“Serving on a Florida Community Association Board: Responsibilities and Best Practices” – FLCAJ Magazine
I have been practicing condominium and planned development law for more than 20 years, and in that time the laws governing condominiums[i], homeowners’ associations[ii], and cooperative associations[iii] have undergone significant changes. This, in turn, has led to changes in how boards govern. For example, in condominiums gone are the days when the board’s biggest concern was receiving a warning or educational letter from the Department of Business and Professional Regulation explaining what was done incorrectly and advising them how to do better in the future. Today the board faces potential fines[iv] and, in some cases, potential civil or criminal liability.[v] As a community association attorney, my goal is to make life easier for board members and managers by educating them on how to effectively govern and manage their communities while minimizing their risk of legal penalties.
Why Serve on a Community Association Board?
I have never been a board member myself, but I have spoken to hundreds of them. What I have seen is that, by and large, most board members get involved because they want to maintain or improve their community’s standards, which has a direct impact on their own property values and those of other members of the community. However, unfortunately, not all board members’ motivations are altruistic. The inclusion of stricter statutory penalties was a reaction to the actions of a few bad actors who mismanaged condominiums and HOAs over the years.
The following are other reasons that I have seen individuals join boards:
- Contributing to a Better Living Environment
Board members often create programs and, to the extent their documents permit,[vi] plan and oversee the maintenance, improvement, and sometimes the development of amenities in their community. They aim to preserve the community’s existing standards, keeping the infrastructure in good condition and appearance so the community is appealing to both current and potential members.
- Maintaining or Enhancing Property Values
HOA members and condominium unit owners often overestimate the board’s influence on property values. In actuality, property values depend on many factors, such as market trends, location, size and layout of the units and the property, age and condition of the units and infrastructure, and available amenities. However, the board can still make a difference by maintaining and, where permitted, improving the property and its amenities, which can help support its value.
- Community Responsibility
Over the years I have met many people who truly had a desire to contribute to their community and wanted to get involved, so they ran for the board or volunteered for its various committees. Some saw themselves as problem solvers who believed they could fix issues in the community. Others wanted to develop their leadership skills through participation on the board, while some ran for the board because they already had certain skills and thought their knowledge and expertise would benefit the community.
Understanding Fiduciary Duty
When I conduct board certification classes, I often ask the audience members to raise their hands if they are familiar with the term “fiduciary duty.” Almost everyone in the room raises their hand. But when I follow up by asking who can define the term, the number of hands raised significantly decreases. Most participants think the term deals with the responsible handling of association money. That is only one aspect of a board’s fiduciary obligation to its unit owners and members. In fact, a board’s fiduciary duty is a legal obligation that goes beyond financial management. [vii]
The Condominium Act states that “an officer, director, or agent shall discharge his or her duties in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and in a manner he or she reasonably believes to be in the interests of the association.” [viii] The statute also prohibits certain activities, including an officer or director deriving an improper personal benefit, reckless actions, acting in bad faith or with malicious purpose, or acting in a manner which exhibits wanton and willful disregard for human rights, safety, or property.[ix] When I present to boards, I give examples of hypothetical violations of these provisions and ask if they would ever engage in such practices. The answer is always no, which is why I reassure them that they, like most board members, have little to worry about in terms of the many statutory criminal or civil penalties. Furthermore, Section 617.0830, Florida Statutes, allows directors to rely on the expertise of others when carrying out their duties to further insulate them from liability.[x] That is why it is critical for boards to have experienced and competent management, bookkeepers, CPAs , and board-certified condominium and planned development attorneys who are well-versed in their respective areas and who understand the laws and administrative codes to guide them through the complex and ever-changing legal landscape.
Best Practices for Board Members
- Transparency
While community association statutes permit board members to communicate through email, they do not allow voting on association matters via email.”[xi] Email communication should be limited as community-related discussions should occur in front of the membership. This allows members and owners to stay informed about what is happening and why. Transparency through clear communication and discussion at board meetings is essential. Members have the right to speak on any item on the agenda.[xii] Proper meeting notices sent within the statutory timeframes also keep the community informed about what will be discussed at each meeting.
