Q: Our condominium association recently voted to purchase new pool furniture. The current furniture is not broken or old, but it was purchased under the previous Board of Directors with different design tastes. Isn’t this a waste of common funds?
-T. C., Naples
A: I am not able to provide an opinion on whether it is a waste of funds, but the question is really whether the Board was able to change the patio furniture without membership approval. Although the concept of material alterations is generally associated with large projects such as painting and construction, it also applies to personal property such as pool furniture. A material alteration is broadly defined as a palpable or perceptive change in the use, appearance or function of the common elements or association property. There are arbitration decisions finding that new patio cushions can be considered material alterations. For purposes of this question, we will assume that the new furniture is so different that it constitutes a material alteration.
To fully answer this question, it is critical to review your specific condominium documents. If the documents are silent on this issue, the statute will control. The applicable statute provides that all material alterations must be approved by at least 75% of the membership. I know it sounds odd to require 75% of your community approve the color of the chase lounge cushion, but it is treated the same as changing the paint color of the entire building.
Now, most condominium documents do address this issue. Some condominium documents provide that the Board has complete control over the acquisition and disposition of personal property. In this context, the Board may be able to sell the old furniture, dispose of the furniture, or acquire the new furniture without any membership approval.
Other documents require the membership to approve material alterations only when the cost exceeds a certain dollar threshold. If your documents fall into this category, and if the cost of the new furniture falls below the threshold, the Board can approve the purchase without membership approval.
Finally, many documents will require a membership vote for this type of acquisition, but it will reduce the threshold from the 75% statutory default. For example, your documents may only require a majority of those owners voting at a meeting to approve this expenditure.
In summary, the new furniture is likely a material alteration of the association property. Material alterations generally require membership approval, but I would recommend you have your condominium documents analyzed by a licensed Florida attorney to determine the interaction between your specific condominium documents and the Florida Condominium Act.
Q: Two neighbors in our community are not getting along. They constantly argue and the sheriff’s department has been called to the community multiple times. Each is separately demanding the Association penalize the other for their behavior. What should we do?
A: First, the homeowners association should recognize that it is (generally) neither equipped nor trained to serve as a security force. The owners should be advised to contact the sheriff’s department every time they feel they are in physical danger. If the conduct of either owner constitutes a violation of the covenants, the Association can pursue normal enforcement mechanisms such as fines and suspensions, but it must do so uniformly for all similar violations.
The Association should not get involved unless the Association is prepared and able to assume a duty of care. In other words, if the Association creates the impression that the Association exists to keep you safe, then you have assumed a duty of care to provide a safe environment. Because the Board is a volunteer group of owners and because the community association manager is also not a security firm, the Board would most likely fall short of providing the necessary duty of care. If one of these owners did physically injure the other owner, and it was reasonable to foresee a physical altercation between these owners, the Association will be likely be sued for failing to prevent a foreseeable safety hazard. That is why it is important that the Association continuously refer the owners to authorities that are trained to handle these disputes.
Q: I serve on the Board of my homeowners association. We are replacing the pavers at the Clubhouse and the funds to pay for the replacement were in the budget. The president just signed a contract without Board approval. The “contract” is a 1-page estimate for $50,000. Is this legitimate?
A: This is an excellent question and the answer may surprise you. Initially, I should note that approving a budget is not the same thing as approving a contract. The Board could budget $1 million dollars for a new roof, but that doesn’t mean a single Director has the authority to interview a roof contractor and negotiate a 30 page contract without Board approval? The same logic applies to paver replacements.
In other words, if the Board sets money aside for a project, the Board still needs to approve the contract to actually spend the money and enter into a contractual relationship to purchase and install the pavers.
Second, condominium and homeowners association can get into a lot of trouble with “estimates”. When the estimate is signed by the Association, it becomes a contract. Most of the time, the estimate contains zero contractual protections for the Association and often only includes a late fee provision for nonpayment. Every significant contract should include certain provisions to protect the Association. For example, each contract should include insurance requirements and indemnification provisions, and may also include issues such as termination, retainage, warranty, and the recovery of attorneys’ fees in litigation.
Most associations are under the impression that every contract can be terminated with or without cause by providing 30 days’ notice. This is simply not the case and if you want the ability to terminate with or without cause, the contract must allow this.
So, unless your Board has already approved the contract or delegated authority to the President to spend $50,000 without Board approval, the contract should be approved by the Board and it is highly advisable to revise the contract or attach an addendum to include basic contractual rights that protect the Association’s interests.