Tag Archives: florda

Your Florida Condominium Board Member Electronic Voting and Communication Policy

Posted on February 2, 2014 | 13 Comments

The use of email and other forms of electronic communication in the operations of condominium associations continues to be a controversial and confusing topic in Florida. The Florida Statutes are significantly behind the times as it relates to technological advances and, therefore, do not provide any guidance around when, if ever, Board email communication and voting is allowed. Further, these issues have not been sufficiently litigated to have a clear understanding of what Florida courts consider legal behavior.

One the one hand, using no electronic communication in this day and age is completely unreasonable. On the other hand, if a Board chooses to conduct all business electronically, the unit owners are denied their right to be present during Board meetings, which violates the law and leads to unit owner distrust of the Board. Given this, all associations can do is comply with the spirit of the Florida condominium statutes (Chapter 718) and use good judgment when conducting association business via email or other electronic communication. In order to ensure all Board members act consistently, I recommend that each association draft and approve a Board Member Electronic Voting and Communication Policy.

Florida Statute Chapter 718.112(2)(c) is clear that all unit owners have the right to attend any meeting of the Board at which a quorum of the Board is present. This means that any gathering of a quorum of the Board, whether at the standard meeting location, in a Board member’s home, or at a local restaurant, is considered a Board meeting if association-related topics are being discussed. It is a common misconception that in order for a gathering of the Board to be considered an official meeting, the Board has to be voting on something. This is not the case.

There are two notable types of meetings that are not open to unit owners:

1. Meetings between the Board and the association’s attorney to discuss litigation and obtain legal advice

2. Board meetings held for the purpose of discussing personnel matters (e.g., employee issues)

The Statute also states that notice of Board meetings (including date, time and location) along with a meeting agenda must be posted conspicuously around the condominium property at least 48 hours in advance of the meeting. This requirement also applies to the two types of meeting mentioned above that are not open to unit owners.

 NOTE: The Statutes are silent regarding where Board meetings may take place. However, the Statutes do specify that the annual meeting must be held within 45 miles of the condominium property so this is a good guideline for all Board meetings.

 Based on the above definition of a Board meeting, an email chain or other form of electronic discussion (e.g., a chat room, web-based conference) where association-related items are being discussed by a quorum of the Board would be considered a Board meeting. Notice for this meeting would have to be posted 48 hours in advance and all unit owners would have the right to attend. As this is impossible in the context of a Board member group email, technically any emails between a quorum of the Board are in violation of the Florida Statutes.

NOTE: In theory, the association could set up some type of web-based conference with a login that all unit owners have. So long as the meeting was properly noticed and all unit owners have access, I believe (though there is no case law to support this that I am aware of) this would comply with the Florida Statutes.

 So, given the rules just discussed, what is a Board to do? My recommendation is to use electronic communication (e.g., email, group texting) but do so in a responsible and considerate way. Remember, Board meeting rules are established to ensure unit owners may remain up-to-date on association issues. Unit owners are only going to become concerned if they feel their rights are being violated and/ or if the Board is acting secretively or unethically. Given this, when considering a Board Member Electronic Voting and Communication Policy, the Board should worry  less about complying with the exact letter of the law and more about ensuring the Board is acting in a way that unit owners would consider appropriate.

NOTE: If a unit owner files a complaint against the association to the Department of Business and Professional Regulation (DBPR) and the DBPR finds the complaint warranted, the association may be fined pursuant to the Florida Administrative Code. Learn more here.

Board Member Electronic Voting and Communication Policy

As association’s policy regarding electronic voting and communication should be reviewed and approved by a quorum of the Board at a properly noticed Board meeting. This gives unit owners the opportunity to provide feedback and helps to protect the Board in the event a unit owner complains about the policy down the road. As I recommend with all policies, the Board should review and re-approve the policy annually (perhaps at the meeting following the annual meeting given the likely presence of new Board members). In my opinion, this policy should include:

1. A requirement that each Board member and the property manager establish an email account for the specific use of association business. The Board member/ property should be required to stop using the account and provide the association access to the account once the Board member/ manager ceases to be involved with the association. Why do this?

  • This requirement can prove to be very useful when a Board member or manager leaves. As association business with attorneys, CPAs, maintenance vendors and unit owners is often conducted via email, losing all of those records can be detrimental to the smooth operations of the association.
  • Depending on the type of communication, these emails may be considered part of the Official Records of the association and, therefore, the association may be required to keep some of them for up to seven years.
  • Knowing that emails may be viewed by future Board members encourages the current Board members/ manager from saying anything via email that they would not want others to read. Comments made via email have hurt associations during litigation when emails were admitted into evidence.

