POWERS AND DUTIES OF THE BOARD OF DIRECTORS

The Association is responsible for the operation and management of the community's affairs pursuant to the Florida Condominium Act. The Association is governed by the Board of Directors, sometimes known as the Board of Governors or Board of Administration. The Board operates the Association.

Chapter 718 of the Florida Statutes specifies the duties of the Board as does Chapter 617, the Not-For-Profit Corporation Act. The Articles of Incorporation and the by-laws set forth additional provisions regarding Directors such as the number of Directors, residency requirements and specific limitation of powers, such as expenditure limitations.

Recall is the ultimate limitation of the Board's power. The Board or an individual Board member may lose the support of a majority of the membership and may be recalled at any time. Pursuant to statute and most Association documents, vacancies on the Board may be filled by the remaining Directors.

The Board members have a fiduciary duty to the membership. The general standards for discharge of a Director's duties are outlined in Section 617.0830 of the Florida Not-For-Profit Corporation Act. All Directors should act in good faith with the care an ordinary, prudent person in a like position would exercise in similar circumstances. A Director must act in a manner he reasonably believes to be in the best interest of the Association. The Court held in a recent case that a Director has no real liability unless there is fraud, self-dealing or unjust enrichment.

A Director may rely on information, opinions, reports or statements, including financial statements, that are prepared or presented by officers or employees of the Association when the Director reasonably believes such person to be reliable and competent. The opinion of legal counsel, public accountants or other persons as to matters the Director reasonably believes to be within that person's professional expertise may be relied on. The Directors are protected by law if they rely on the advice rendered by a professional. Therefore, whenever the Board faces a question as to its operations or procedures, the Board should request an opinion in writing from a party skilled in the respective area.

The most important power and function of the Board is to establish and collect the assessments. The collection of assessments is essential to the operation of the Association and should be conducted in a fair manner based on established policies.

Maintenance of proper financial records of the Association is part of the budget and assessment process. Most Boards have the significant authority to establish budgets and impose assessments as deemed necessary, however, the Condominium Act creates substantial requirements for financial reporting, standards for budgets and record keeping in this area. The service of a professional accounting firm familiar with condominium budgets and accounting is recommended.

The Board's authority to acquire, convey, lease or mortgage Association real property is limited pursuant to statute unless specifically authorized in the Declaration. Traditionally, unit owners must approve such matters.

Most Association documents convey authority on the Board of Directors to adopt reasonable rules and regulations. The rule-making authority of the Board allows the Association to control use of the common elements and use of the units. Rules can also address inspection of records, reply to owner inquiries, club house and pool use and parking issues. All rules must be reasonable and must not contravene a right granted in the Declaration or reasonably implied from terms of the Declaration.

As condominiums are parcels of real estate created upon the recording of a Declaration of Condominium, the law is drafted to protect the status quo. The Board must operate and maintain the common elements. No material alteration or substantial additions may be made unless specifically allowed by the terms of the Declaration, or the if the Declaration does not so provide, then only with approval of seventy-five percent (75%) of the total voting interests. The purpose of this provision is to ensure that a purchaser of a condominium can anticipate that his property will remain as originally purchased and not subject to annual revisions by each new Board. Of course, the opposite position is that a condominium may remain pastel pink forever unless a change is authorized by the members.

It is well established that the Board may exercise a wide range of decision-making authority based upon the Business Judgment Rule. The Business Judgment Rule has afforded Boards the right to make certain changes in common elements. For example, arbitration decisions have held that worn Chatahoochie decking may be replaced with paver bricks and revisions to the common area landscaping plan may be made by the Board without a vote of the members.

The degree to which a Board maintains the common elements is clearly within its discretion. All decisions of the Board regarding such maintenance are presumed correct, absent the showing of mismanagement, fraud or a breach of trust. The Business Judgment Rule even prohibits arbitrators from substituting their judgment as to the appropriate degree of maintenance.

The Board may employ and dismiss personnel necessary for the maintenance and operation of the common elements. Additionally, the Board has the authority to contract for management. When a manager is retained, the Board does not eliminate any of its own powers but merely gives the control of the day-to-day functions to the manager.

The topic for this issue is roofing problems. The Board of Directors, in maintaining the condominium, will eventually be involved in roof replacement. In repairing roofs, as with any other portion of the common elements, material alterations are not to be undertaken, however, the Board has the authority to make reasonable decisions under the Business Judgment Rule. An example of the authority of the Board on a re-roofing job would be the decision regarding the quality of replacement roofing and all of the associated specifications of the contract. The Board, however, would be prohibited from changing the type of roof, such as from shingles to roll roofing, or to change colors.
Another significant function of the Board is enforcement of the Declaration. It is within the business-making authority of the Board to determine when a problem should be addressed by the Association. A situation which exists only between two neighbors is not an Association issue. However, if a larger number of members are affected by one party's conduct, the Board may determine when to act.

One useful power of the Board is to appoint committees. The Board may appoint committees for any function it deems necessary to carry out Association business. If the documents allow fining, the Board may appoint a Fining Committee. The imposition of fines may allow the Association to control violations of its documents from within without resorting to litigation or arbitration.

Many condominiums have Directors who are part-time residents. The part-time residency of Directors may create a problem in establishing a quorum during the summer months. Unless the Articles of Incorporation or bylaws provide otherwise, the Board of Directors may, by a majority of its full membership, designate from its members an Executive Committee. If given full authority, the Executive Committee may exercise all authority of the Board with the exception of: filling vacancies on the Board, revising the bylaws or approving or recommending to members actions required to be approved by the membership. The Executive Committee is used by many Associations.

As the Board is acting on behalf of the membership, it is essential that the Board keep appropriate records of all of its meetings. In addition to providing authority for actions to be taken, the meeting minutes also create a corporate history which future boards will rely on and utilize.

The power and authority of the Board of Directors is to make all reasonable decisions to govern the condominium. The Board members should act as conservative businessmen burdened with the duty to maintain the status quo. Directors should rely on the written advice of professionals to limit their own personal liability.

By: Joseph R. Cianfrone, Esq.

THE FOREGOING ARTICLE WAS PUBLISHED IN CONDO MANAGEMENT MAGAZINE, TAMPA/ST. PETE, VOLUME IV, NUMBER 41, FEBRUARY 1998.