- Board Certification and Education
Board members are statutorily required to be certified and must continue their education.[xiii] The standards for the educational curriculum have increased over the years and are now codified in the statutes for each type of association.
- Compliance with Governing Documents
The board must also comply with the community’s governing documents. Without specific discretion granted in your documents, the board cannot grant variances from the written text of the documents without risking legal troubles, including selective enforcement issues and potential claims of discrimination from those seeking similar variances in the future. If your board has already been granting “variances” or not strictly enforcing the community’s governing documents, speak with your attorney about how to legally hit the “reset button” through a board resolution.
- Proper and Lawful Budgeting
Budgeting and handling reserves has become especially complex in condominium associations over the last few years, so seek advice from your professionals as you begin to prepare your upcoming budget.
- Board Member Code of Conduct
Some communities have taken the additional step of developing, with their legal counsel, a board member code of conduct which provides a clear understanding of the duties of the directors and officers and what is expected of them in various situations.
Conclusion
Serving on a community association board can be a rewarding way to help shape your community’s future, protect the property, and foster a sense of community. By embracing their fiduciary responsibilities to the owners, practicing effective governance, and communicating clearly and in a transparent manner, board members can lead their communities effectively and minimize disputes. To meet their obligations and enhance the community’s quality of life, boards should stay up to date on Florida’s legal requirements, consult with knowledgeable professionals, and engage with residents in a transparent manner.
This article is intended for educational purposes only and is not intended as legal advice.
The author wants to thank Joseph Markovich, Esq., for his thoughtful proofreading and editorial suggestions.
[i] Chapter 718, Florida Statutes.
[ii] Chapter 720, Florida Statutes.
[iii] Chapter 719, Florida Statutes.
[iv] See Chapter 61B-21, Florida Administrative Code.
[v] See 718.111(1)(a), and 718.111(1)(d), Florida Statutes.
[vi] Section 718.113, Florida Statutes, outlines the requirements for material alterations in condominiums.
[vii] Sections 718.111(1)(a) and 719.104(8)(a), Florida Statutes provide: “The officers and directors of the association have a fiduciary relationship to the unit owners.” Section 720.303(1), Florida Statutes, provides: “The officers and directors of an association have a fiduciary relationship to the members who are served by the association.”
[viii] Section 718.111(1)(d), Florida Statutes (referencing Section 617.0803, Florida Statutes.)
[ix] Id.
[x] Section 617.0830, Florida Statutes provides, in relevant part:
(2) In discharging his or her duties, a director may rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:
(a) One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented;
(b) Legal counsel, public accountants, or other persons as to matters the director reasonably believes are within the persons’ professional or expert competence; or
(c) A committee of the board of directors of which he or she is not a member if the director reasonably believes the committee merits confidence.
(3) A director is not acting in good faith if he or she has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (2) unwarranted.
(4) A director is not liable for any action taken as a director, or any failure to take any action, if he or she performed the duties of his or her office in compliance with this section.
[xi] Sections 718.112(2)(c), 719.106(1)(c), and 720.303(2)(a) Florida Statutes.
[xii] See also 718.112(2)(c) for additional speaking rights available to condominium unit owners.
[xiii] Sections 718.112(2)(d)4(b), 719.106(1)(d)1(b), and 720.3033(1), Florida Statutes.
To read the original FLCAJ article, please click here.
Mark Friedman is a shareholder in the West Palm Beach office of Becker and is recognized by the Florida Bar as board certified in condominium and planned development law. Mr. Friedman has provided legal counsel to condominium, homeowner, and cooperative associations since 2005, when he joined Becker. He describes his job as one that is geared to making the lives of board members and managers easier. His work with these communities includes covenant enforcement, analysis and review of bank loans, document review and drafting, and contract analysis and drafting, as well as providing guidance to the boards and managers about the statutory and documentary guidelines for the ongoing administration of their association.
