We all know that in both a condo and an HOA board members serve without compensation. Suppose however that a member of the Board owns a business and that business wants to enter into a contract with the association? For example, let’s say the condominium needs a paint job. The condo President is a general contractor and his company is qualified to do the work. The President tells the other Board members that the association should hire his company to do the job because he will give them the best price, he will personally supervise the job, he will provide the standard warranties and his company is licensed, insured and will pull the proper permits. Can the Board vote to hire the services of the company owned by the association President? The answer is “Yes” but only if certain legal hurdles are accomplished first.
Both Florida condominium and H.O.A. law would allow the association to enter into this agreement. First however:
(a) The association shall comply with the requirements of s. 617.0832, meaning the contract and the relationship must be disclosed;
(b) The disclosure shall be entered into the written minutes of the meeting.
(c) Approval of the contract or other transaction shall require an affirmative vote of two-thirds of the directors present.
(d) At the next regular or special meeting of the members, the existence of the contract or other transaction shall be disclosed to the members. Upon motion of any member, the contract or transaction shall be brought up for a vote and may be canceled by a majority vote of the members present. Should the members cancel the contract, the association shall only be liable for the reasonable value of goods and services provided up to the time of cancellation and shall not be liable for any termination fee, liquidated damages, or other form of penalty for such cancellation.
I know that some of you may think it’s simply a bad idea to hire the services of a company owned by one of the directors. I can’t say I agree. If the Board member’s company is reputable, the association is getting a good deal and the statute is complied with, perhaps it can work out well for the association. I would love to know if any of you had positive or negative experiences in this regard.