Category -> KG In The News
High & Mighty When Boards Go Overboard
There’s nothing worse than being a unit owner in a building and seeing someone on your board breaking a rule and seemingly getting away with it.
Some board members believe that they are “above the law” so to speak, and seem to be operating under a different set of rules than the rest of the building. This could be anything from giving themselves preferential treatment for parking spots, flouting pet rules, fast-tracking their own alteration projects or voting on financial matters when they themselves are in arrears.
Allison L. Hertz, a lawyer with the law firm of Rosenbaum Mollengarden PLLC in West Palm Beach has seen her share of board members try to get away with things, and she does what she can to help right the ship.
“Board members not following their own bylaws happens more than you’d like it to happen,” adds Raymond A. Piccin, a partner with the community association law firm of Katzman Garfinkel in Fort Myers. “There are two reasons. One is obviously intentional—which is probably the worst-case scenario—and the second is unintentional. A lot of boards usually adopt what the prior board did. I can’t tell you how many times I’ve run into situations where I’ve read the documents to them and they say, ‘We’ve been doing it this way for 20 years.’ That may be so, but that doesn’t make it right. I would say eight out of 10 times it’s innocent, but there is a small percentage [who do things] for nefarious reasons: either they want to get back on the board to get other people off the board or some other reason.”
Rogue board members are awful for building morale, have a corrosive effect on residents’ confidence in their board, and can cause a myriad of problems. In addition, in Florida there’s a law that if a board member is 90 days past due on his or her assessments, they are no longer eligible to serve on a board.
“There are times when a board member tends to think that they are in a position of power rather than one of responsibility and they tend to have a flagrant disregard for the rules and regulations of the community,” says Kelly Ann Vickers, LCAM, the senior business development manager of KW Property Management & Consulting, which has offices throughout Florida. “These situations are far more difficult to manage as a result of the high level of emotion that can be involved and any guidance from an LCAM or a management firm will be viewed as confrontational and personal.”
A fiduciary relationship exists when one party puts its trust in another party and grants to that second party a degree of influence and power. There is the understanding in a fiduciary relationship that the second party has a high level of accountability, including moral accountability, to the first party, and that the second party—the fiduciary—will put the best interests of the first party above his own.
“Essentially, a board member’s fiduciary duty includes acting in good faith and in the best interest of the association and its members,” says Hertz. “It does not mean that a board member must be an expert in every area associated with running the corporation or the building. In discharging his or her duties, a board member may reasonably rely on statements and reports prepared by attorneys, accountants, and other experts, and employees, officers, and committees of the board. A board member is not acting in good faith or in the best interest of the corporation if the board member derives an improper benefit from his or her position as a member of the board.”
According to amended provisions of the Florida Condominium, Cooperative and Homeowners Acts, (respectively, Chapters, 718, 719 and 720 of the Florida Statutes) board members must certify that they have read the association’s governing documents and that they will work to uphold such documents and that they will faithfully discharge their fiduciary responsibility to the association’s members or complete an educational course administered by the Division of Florida Condominiums, Timeshares and Mobile Homes.
In a black-and-white world, a board member shouldn’t be held to any higher standard than any other unit owner in terms of their obligation to follow rules, but in real life, they must be to keep things running smoothly. If not, unit owners get upset and all of a sudden it undermines a board’s authority and it makes them wonder what else they can be doing wrong—like possibly embezzling—it creates a firestorm of problems.
“A board’s duty is to promote health, maintenance and support of the community so they do have a fiduciary duty to act in the best interest of everyone and sometimes that’s a difficult thing to do,” adds Piccin. “What it comes down to is that you have to place everyone’s interest above your own. It has to be what’s best for everyone.”
Breaking the Rules
In one building that Vickers managed, board members from the condominium association were participating in several questionable practices, such as voting on a budget without having a meeting or presenting the proposed budget to the membership before they voted on it, refusing to allow members to speak at meetings, and allowing a board member to keep more than the maximum number and type of pets specified in their own documents.
“In instances such as those, it’s important to recognize that they have not had access to guidance from a knowledgeable LCAM or management firm who can caution them on Florida statutes,” says Vickers, “Or emphasize the importance of implementing the golden rule of being fair and consistent in applying the rules to all members of the community.”
Board members who break rules may do so out of a feeling of superiority or it may just be in their nature and they think they can get away with it.
“All of the owners must be treated the same by the association. This includes members of the board,” says Hertz. “In the event a board member violates a covenant or restriction and the board does not take action, other owners will likely raise the defense of selective enforcement if the board attempts to enforce the restriction against them. It may be difficult for board members to confront other board members for violating rules or committing improper acts. However, in my experience, whether the issue is addressed depends on the dynamics of the board. The issue may be resolved relatively quickly or it could lead to a situation where the board cannot get a lot accomplished because of the conflict and the association is subjected to selective enforcement defenses.”
Piccin believes that there should be no differences between how a rule-breaking board member should be dealt with compared to a unit owner who may step out of line. In fact, he believes that the board member should be held to a higher standard and should be setting the example in the community.
Without question, unit owners expect board members to lead by example and comply with the same rules and regulations all unit owners abide by.To do otherwise breeds distrust in the board and lowers the morale of a community.
If a unit owner sees a problem they should contact the managing agent or property manager and complain about the board member’s infraction.
“The first thing to do is make sure you’ve got evidence. You don’t want to start accusing anyone of self-dealing on a whim,” says Piccin. “You want to make sure you’ve got your ducks in a row. And if you do, you’ve got to start documenting things by putting them in writing and sending things to the association. Folks get really emotional in community associations and a lot of times start saying things they shouldn’t be saying. The easiest thing to do if you suspect someone of double dealing is to follow the money trail because they have access to the association’s financial records. That’s where folks trip themselves up. They’ll be checks written to that particular person or they’ll have checks written to a corporation that doesn’t exist. Even if they are a legitimate company you can see who the owners of that company are and 9 times out of ten it could be a family member that owns the company.”
“The first step is to address the concerns in a written letter to the Board of Directors, and request an opportunity to discuss the concerns of the residents with the board members,” says Vickers. “If this proves unsuccessful, the residents can either file a formal complaint with the Department of Business and Professional Regulation which should include proof of the allegations or they can petition the membership to recall the board member(s) which they have concerns about.”
Another thing unit owners can do if they suspect fraud is attend board meetings to follow the issues, speak up at owners’ forums at a board meeting or write the board and management raising issues of concern.
“Condominium and cooperative unit owners are often times required to file a petition for arbitration against the association to address violations,” says Hertz. “Members of homeowners associations may demand pre-suit mediation in certain circumstances, but such mediation is simply a precondition to filing an action in court.”
Then of course the easiest course of action against a board member breaking rules is to simply campaign against them in the next election and make sure they don’t get their position back.
One of the best ways to make sure everyone—board members included—is on the same page is to have a good set of rules with all procedures in place such as a complete set of documents for suspected rule violations as well as guidelines for disputes such as arbitration or mediation.
Keith Loria is a freelance writer and a frequent contributor to The South Florida Cooperator. Staff writer Christy Smith Sloman contributed to this article.