Condo Board Members Resigning After Stricter Reserve Rules, Causing Chaos

The firm’s latest Miami Herald “Real Estate Counselor” column was authored by shareholder Roberto C. Blanch, and appeared in this past Sunday’s edition of the paper. The article, which is titled “Condo Board Members Resigning After Stricter Reserve Rules, Causing Chaos,” focuses on resignations of entire association boards of directors due to the growing levels of discord at many communities caused by rising insurance costs and the new state requirements for structural inspections and reserves. Such sudden resignations of entire boards have been leaving some communities in extraordinarily difficult situations. Roberto’s article reads:

. . . Two cases of boards of directors resigning at Tampa Bay-area communities made headlines last summer.

A July report by ABC Action News in Tampa chronicled how the sudden exodus of HOA directors at the On Top of the World retirement community essentially rendered the association temporarily defunct. It could not proceed with any day-to-day business with only one member left on its nine-person board.

The community called a special meeting to appoint four new directors to bring the total to five, which met the required quorum and allowed the board to continue performing its duties.

Two of the departing directors felt the vitriol and personal attacks by residents had become too much to bear, the station reported. The Pinellas County Sheriff’s Office was called in to investigate several online posts, including some urging residents to “storm the [board] meeting” and attend it “armed and loaded.”

A few weeks earlier in June, Villas of Carillon residents near St. Petersburg were informed via email that the HOA’s entire board of directors had resigned, effective immediately, the CBS affiliate, 10TampaBay.com, reported. Their resignation came after the owners successfully postponed a board vote over a special assessment for $60,000 per unit stemming from the results of a structural integrity reserve study.

The station chronicled how more than 100 owners packed a hotel ballroom to vote on the assessment, asserting the board was not following the proper procedures.

“In a surprise turn, the board and property management company allowed a motion to postpone going to a vote, and everyone shouted ‘Aye.’ Meeting adjourned,” the station reported.

Last month, at Grenadier Lakes at Welleby in Sunrise, the HOA’s board of directors also abruptly resigned, leaving owners with no way to access the association’s funds to pay a $20,000 insurance bill, CBS4 Miami reported. Residents scrambled to raise enough money to cover the bill in less than 24 hours, and they launched an online fundraiser to secure additional funds to cover the next month’s payment.

The owners also filed an emergency motion asking Broward Circuit Court to grant them the power to elect a new board so they can access the HOA’s funds and pay for such essential expenses.

Florida lawmakers have enacted laws in recent years aiming to increase transparency in community association governance and board member accountability, and to require milestone inspections and funding of structural-integrity reserves. Those new mandates, together with the financial burden of rising premiums for required insurance, have created significantly increased costs for many associations that are passed onto members.

As a result, tensions have grown due to owners being skeptical of their governing boards, and directors exasperated by the cynicism of their neighbors. This has led to increased resignations by directors and greater reluctance of others to volunteer for board service.

Given all the upheaval, many are calling for legislative fixes to provide some relief. The state’s lawmakers should facilitate emergency votes to elect new directors after resignations of complete boards; provide for incentives for insurers to lower premiums for associations; create loan programs for associations facing increased costs; and expand the training and certification of association directors.

As these recent cases illustrate, mass resignations that leave associations without a functioning board can lead to significant legal, financial and administrative challenges as well as increased costs. Plus, the resigning directors who refuse to provide for some sort of transition could be considered to be in breach of their fiduciary duties. . .

Roberto concludes his article by noting that Florida law requires community associations to maintain a functioning board of directors, and their governing bylaws typically spell out the process for elections or appointments of new board members following resignations. He writes that with all the turmoil that many communities are experiencing, and in the absence of legislative fixes to address the mounting strains, directors and managers would be well advised to consult with qualified and experienced association attorneys to review the procedures prescribed by their documents and consider possible changes to help avoid the repercussions of a sudden mass exodus by all their directors.

Our firm salutes Roberto for sharing his insights on the reverberations that are being caused by sudden resignations of entire boards of directors with the readers of the Miami Herald.  Click here to read the complete article in the newspaper’s website.

Roberto and the firm’s other South Florida community association attorneys write about important matters for associations in this blog and our Herald column, which appears every two weeks on Sundays, and we encourage association directors, members and property managers to click here and subscribe to our newsletter to receive our future articles.