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SHOULD THE BOARD HIRE A BOARD MEMBER’S COMPANY?
By Eric Glazer, Esq.
Published October 5, 2015
Let’s say your condominium building needs a paint
job. It just so happens that the President of the association
is the owner of a general contracting firm. He tells the Board
to stop racking their brains trying to find a company. He
promises to have his company do the job right. He will
certainly give the association the best price. His company will
provide a warranty. He will personally supervise the job. All
required permits, if any, will be pulled. And in the end…..it
will look like Michaelangelo himself painted the property.
Two questions…….The first is whether or not the
Board of Directors can enter into a contract with a company that
a fellow director has an interest in. The second question
is…even if the law allows for such a contract, is it a good
idea?
For both condominium and homeowner associations the
law states:
(As to any
contract or other transaction between an association and one or
more of its directors or any other corporation, firm,
association, or entity in which one or more of its directors are
directors or officers or are financially interested:
(a) The
association shall comply with the requirements of s. 617.0832.
(full disclosure)
(b) The
disclosures required by s. 617.0832 shall be entered into the
written minutes of the meeting.
(c) Approval of the contract or other transaction shall require
an affirmative vote of two-thirds of the directors present.
(The director who is interested cannot vote)
(d) At the
next regular or special meeting of the members, the existence of
the contract or other transaction shall be disclosed to the
members. Upon motion of any member, the contract or transaction
shall be brought up for a vote and may be canceled by a majority
vote of the members present. Should the members cancel the
contract, the association shall only be liable for the
reasonable value of goods and services provided up to the time
of cancellation and shall not be liable for any termination fee,
liquidated damages, or other form of penalty for such
cancellation.
So,
Florida law does allow the association to enter into a contract
with a director’s company. But is that a good idea? There are
situations where such an arrangement can work out fine. The job
gets done, the service is performed, the association saves
money, and everyone is happy. When it goes bad however, it’s an
uncomfortable situation for everyone. Remember, the road to
hell is paved with good intentions.
Doing business with a Board member or their company. Good idea
or bad?
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About
HOA & Condo Blog
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Eric Glazer graduated from
the University of Miami School of Law in 1992 after
receiving a B.A. from NYU. He has practiced community
association law for more than 2
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decades and is the owner of Glazer
and Associates, P.A. a seven attorney law firm with offices in
Fort Lauderdale and Orlando and satellite offices in Naples,
Fort Myers and Tampa.
Since 2009, Eric has been the host
of Condo Craze and HOAs, a weekly one hour radio show that airs
at noon each Sunday on 850 WFTL.
See:
www.condocrazeandhoas.com.
He is the first attorney in the
State of Florida that designed a course that certifies
condominium residents as eligible to serve on a condominium
Board of Directors and has now certified more than 10,000
Floridians all across the state. He is certified as a Circuit
Court Mediator by The Florida Supreme Court and has mediated
dozens of disputes between associations and unit owners. Eric
also devotes significant time to advancing legislation in the
best interest of Florida community association members.
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