V.M. from Miami-Dade County, Florida writes:
Dear Mister Condo,
I was chosen as chair to revise our condo documents; my committee (8) and I chose 6 new amendments that were presented to the board prior to the board’s delivery to the attorney for review. At the moment our condo association has 2 existing bank loans and most recent the board opened a line of credit for $3,000,000. The committee chose to add statute 718.1265 and 617.0830; “the board of directors shall have the right to borrow money to exercise emergency powers in response to a disaster for which a state of emergency has been declared, as provided in the Florida Condominium Act, without unit approval. Other than a state of emergency, the Association will be mandated to obtain 75% approval from the voting membership to borrow money”. This amendment must be included in the documents to be enforced by the association, it was chosen by the committee and voted down at the last board meeting by the board. The board decided to remove this revision from the attorney and membership’s view. This act by the board seems totally unethical to not allow members to protect themselves from a runaway board that could financially bankrupt this not for profit corporation. Is this legal for a board to act as judge and Jury that could simply be defined as a conflict of interest. Is this legal?
Mister Condo replies:
V.M., since I am not an attorney I offer no legal opinions in my column. I will say that a Board that does anything outside the letter of the law is opening itself up to a lawsuit from association members. Further, regardless of how they word their amendment, if it doesn’t comply with Florida State Law (current and future), the association wouldn’t have a leg to stand on in court. Federal, state and even local laws supersede association governance documents. With regards to the ethics in question, it has been my experience that Boards that don’t perform to the ethical expectations of their members tend to get voted out of office. All of these folks are volunteers who require either election or appointment to their position to fill vacancies. Acting outside of the best interest of the association is one sure-fire way to lose your seat at the next election. In theory, the democratically elected leaders of the community are empowered to handle the day-to-day business of the association. Taking out loans, levying Special Assessments and such are rare occasions. The spirit of the law is to allow the Board to run the everyday business decisions. They can create and implement budgets, hire and fire employees and managers, enter into contracts with vendors, and so on. Putting association members in potential financial devastation due to unforeseen expenses and loan commitments are not typical or common business decisions. If they act outside their authority or the law, they will very likely be called out for their actions. As of now, they have not done so but they appear to be laying the groundwork. This is a great time to seek your own legal advice to prevent them from potentially creating large debts for the association to repay. Keep in mind also that the banks that lend to HOAs almost always require legal review to make sure the association isn’t out of compliance with law or their own governing documents. If they had acted illegally, it would likely be caught by the lender. All the best!