By Attorney John C. Goede
Q: Our community has a small group of owners that try to bully the board at meetings and take control of the meeting. As a result, we end up emailing each other a lot leading up to meetings to strategize and minimize debate at the meeting itself. Any other suggestions?
A: There are a few points here worth discussing. First, it is important to remember that you cannot vote by email. Any action taken via email is not corporate action because Florida Statutes Section 718.112 provides that “members of the board of administration may use e-mail as a means of communication but may not cast a vote on an association matter via e-mail.” The good news about this statute is that it clarifies that email discussions between directors are not meetings, but it also clearly provides that your votes must be cast at meetings.
Next, be aware that anything you put in an email could eventually be a public document. There are a few arbitration cases and declaratory statements addressing this topic, but a general rule is that emails between directors on their private email accounts are not official records of the association. This means that some emails between directors may be excluded from the official records and therefore unavailable for inspection by owners when they make a request to inspect official records. That being said, you have to anticipate that someone will eventually forward the email to management or to someone with the obligation to maintain official records therefore bringing the email into the association’s official records. Some board members will argue that it is a good thing to have all emails subject to inspection and others would argue that it is difficult to efficiently debate via email with concerns that the email discussion would be public before the matter is ready for discussion at a board meeting.
Both sides of this argument have some merit, but the main point is that you should type your emails with anticipation that someone will eventually forward it outside of the board or copy someone with an obligation to store the email in the official records. Also remember that the email could be requested via subpoena in litigation, if any.
Next, remember that Florida law provides that owners can be limited in their ability to speak at meetings. The board can adopt a rule limiting owners to speak for up to three minutes and the board can require a sign-up sheet so that only owners signing up before the deadline have an opportunity to speak at meetings. These types of rules can keep the meeting moving forward and create some structure to the discussion. Obviously, anyone who has tried to enforce these rules knows that it can be difficult, but you should consider these rules if the goal is to have an efficient meeting where the board can actually debate in the open forum as opposed to emailing everything.
Finally, many board members find themselves in lengthy debates with unit owners where the unit owners seek answers to complicated and sometimes leading questions. I would urge you to contemplate that sometimes the best answer to a question is to acknowledge the question and indicate that the board will consider the question.
Q: Can associations lend money to each other and charge interest? We learned that multiple associations in our community have been lending money to each other and that does not sound like it should be permitted.
T.R., Bonita Springs
A: The answer is that it depends. Most condominium and homeowners’ associations (HOAs) in Florida are created under Chapter 617 of the Florida Statutes as not-for-profit corporations. That statute broadly provides that a not-for-profit corporation can lend and borrow. If the analysis stopped there, the answer would be that lending and borrowing is fine.
That being said, the association also has articles of incorporation, bylaws, and declarations that could self-impose a restriction on these activities. For example, many documents provide that the unit owners must approve any borrowing before the board has the authority to borrow. As far as lending is concerned, this is quite rare, but I would recommend that a condominium or HOA only lend money if the documents expressly provide this authority. First, this is because lending is not necessarily relevant to the maintenance, operation and repair of common areas or other typical operations of a residential community. Second, the act of lending requires a risk component analysis. Some of my clients have directors with extensive financial backgrounds, but most do not have these backgrounds, and most do not have the ability to properly evaluate whether a loan is advisable when the source of the financing is common funds.
Thus, borrowing is a frequent activity and the board can typically borrow in its discretion unless the governing documents self-impose a restriction. Lending, however, would likely require additional authorizations and due diligence because the board would be taking a risk by lending to any third party – even a neighboring community.
Q: Our HOA did not have a 2020 annual meeting because of COVID-19. At that meeting, there should have been two directors up for election. The board is preparing to conduct a virtual 2021 annual meeting and the board is claiming that everything was delayed a year and those two seats are back up for election. How should this work?
A: Because the board had emergency powers for most of 2020, many communities cancelled and tried to reschedule their annual meeting, and many could not get a quorum even if they tried twice. Assuming that your question means that there are a total of five directors, the most likely answer is that all five directors are up for election in 2021. When you are not able to have an election, it does not necessarily mean that everything is pushed back until you get a quorum, but it means that the two directors from 2020 would stay on the board as holdover directors until the association could get a quorum and conduct the meeting and therefore, conduct the election. As a result, the two directors up for election in 2020 would again be up for election in 2021 and the three directors originally up for election in 2021 would still be up for election in 2021. Depending on your specific bylaws, this also means that you would re-stagger the terms either by the votes received or by drawing straws or some other arrangement. The answer to this question ultimately involves a review and analysis of your specific bylaws. So, I would recommend you consult your legal counsel to provide an opinion on how to move forward.