What to Know Before Serving in an HOA or Condo Association
The Homeowner’s Association (HOA) or Condo Association is the governing administration of a housing or condominium community. The vast majority of new developments and nearly every condo or townhome development in the State of Florida has an HOA board that is made up of volunteer homeowners.
There are some basics that all residents who are considering becoming active in their HOA should know.
Florida HOA Law
In Florida, HOAs are governed by Chapter 720 of the Florida Statutes. HOA governing documents typically state that they are “subject to Florida Statute Chapter 720 as amended from time to time,” or Florida Statute Chapter 617 and or 607, in the event that the association was created before Florida Statute Chapter 720 was enacted.
HOA Bylaws, Declarations of Restrictive Covenants, and Rules are binding legal contracts that homeowners enter into as part of the home-buying process. New HOA laws are constantly being enacted. When the state legislature passes new laws, they apply going forward rather than retroactively. In other words, existing HOA governing documents continue to be governed by the previous set of laws. Homeowners can obtain a copy of the Florida law at the time that the HOA documents were recorded by requesting a copy of the laws from their county courthouse.
Typical HOA Structure
Typically in an HOA, the owners of the community elect their peers to serve as volunteers on a board of directors. This board of directors is the governing body of the community, making decisions on key issues and representing the community’s residents and their collective best interests. In general, these interests are any that align with protecting the homeowner value. To protect these interests, the HOA enforces covenants and restrictions, rules that the whole community has agreed to by contact. Finally, the HOA board assesses and collects HOA fees. These fees are the HOA’s main source of income and pay largely for the maintenance and janitorial services provided in the community’s common areas.
HOA Powers and Duties
HOA boards often delegate their authority to property management companies and law firms that have the professional experience to handle the day-to-day requirements of the community. Nevertheless, the HOA itself and its board members still maintain ultimate control and responsibility.
Day-to-day management of a community typically involves exercising the following powers and duties:
- Conducting due process procedures for rule violations against association members
- Delegation of authority and tasks to HOA board committees and employees
- Formulation and enforcement of rules for the common areas
- Payment of taxes, assessments and fines to the relevant political subdivisions to avoid liens on the community’s common areas
- Preparation of budgets and financial disclosure documents
- Procurement of services and goods used on the common areas
- Selection and premium payments for insurance
- Uniform enforcement of the bylaws, covenants and restrictions of the community
“In Florida, HOAs are governed by Chapter 720 of the Florida Statutes.”
Personal Liability of HOA Directors
In Florida, although no particular agency enforces the state’s HOA statutes, the Department of Business and Professional Regulation regulates HOA elections and recalls. Homeowners with grievances often resolve them through an escalating process that begins with negotiation, proceeds to mediation and ends with arbitration or, in rare cases, court litigation.
Board directors themselves are generally not held personally liable for conduct of an HOA for the purposes of personal injury or property damage. However, HOA directors may indeed be held liable as individuals if their personal conduct caused an injury. Typically, insurance limits set by law apply that limit the total value of liability that a board member can face in a direct lawsuit related to their role in an HOA.
Many HOAs are formed as non-profit corporations, in which they have a statutory requirement to fulfill all obligations in “good faith”, in the “best interests” of the corporation, and with “prudence” as defined by what a reasonable person would do in any given circumstances. All HOAs are prohibited from making decisions for the benefit of their board members and at the expense of the associations’ members. Individual board members who do not act in accordance with these laws risk expulsion and may also face legal repercussions.
There is also financial risk involved with becoming a member of an HOA board. This is particularly true if the HOA has not taken the time and effort to become incorporated. Should an unincorporated HOA be unwilling or unable to pay a company for services delivered, the director of the HOA that procured those services may be held personally liable for the debt. Likewise, board members should always act within the authority and guidelines of the HOA. Signing a contract without first explaining the benefit of the service to the HOA, or executing a contract without authority may mean that the board member is personally liable for the cost incurred.
The Importance of Legal Counsel
HOAs and their board members frequently hire accountants and attorneys to manage the more complex financial and legal aspects of their role. Although an HOA board position is voluntary, the risks and challenges faced by HOA and the individuals who serve in them are decidedly “high stakes”. If you are considering running for a voluntary position in an HOA, or if you are already a member of your HOA board, be sure that you and your HOA have the legal support needed to make important decisions on the part of your associations members.
South Florida Law
The complexities of Florida’s HOA and condo association law make it difficult to navigate for even experienced HOA board members. Be sure not to “go it alone”. Here at South Florida Law we have boutique firm attention to detail with the big firm resources necessary to draft and review HOA documents and represent HOAs and Condo associations. Call us today at 305.900.8885 or reach out via our contact form.