Briny Breezes is a resident owned manufactured housing cooperative located in Palm Beach County.
Two of the community’s sea walls that protected the cooperative property needed repairs and upgrades. The directors of Briny Breezes, Inc., the cooperative association that owns and operates the community, hired an engineer who reported that the required repairs and upgrades to the seawalls would cost approximately $150,000.
While there were adequate funds in the association’s reserve account to pay for these repairs, Briny Breeze’s governing documents clearly prohibited the association’s board of directors from spending more than $30,000 for capital improvements or spending more than $30,000 for replacement of capital assets in any fiscal year. According to the association’s governing documents, the affirmative vote of at least 51 per cent of the members was required for these expenditures.
Earlier this year, Briny Breeze’s manager asked the Division of Florida Condominiums, Timeshares, and Mobile Homes (the "Division") to determine whether the association’s board of directors could use the reserve funds to pay for the seawall repairs that were needed to protect the cooperative property without obtaining the approval of the association’s members.
The Division, in its Declaratory Statement issued this May, held that the association could use its reserve funds to make the needed repair to the seawalls without a vote of the membership.
The Declaratory Statement cited Florida Statutes Section 719.104(5), a federal bankruptcy court decision interpreting Florida law, several decisions of our state appellate courts and a decision rendered by one of the Division’s arbitrators.
The Division noted that , even if expenditures result in alterations or improvements to the community’s common elements, it is within the board’s authority to authorize these expenditures without member approval where the expenditures for the alterations or improvements are needed to protect the common elements.
At the same time, the Division did caution that an association’s directors might very well be precluded from unilaterally spending money for upgrades that constituted material alterations to the common elements and went beyond the repairs required to protect the common elements.
The Division concluded that, while the "safest course for the board is to get a unit owner vote", the board should not be limited to "simply repair the sea wall to protect the common elements."
Hopefully, this Declaratory Statement will provide ROCs with some guidance in the future.
I’ll be discussing issues affecting aging members of resident owned communities this week on "Community Matters".