2. A requirement that electronic communications between a quorum of the Board are only to be used as a means to transmit information and not as a discussion forum. For example, a Board member can send an email to the Board providing an update regarding an association project or providing an opinion on an upcoming meeting agenda item (perhaps the Board member won’t be there). These messages should be in FYI format and should not ask the Board to provide feedback. If an informative email from a Board member elicits a back-and-forth discussion, the emails should cease and a Board meeting should be scheduled. There are no restrictions on communications between less than a quorum of the Board.

3. A requirement that no Board voting take place electronically unless there is no other option. For example, the association’s insurance policies are up for renewal in 5 days and the Board’s next meeting is scheduled for tomorrow. At the time of the meeting, the insurance broker was unable to obtain all necessary insurance quotes. Due to scheduling conflicts, a quorum of the Board will not be able to meet again before the policies expire. Once the quotes are received, the Board reviews them and votes via email to renew the current policies.

These types of situations, calling for an electronic vote, arise from time to time and the association’s Board Member Electronic Voting and Communication Policy should outline how to proceed during and after the electronic vote. Here are some general guidelines regarding electronic voting:

1. Robert’s Rules of Order should be followed as best as possible:

  • A Board member should send an email with a motion to the Board
  • Another member should second the motion in an email to the Board and ask “All in Favor?”
  • All Board members should respond to the Board with a “yes” or a “no” vote

2. The vote should be included on the agenda for the next Board meeting and ratified

3. The minutes should provide an explanation as to why the vote was cast via email and a copy of the email chain showing the Board’s vote should be included with the minutes.

NOTE: You may have heard that Boards are allowed to vote via email so long as the vote is unanimous. This relates to non-profit law (Florida Statutes Chapter 617), which allows for voting outside of a Board meeting if all Board members vote unanimously in writing. Whether this Statute allows for written votes via email (as opposed to a signed document) is unclear. Regardless, for condominium associations the Florida Condominium Statutes (Chapter 718) overrule Chapter 617 when there is a conflict and Chapter 718 does not allow Boards to avoid a meeting by voting unanimously in writing.

I hope this overview of electronic Board communication has been helpful. Our management and consulting firm, VERA Property Management, will gladly draft a Board Member Email Voting and Communication Policy for your association. Please contact us today for a quote.

As always, feel free to reach out with questions or comments.

Emily

Emily Shaw is a condominium homeowner in Tampa, Florida and a Director of VERA Property Management, a firm providing full-service community association management in the Tampa Bay Area as well as consulting, financial and legal services to all Florida community associations. 

→ 13 Comments

Posted in Board Meetings, Florida Statutes, Policies

Tagged , , , , , , , , , , , , , , , , , , , , , , , , ,

Condominium Association Management Company Contracts: Negotiating the Points that Matter

Posted on June 23, 2013 | 14 Comments

The contract that a condo association Board signs with a professional management company is far and away the most important agreement that the Board must review, negotiate and approve. These contracts typically cover everything from monthly management fees, to financial statement reporting, to after-hours emergency services, to the amount of time the manager will be on property each week, just to name a few. Still, all too often these contracts are only given a cursory review before they are signed and it is only when Board members are dissatisfied with the management company’s performance that they take the time to read the fine print.

It is critical that condominium association Boards review their management contracts in full and negotiate their terms. Many inexperienced Board members may not think they have the leverage to negotiate contract terms but that is assuredly not the case for the following two reasons: (1) most management companies make their money by managing many properties at once, earning only small profits from each, and are therefore always hungry for new business, and (2) most urban areas are saturated with management companies and therefore competition is stiff.

Given the impact the management contract can have on the success of the association, I will provide some insight below into the key aspects of a standard management contract and highlight the details to which the Board should pay the most attention and negotiate if necessary.

Contract Length and Termination Provisions

The management contract will specifically detail how long the contract is in force and what the termination provisions are. While the length of the contract (ex. 1 year, 2 years) may seem like the key factor here, it is actually the termination provisions that need careful evaluation and negotiation to ensure the association’s interests are protected. Termination provisions specify when the association can cancel the contract and how they must provide notice to management of their decision to cancel.

