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Condo Q&A: Amending Documents, Bylaws and Boards

Is it acceptable for a condo association to “self-insure” and cancel their current insurance? Also: Can a board avoid naming a director to an empty position?

STUART, Fla. – Question: My cooperative dock association board of directors is exploring the ability to “self-insure” by cancelling the wind coverage on the docks and increasing the reserves. The present windstorm insurance is almost half of the annual budget and is effectively useless due to the deductible. The board thinks they can do this by amending the governing documents to remove the insurance requirement. Can this be done?

Answer: Probably not. While the governing documents can be changed by an amendment, the documents cannot be changed to circumvent the requirement of the Cooperative Act. Specifically, F.S. 719.304(3) which requires a cooperative association to insure all association property. In a cooperative, the association “owns” the docks and leases them to the members. So, the statutory requirement that the association insure “association property” includes the “docks” even though Statute 719.104(3) does not literally use the word docks.

The Cooperative Act also allows an association to “self-insure” as an alternative to traditional insurance. However, “self-insurance” is not simply maintaining reserves. It is controlled by Florida Statute 624. To boil it down, it requires the association to essentially create its own insurance company and fund it. It is extremely complex and cost prohibitive in the sense of the actual savings.

Question: We have a five-member board, one of the members resigned. The remaining four refuse to appoint a fifth member. When questioned at a recent meeting why they did not appoint a fifth member, the response was that the attorney informed them that all that is needed is a quorum to perform board business, which was never questioned. Our Bylaws were and are as follows: “The affairs of XYZ POA shall be managed by a Board consisting of five (5) Directors”

In your opinion aren’t five directors required at all times? This has nothing to do with a quorum.

Answer: Yes, I think your board is required to appoint a fifth director. The section you cite from your bylaws provides that the board “shall” consist of five directors. The use of the word “shall” means it is mandatory. As you correctly point out, the quorum is not the issue. A board can conduct lawful business as long as a quorum of the board is present at the meeting, which in your case means three, however this does not mean the board can ignore the requirement that the board is supposed to have five directors.

Question: A person in my condominium submitted their name to be a candidate for the board. However, the person was delinquent in the payment assessments. Before the candidate deadline passed, the manager contacted the person and told them they were delinquent and needed pay up before the candidate deadline. The person paid and their name was listed as a candidate. Is it proper for the manager to have done this?

Answer: Chapters 718 (condominiums) and 720 (HOA/POA) both require that a candidate for the board must be 100% current on all monetary amounts owed to the association at the time they submit their name to be candidate. If they are not, then their name cannot be listed on the ballot. The candidate is the person primarily responsible for making sure he or she is eligible to be a candidate. However, it is not illegal or necessarily improper for the manager to have notified the candidate about the problem in time for the candidate to correct it. However, if the manager was going to do this then it should be done for all candidates as well.

Richard D. DeBoest II, Esq., is co-founder and shareholder of the Law firm Goede, Adamczyk, DeBoest & Cross, PLLC. The information provided herein is for informational purposes only and should not be construed as legal advice. The publication of this article does not create an attorney-client relationship between the reader and Goede, Adamczyk, DeBoest & Cross, PLLC or any of our attorneys. Readers should not act or refrain from acting based upon the information contained in this article without first contacting an attorney, if you have questions about any of the issues raised herein. The hiring of an attorney is a decision that should not be based solely on advertisements or this column.

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