IS A TRUSTEE OR BENEFICIARY OF A TRUST ELIGIBLE TO RUN AND/OR SERVE ON AN ASSOCIATION’S BOARD OF DIRECTORS?

One of the questions we receive over and over from our clients is the question “is a trustee or trust beneficiary eligible to run for and/or serve as an association
board member?”

While the question is not directly addressed in either Chapter 718, Florida Statutes (the “Condominium Act”, Chapter 719, Florida Statutes (the “Cooperative Act”)
or Chapter 720, Florida Statutes (the “Homeowners Association Act”), Chapters 607 and 617, Florida Statutes (the “Florida Business Corporation Act” and the “Florida
Not for Profit Corporation Act”, respectively) do provide some guidance.

Section 607.0802(2), Florida Statutes, provides as follows:

In the event that the eligibility to serve as a member of the board of directors of a
condominium association, cooperative association, homeowners’ association, or
mobile home owners’ association is restricted to membership in such association and membership is appurtenant to ownership of a unit, parcel, or mobile home, a grantor of a trust described in s. 733.707(3), or a qualified beneficiary as defined in s. 736.0103(14) of a trust which owns a unit, parcel, or mobile home shall be deemed a member of the association and eligible to serve as a director of the condominium association, cooperative association, homeowners’ association, or mobile home owners’ association, provided that said beneficiary occupies the unit, parcel, or mobile home. (Emphasis added.)

Similarly, Section 617.0802(2), Florida Statutes, provides:

In the event that the eligibility to serve as a member of the board of directors of a
condominium association, cooperative association, homeowners’ association, or
mobile home owners’ association is restricted to membership in such association and
membership is appurtenant to ownership of a unit, parcel, or mobile home, a grantor of a trust described in s. 733.707(3), or a beneficiary as defined in former s. 737.303(4)(b) of a trust which owns a unit, parcel, or mobile home shall be deemed a member of the association and eligible to serve as a director of the condominium association, cooperative association, homeowners’ association, or mobile home owners’ association, provided that said beneficiary occupies the unit, parcel, or mobile home. (Emphasis added.)

The above sections of the Florida Business Corporation Act and the Florida Not For Profit Corporation Act provide that the grantor of a Trust, or the beneficiary of a trust that occupies the unit is eligible to serve on an association’s board of directors.

Additionally, the Division has ruled in several cases regarding trustees serving on a board of directors. A trustee of the trust that currently owns the unit is eligible to serve on the Association’s board of directors. See McWilliam v. Maya Marca Condo. Ass’n, Inc., Arb. Case No. 2003-09-4468, Amended Summary Final Order (April 12, 2004)(Where an association’s by-laws provide that a board member must be the owner of a unit, “have an interest therein” or be an officer or designated agent of an owner corporation, it is reasonable to interpret this language to apply to current, legal interests, such as trustees or life estate holders.); see also, Spevack v. Plaza Del Prado Condo. Ass’n, Inc., Arb. Case No. 2004-00-2794, Summary Final Order (March 30, 2004) (Where the documents required that board members be unit owners, the arbitrator held that a board member who was a co-trustee with a life estate in a unit was eligible to sit on the board.); see also Mark Stern v. Playa Del Mar Association, Inc., Arb. Case No. 2007-06-6957, Order (May 5, 2008)(As trustee of the trust that currently owns the unit, Petitioner is eligible to serve on the Association’s board of directors.)

Is a trustee or trust beneficiary eligible to run for and/or serve as an association board member? As you can see from above, the answer is yes.

Written by Howard J. Perl Esq. for Florida Condo HOA Law Blog

Special Assessments May Provide Insured Cash Flow After Storm

Two weeks ago today, Hurricane Irma tore through in Southwest Florida. All things considered, it could have certainly been much worse. However, it was as bad as it gets for those who lost their lives, and some communities suffered relatively substantial property damage. So, over the next several weeks, this column will focus on legal issues commonly confronted by associations dealing with disaster recovery.

Most associations do not have sufficient cash on hand to meet immediate post-disaster needs. In my opinion, restricted reserves should not be used without an owner vote. There are several options that are available, including lines of credit and advances from insurers. Under no circumstances should an association finance any kind of work by assigning insurance policy rights to a vendor.

For condominium associations, there may be the ability to use special assessments to get some additional insurance contributions, albeit in a roundabout way. Section 718.111(11)(g) of the Florida Condominium Act states that “a condominium unit owner policy must conform to the requirements of Section 627.714.”

Section 627.714 of the Florida Statutes provides that every condominium unit owner’s insurance policy, commonly referred to as the “HO-6” policy “must include at least $2,000 in property loss assessment coverage for all assessments made as a result of the same direct loss to the property, regardless of the number of assessments, owned by all members of the association collectively if such loss is of the type of loss covered by the unit owner’s residential property insurance policy, to which a deductible of no more than $250 per direct property loss applies. If a deductible was or will be applied to other property loss sustained by the unit owner resulting from the same direct loss to the property, no deductible applies to the loss assessment coverage.”

While HO-6 insurance is no longer mandatory for condo unit owners in Florida, my experience has been that the vast majority of unit owners carry it. So, simply stated, an association can get some of the funds necessary for certain aspects of hurricane damage from the unit owners’ insurance companies, by levying a special assessment and then having the owners turn to their private insurers for reimbursement.

Such assessments should not be imposed without the guidance of legal counsel, as there are some technicalities involved, and the nature and extent of your community’s damage may play a role, as well.

Further, given that a state of emergency was declared, the “emergency powers” granted to boards in Section 718.1265 of the Florida Condominium Act are applicable. Among other extraordinary powers granted to boards, this law states that regardless of any provision to the contrary and even if such authority does not specifically appear in the declaration of condominium, articles, or bylaws of the association, the board of directors may levy special assessments without a vote of the owners. Whether the board can skip the statutorily required 14-day notice requirement under the emergency exception in the statute will depend on the severity of the damage and other factors.

Next week, I will pass on some tips to avoid making your hurricane damage repair project a bigger disaster than the storm itself, a situation I saw over and over after the 2004-05 hurricanes. One quick and perhaps obvious tip: Don’t feel pressured to sign contracts involving significant expenditures or undertakings without proper review, including asking your attorney to look them over. While there are many reputable vendors who specialize in post-disaster services, there are unfortunately charlatans who show up after these events. Remember, the term “con man” derives from the word confidence, so you probably won’t see it coming. There are attorneys, engineers, managers, and insurance professionals who have done business in your community for years, and aren’t just here for the quick buck. People sometimes forget that when they are in a state of panic, and that is not a good place to be when making decisions that affect one of your most significant investments, not to mention the investment of your neighbors to whom board members owe a fiduciary duty.

Written by Joe Adams is an attorney with Becker & Poliakoff, P.A., Fort Myers. Origianally posted on Florida Condo HOA Law blog.