A Change to the Financial Reporting Requirements

Lost in all of the controversy surrounding the recent amendments to Florida's laws governing community associations--and, in particular, the changes to condominium association laws enacted by House Bill 1237--were revisions to the financial reporting requirements for condominium and cooperative associations.

House Bill 6027 became effective on July 1 and amends provisions of Chapters 718 and 719 of the Florida Statutes.   House Bill 6027 is a "two edged sword":

  • On one hand, it removes the "fewer than 50 units" exception that allowed community associations to simply prepare a report of cash receipts and expenditures instead of either compiled, reviewed or audited financial statements regardless of the association's annual revenue.  House Bill 6027 also removes this exception from F.S. Section 720.303, which governs financial reporting for mandatory homeowners associations.
  • On the other hand, condominium and cooperative associations are no longer prohibited from waiving the statutorily provided financial reporting requirements for more than 3 consecutive years.   This prohibition against associations waiving these reporting requirements more than 3 years in a row was a fairly recent addition to Florida statutes.  House Bill 6027 effectively "turns back the clock" and allows associations to waive those financial reporting requirements on an annual basis for as long as the association's members see fit.

At least in regards to these financial reporting requirements, "what the legislature giveth, the legislature taketh away".

I hope all of you had a safe and restful 4th of July and that we'll have another uneventful hurricane season.

 

ROC Presidents Should Preside, Not Rule

Florida statutes governing condominium and cooperative associations specifically provide that it is the association's board of directors that is responsible for the administration of the association.   Similarly,  the governing documents for most mandatory homeowners associations governed by Chapter 720 of the Florida Statutes and community associations governed by Chapter 617 of the Florida Statutes provide for administration by a board of directors elected by the association's members.

Unfortunately, it's not uncommon for a President to overlook or ignore statutes and the association's bylaws and attempt to bypass the association's board (and in the most extreme situations, the association's members) in making decisions or taking actions unilaterally.

These decisions or actions are often taken without any input from other board members or the community's manager.   As a result, the President may have already committed the association to a particular course of action (such as entering into a contract to purchase a vehicle or other expensive piece of equipment) before anyone else in the community knows that the purchase has occurred.

In these situations, the President may have clearly exceeded his or her authority--however, he or she may have nonetheless bound the association under the doctrine of "apparent authority" and the association's members would be obligated to honor a contract that the association's board of directors never approved.

Presidents should be reminded that, in most, if not all, community associations, the President is elected by only a small group of individuals--the members of the Board of Directors.   The Board of Directors does not have the authority to delegate the power to run the association and the community to any one person, including the President.

The association's members elect a Board of Directors and it is that Board--and not any one person-- that is empowered with the administration of the ROC.  

Presidents should also remember that a Board that appoints one of its members as the association's President has the power to remove that person from the office of President if that Board sees fit to do so.

Obviously, there are certain day-to-day operational decisions that should fall within the discretion of a President and/or ROC manager.   However, the President that chooses to exceed the scope of his or her authority does so at the President's peril--and that of the association itself.