the provisions of the governing documents are enforced.
While many communities are self-managed, I personally would never serve on a board where proper outside assistance was not supported by the community. Board members are volunteers and rarely conversant in the myriad of issues required to operate a community. The primary function of a board is to set the policies and actions of the association, not execute them.
All of that said, the decision on whether to hire a management company or not typically lies with the board. While I have seen the rare set of bylaws that require membership approval for this action, most bylaws specifically grant the authority to hire managers to the board, or do so through a general grant of powers. However, some bylaws do place limits on a board’s authority to increase budget expenditures (though most do not), so that could also serve as a practical restraint (the board needs to be able to pay for it).
Of course, the members of an HOA always have the ultimate veto power over the board’s decisions through the statutory right of recall. Board members can be removed by a majority of all voters, with or without cause, if certain procedures are followed. I do not encourage recalls, they are usually quite divisive, but it is an option.
If the association is going to hire a management company, it should interview several candidates, although the competitive bidding requirements of the statute do exempt management companies. The relationship should be documented in a written contract, reviewed or prepared by the association’s attorney. In my opinion, every management agreement should be terminable at will by either party on reasonable notice, such as 30 or 60 days.
A management agreement should also clearly set out what the duties of the manager are, set forth any extra costs beyond the monthly per-door fee, and contain appropriate provisions regarding insurance and indemnification.
Q: I own a home that is subject to a homeowners’ association. Am I entitled to review the association’s budget and other financial records? (E.L., via e-mail)
A: Yes, owners are entitled to inspect and copy the financial records of the association. Both the Florida Homeowners’ Association Act, Chapter 720 of the Florida Statutes, and the Florida Condominium Act, Chapter 718 of the Florida Statutes, grant owners broad inspection rights.
The association’s budget and other financial information are official records of the association that must be made available to an owner for inspection and copying. Section 720.303(4) of the Florida Homeowners’ Association Act provides that the association’s tax returns, financial statements, financial reports and any other records that identify, measure, record or communicate financial information are official records that must be made available on request. Also, as to the budget, Section 720.303(6) of the Act requires that after adoption of the budget by the board, the association must either send each owner a copy of the budget or a notice stating that a copy of the budget is available free of charge.