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Board member issues need to be resolved

January 24, 2014
By SYLVIA HELDRETH - Real Estate Law , Cape Coral Daily Breeze

QUESTION: I just heard that a member of our HOA's board of directors may be indicted for felony theft because of how some of the funds in our association's reserve accounts were invested.

It turns out that he is also one of the owners of the company that handles our landscaping. We thought he was an investment counselor! What do we do now?

ANSWER: There are two issues here. A director or officer charged by information or indictment with a felony theft or embezzlement offense involving the association's funds or property must be removed from office immediately. If the charges are resolved without a finding of guilt or without acceptance of a plea of guilty or nolo contendere, he should be reinstated for any remainder of his term of office.

Your board should fill the vacancy according to general law until the end of the period of the suspension or the end of the director's term of office, whichever occurs first.

The second issue requires compliance with Florida Statute 617.0832 that states "no contract or other transaction between a corporation and one or more of its directors or any other corporation, firm, association or entity in which one or more of its directors are directors or officers or are financially interested shall be either void or voidable because of such relationship or interest." This means you could not void the contract if the fact of the relationship or interest had been disclosed or known to those who are entitled to authorize the contract or transaction and that the contract is fair and reasonable at the time it is authorized.

At the next regular or special meeting of the members, disclose the existence of the contract to the members. Upon motion of any member, the contract should be brought up for a vote and may be canceled by a majority vote of the members present. If the members cancel the contract, the association is only liable for the reasonable value of goods and services provided up to the time of cancellation and is not liable for any termination fee, liquidated damages or other penalty for such cancellation.

If the board is happy with the services of the landscaping company, they would need to enter the disclosures required by Statute 617.0832 into the written minutes of the meeting. They would also have to approve the contract or other transaction by the affirmative vote of two thirds of the directors present.

It would be a good idea to seek the advice of an attorney about both of these situations.

Attorney Sylvia Heldreth is a Certified Specialist in Real Estate Law. Her office is located at 1215 Miramar Street in Cape Coral.

This article is not intended as specific legal advice to anyone and is based upon facts that change from time to time. Individuals should seek legal counsel before acting upon any matter involving the law.



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