When starting with a new management company, Boards should consider requiring an early termination provision that allows the association to terminate the manager at anytime with 30 – 90 days’ notice. This serves three major purposes. The first is straightforward. If the Board is unhappy with management’s services, they can terminate the agreement and begin looking for new management immediately without having to wait until the contract term is up. Of course, you can always terminate a manager at any time but if you do not follow the termination provisions within the contract, the association may be responsible for paying monthly management fees to the terminated manager until the end of the contract term, essentially double-paying for management services.

The second benefit to a 30-90 day cancelation provision is subtler than the first. Managers are more likely to continue to work hard for the association if they know that their services can be terminated at anytime. Multi-year management contracts with no early termination provision encourage complacency on the part of the manager. If a potential manager refuses to allow an early termination provision, then at the very least the Board will want to negotiate a contract term of at most one year with no auto-renew clause.  If the Board is able to negotiate an early termination provision, it is then wise to obtain a long a contract term to lock in the monthly management fee (i.e. avoid fee inflation).

Monthly Management Fee and Other Expenses

The monthly management costs is typically one of the largest line items in an association’s budget so it is obviously important to consider the cost of a management company with which you are considering contracting. Understanding what the monthly fee includes and what services the management company will charge separately for is more important that the actual dollar amount of the monthly fee. These extra charges can be as much as half of the cost of the monthly management fee so it is very important to read the contract carefully, prepare a list of what the monthly fee does and doesn’t include, and estimate what the association’s additional monthly expense may amount to. If the monthly fee is too high for the association’s budget, the Board may have more luck adding extra services as part of the monthly management fee versus attempting to negotiate a lower monthly management fee. Further, the more that the Board can incorporate into the flat monthly fee, the easier budget preparation will be as there is less guesswork involved. I’ve provided a brief overview below of the main services included in the standard management contract and highlighted certain items that are frequently billed separately from the monthly management fee:

Administrative Costs

This includes items such as copies, envelopes, faxes, stamps and phone calls. Some management companies will absorb the costs associated with the association’s legally required annual mailings (e.g. budget meeting notices) but not the costs associated with Board-directed mailings such as violation letters, newsletters, policy updates, etc. If the manager will be charging for mailings, consider if the management company would be willing to provide residents the option of receiving these mailings by email (when allowed by statute), as this could save the association significant cost.

Financial Services

This includes bookkeeping services, financial statement preparation, paying association invoices, processing monthly maintenance fees from residents, collection efforts, and tax-related items. Management companies typically included the above in their monthly management fee. However, it is important to confirm if there are any additional costs associated with:

  1. Preparing delinquency letters, pre-lien letters and/ or sending financial information to the assocation’s attorney
  2. Completing and mailing out Form 1099s to appropriate vendors
  3. Processing returned check fees
  4. Budget preparation
  5. Issuing coupon books
  6. Preparing estoppel letters
  7. Providing financial statements to the Board above and beyond a balance sheet and P&L (e.g. check register, bank statements, A/R detail etc.)
  8. Reserve analysis
  9. Providing information to the association’s CPA for the purpose of completing tax returns, audited financial statements, etc.

Management Services

This includes attending Board meetings, completing property walks, bidding out maintenance projects, providing a website for your property, meeting with Board members, emergency preparedness, afterhours emergencies, handling resident complaints/ concerns, etc. Usually all of these services are included in the monthly management fee; however, sometimes there are provisions in the contract aimed at keeping total management hours below a certain threshold. Here are two examples:

  1. Manager attendance at one Board meeting a month (within certain hours) is included in the monthly management fee but there will be an hourly rate for any additional or afterhours meetings. If your association Board tends to meet multiple times per month or tends to meet on evenings/ weekends, this could be an additional expense.
  2. Bidding and overseeing all property projects is included in the monthly management fee but there may be a provision that specifies additional charges for projects that will cost above a certain threshold. The idea here is that a $100,000 project (e.g. painting, roofing, paving, etc.) will take much more of the manager’s time than would a small project. If you have large projects coming up, this additional cost would need to be included in the budget.

I encourage all Board members to take the time to read management contracts in detail, and to consider the items outlined above, before moving forward. Management contracts are all drafted differently so when comparing multiple management companies, be sure you are doing an “apples to apples” comparison (including all additional fees) as opposed to just comparing the fixed monthly management fee. Lastly, don’t forget to negotiate! The Board has more leverage than members typically realize.

I hope you have found this discussion of management contracts helpful. If you need any assistance in reviewing a management contract, feel free to email me and I would be happy to take a look.

Emily

emily@flcondoassociationadvisor.com

→ 14 Comments

Posted in Contracts

Tagged , , , , , , , , , , , , , , , , , , , , , , , ,