Board of Directors -Donna DiMaggio Berger

The Dysfunctional Board

Today’s Blog was written by another of South Florida’s most important Condo Attorneys—Donna DiMaggio Berger— a Managing Partner of Katzman, Garfinkel and Berger, a fine firm that was, at one time, our attorneys. She is also Executive Director of the Community Advocacy Network (CAN) and has graciously allowed me to reprint her work.

Whether you serve on behalf of a condominium, cooperative or homeowners' association, there are several traits (good and bad) that these volunteer boards share. It is important to remember that boards of directors for (Condominium) communities in Florida are made up of your neighbors who take time away from jobs, families and hobbies to serve their communities. The experience level of any given board is typically varied and can run the gamut from school teachers, tradesmen, former CEO's of Fortune 500 companies to stay-at-home parents.

The vast majority of these folks volunteered to serve on their board in order to safeguard their largest asset, their home. Despite scattered media reports on directors treating the association coffers as their personal piggy bank or generally acting as despots, most directors conscientiously undertake the duties and responsibilities attached to board membership. It is important to remember that board members are held to a "reasonable businessman" standard (also known as the business judgment rule); they are not held to a level of absolute perfection.

Board members should not be expected to act as quasi-accountants, engineers, attorneys, etc. They should know and understand that certain elements of the association operations will be beyond their level of expertise and, at that point, they should seek counsel from experts to guide them in the decisions they make on behalf of the association. Some boards seem to know both their responsibilities and inherent limitations from the outset and others have to learn it the hard way. Let's take a look at the traits which make up three different types of boards: the poorly functioning (aka dysfunctional) board; the functioning board and the highly functioning board.  { Today, only the dysfunctional Board will be described.  MEK.}

The Poorly Functioning Board : These boards are not hard to spot and woe to the persons living in a community served by this kind of board as well as to the board members who know better who find themselves sharing duties with directors who do not.

-Board meetings are held sporadically and without proper notice. Actions which would typically require a fourteen (14) day advance meeting notice (such as for special assessments or changes to rules) are passed with only forty-eight (48) hours or less notice since they are always "an emergency";

-When board meetings are held unit owners are not allowed to participate and, in some cases, even attend. As a result, these meetings often deteriorate into chaos and are quickly adjourned. There is little to no transparency in terms of association operations;

-Owner requests to inspect the books and other requests or inquiries may be ignored or made more difficult than necessary;

-Architectural control guidelines may be applied selectively depending on the whims of the board or a particular member of the board;

-The annual corporate report is not timely filled out and the corporate entity has been dissolved at some point which not only exposes the association members to potential individual liability but requires costly reinstatement fees;

-Contracts requiring payments in excess of 5% of the total annual budget (including reserves) for condominiums and in excess of 10% of the total annual budget (including reserves) for HOA's are entered into and signed without first complying with the competitive bid requirements of Section 718.3026(1) and Section 720.3055 (1) respectively;

-Contracts are given to companies with whom board members may be connected either directly or indirectly and these contracts are not reviewed by counsel prior to execution. Typically, these contracts are written for the benefit of the contractor/vendor and, among other problems, fail to provide any protection to the association in the form of payment and performance bonds or the use of liquidated damages to discourage lengthy delays. Sufficient warranty language may be missing altogether. Some contracts are signed unilaterally by only one board member without a board resolution and occasionally without the knowledge of the full board;

-Maintenance assessments are not collected in accordance with the provisions of the Declaration (either on a square footage or pro-rata basis) and delinquencies are allowed to go beyond the three month or two quarter mark with no attempts to collect;

-The Board (if it is a condominium association) does not pass a budget with full reserves each year. If reserves are in place, the board (either a condominium or HOA) uses reserve money for purposes other than that for which it was collected without a membership vote;

-Important decisions regarding new tenant or potential purchaser approvals, disability accommodations and covenant enforcement violations are made without regard to the board's statutory and documentary authority and without legal consultation as to the association's ability to obtain a successful outcome; and/or

-This Board may have no idea what amendments to the governing documents have been passed over the years and may be using an unrecorded set of documents which provide little or no guidance.

Now that we've seen where a board can go very wrong, our next blog will discuss those functioning boards who get the job done but aren't scoring A's on anyone's report card.

Donna DiMaggio Berger

Katzman, Garfinkel & Berger 

http://www.kgblawfirm.com 
954-486-7774  

 ~~~~~~~~~~~~~~~

Thanks again to Donna. Don't forget to ask your friends to look at your Blog --

www.Southpoint-Condo.Blogspot.com  

Let me know what you think--Pro or Con-- we encourage open discussion.

Michael E Katz    954-563-0959  Katz8356@comcast.net

Southpoint

Director