“Management Company Conflict of Interest Questioned” – News-Press

“Management Company Conflict of Interest Questioned” – News-Press

Q: Can the president of a condominium association also be an owner of the property management company that represents the association or is that a conflict of interest? (K.R., via e-mail)

A: The facts you describe create a rebuttable presumption of a conflict of interest, because the president of the association, who is presumably also a board member, owns an interest in a business that does business with the association.

Section 718.3027 of the Florida Condominium Act prohibits an association from entering into a contract with a vendor when the contract poses a conflict of interest, unless the director or officer with the conflict follows the required disclosure procedures. If a director or officer proposes to engage in an activity that is a conflict of interest, the proposed activity must be listed on, and all contracts and transactional documents related to the proposed activity must be attached to, the agenda for the meeting at which the board will be voting on the matter.

The director or officer with the conflict must disclose his or her relationship to the board before the board approves the contract, and the disclosure must be included in the written minutes of the board meeting. He or she must also abstain from voting on the contract and the agreement must be fair and reasonable.

Even if there are ways where such a contract can be legally made, that does not make it a good idea. The president of the association is usually the day-to-day interface with the management company and the officer in the best position to apprise the board of how the management company is doing, good or bad. When that role falls upon a person who has a financial stake in the business, the possibility of divided loyalties seems unavoidable.

Q: I live in a resident owned mobile home park that is only governed by the non-profit law. For the recent annual meeting, the board sent out a document called “limited proxy.” I filled one out and gave it to my neighbor. When they went to the meeting, they were not allowed to get a ballot and were told that I had already voted by the proxy. Is this correct? (G.C., via e-mail)

A: The use of and difference between proxies and ballots is often a confusing. Chapter 617 of the Florida Statutes, the Corporations Not For Profit Act, does not extensively regulate proxies. The law simply states that unless prohibited by the articles of incorporation or bylaws, members may vote by proxy.

In general, two types of proxies are most commonly used, a “general” proxy or a “limited” proxy. A general proxy essentially gives the holder of the proxy the right to vote as he or she sees fit on any issue, presumably as agent and in accordance with the wishes of the person who gave them the proxy. A limited proxy is essentially a signed “absentee ballot,” and the proxyholder is essentially a “warm body” to present the vote.

Whether your association’s handling of the proxy was correct could not be determined without seeing the actual proxy used, and review of the corporation’s bylaws. However, if you did check off your votes on the matters to be considered at the meeting, there would have been no reason to give your proxyholder a ballot.

The Florida law for condominium and cooperatives generally provides that absentee members may only vote on substantive issues through a limited proxy and must use a specified type of ballot for board elections. There is no similar law for homeowners’ associations.

Joseph E. Adams is a Board Certified Specialist in Condominium and Planned Development Law, and an Office Managing Shareholder with Becker & Poliakoff. Please send your community association legal questions to jadams@beckerlawyers.com. Past editions of the Q&A may be viewed at floridacondohoalawblog.com.