Q: Is a Board member who fails to obey the terms of certain provisions of the statute breaching his fiduciary duties and will he automatically be removed from the Board if he is?
– J.L., Vero Beach
A: Board members, whether they are part of a homeowner’s association or a condominium association, are there to represent the interests of all of the homeowners who reside in that community. To that end, it is a Board member’s duty to act in a manner which is in the best interests of the community. This relationship creates a fiduciary duty which encompasses the obligations of loyalty to the homeowners, diligence to adhere to the standard of reasonable care which a reasonable prudent director would exercise in the performance of his or her work, and the duty to act with loyalty and good faith to the homeowners. The term “fiduciary duty” means the duty to act for someone else’s benefit and not your own personal interests. The Florida legislature has incorporated the “fiduciary duty” rule in both the HOA Act and the Condominium Act, both of which expressly state “[t]he officers and directors of an association have a fiduciary relationship to the members who are served by the association.”
The guiding principle that protects Board members from their decisions is the “business judgment rule”. Under the “business judgment rule” directors are presumed to have acted properly and in good faith and are only called upon to account for their actions when they are shown to have engaged in fraud, bad faith or an abuse of discretion. Applying the business judgment rule, there is a “presumption” that in making a business decision, the directors have acted on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the association. Based upon these legal principles, a Board member is shielded from personal liability as long as the decisions made are within their “business judgment” and not in conduct that amounts to fraud, self-dealing, or unjust enrichment. In other words, merely making a bad decision or doing something that is considered “negligent” does not generally give to a claim for breach of fiduciary duty even if such negligence caused damage to the association.
As to your question, an alleged breach of fiduciary duty may or may not lead to automatic removal on its own and without more facts about your situation, I cannot provide you with a specific opinion. But you should be aware that there are some circumstances that could warrant the immediate removal of a director. This includes such things as being charged with felony theft or embezzlement of association funds. Or if a director is more than ninety days delinquent their maintenance fees, that would also lead to automatic removal. Likewise, if a Board member is required under the governing documents to be an owner and sells his unit/home, that may force an immediate removal.
Beyond these types of automatic triggers, there are specific procedures in the HOA (or Condominium) Act that you would need to follow to recall a director. For example, for HOAs, Section 720.303(10)(a) of the Florida Statutes provides that a member or members of the a homeowners’ association’s board of directors may be removed by a vote of the majority of the association’s voting interests. The statute also provides that the recall may be without cause. This means that the homeowners seeking the recall do not have to provide a reason for recalling a director. The homeowners simply have to follow the procedures of the statute and applicable administrative rules. Homeowners may recall a member or members of their board by a vote at homeowner meeting or by written recall agreement.
Similarly, under Section 718.112(2)(j) of the Florida Condominium Act, any board member can be recalled and removed from office with or without cause by a vote or written agreement of a majority of all voting interests. A special meeting of the unit owners to recall a member or members of the board of administration may be called by 10 percent of the voting interests giving notice of the meeting as required for a meeting of unit owners, and the notice must state the purpose of the meeting. After a director is recalled, Florida law allows the board to fill the director’s vacancy by appointing a new director, pursuant to a majority vote of the remaining directors, even if it is less than a quorum. The appointed director then serves the remainder of the recalled director’s term.
Please keep in mind that my response to your question is fairly broad and may not apply to the current situation that you are dealing with. Therefore, I would recommend that you discuss your issues regarding the Board member with a local attorney who can give you specific direction on your issues.
Harris B. Katz, Esq., is Managing Partner, Boca Raton of the Law Firm Goede, Adamczyk, DeBoest & Cross, PLLC. Visit our website, www.gadclaw.com, or to ask questions about your issues for future columns, send your inquiry to: firstname.lastname@example.org. 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 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.