It happens in business, government, and industry every day: employees are given the rules of a new job, and very shortly thereafter, learn shortcuts to circumvent them in the interests of time.
The same is done with co-op and condo boards, which may find themselves straying from the letter of the law which governs the entity over which they have been granted authority.
For co-ops, condominiums and homeowner’s associations, there are documents and guidelines available to help a board efficiently, effectively, and legally lead its community.
“A board must conduct the business of its association in accordance with the governing documents of that association—the declaration, amendments, bylaws, article, rules & regulations—in addition to Florida statute,” says Candice Gundel, a senior associate attorney with the Business Law Group, P.A. in Tampa. “In addition, a board should consider Robert’s Rules of Order when conducting meetings, as well as any relevant case law and arbitration decisions.”
A board should make its decisions based on the “reasonable person” standard, as well as the business judgment rule. “The ‘reasonable person’ standard’ is a term of art in the law that serves to guide officers and directors, with the ‘reasonable person’ being a hypothetical entity who exercises average care, skill and judgment in making decisions,” she says. “The key for associations in both the ‘reasonable person’ standard and business judgment rule is to make sure that the board is taking action uniformly and is treating all like situations in a similar or identical manner—i.e. no selective enforcement.”
“We always tell our boards to be very familiar with their collection practices, so they can make sure that the business of their association can continue because, even though they are typically not-for-profits, boards do need to bring in revenue to administer and operate their communities,” says Marzan. “It’s also important that boards understand use restrictions. All communities have them, and they’re primarily embedded in an association’s restrictive covenants—or the bylaws/rules for cooperatives—and they are rules and regulations that address behavior—essentially what one can and cannot do. Knowing those will allow a board to understand whether or not something happening in the community is appropriate, or if they’re following proper collection practices.”
“In addition, an association that does not follow correct protocol is exposing itself to the risk of litigation. An extreme example can be found in HOAs. The Marketable Record Title Act requires that an HOA renew its governing documents within 30 years. If this renewal goes ignored or is done improperly, the association’s declaration will no longer be enforceable, virtually extinguishing the association. The process to renew the governing documents is relatively simple and inexpensive on its face, but were the document to expire, the cost and process to reform would increase ten-fold in both difficulty and expense—should it even be a possibility at all to do so.”