THERE’S A CONFLICT IN THE NEW CONFLICT LAWS

As you know, the condo crime bill was quickly rushed through The Florida Legislature this year.  Unfortunately, as a result, the statute may have created more questions than answers in some circumstances.  Clearly, The Florida Legislature wanted to prevent board members from continuing to make a buck off of the association.  As a result, the statute was amended to read:

718.112

An association, which is not a timeshare condominium association, may not employ or contract with any service provider that is owned or operated by a board member or with any person who has a financial relationship with a board member or officer, or a relative within the third degree of consanguinity by blood or marriage of a board member or officer. This paragraph does not apply to a service provider in which a board member or officer, or a relative within the third degree of consanguinity by blood or marriage of a board member or officer, owns less than 1 percent of the equity shares.

This paragraph makes it clear – a condo board cannot contract with a service provider owned or operated by a board member or the board member’s family.  Sounds simple.

But then we run into the amendments to Florida Statute 718.3027 which now states:

Directors and officers of a board of an association that is not a timeshare condominium association, and the relatives of such directors and officers, must disclose to the board any activity that may reasonably be construed to be a conflict of interest. A rebuttable presumption of a conflict of interest exists if any of the following occurs without prior notice, as required in subsection (4):

(a) A director or an officer, or a relative of a director or an officer, enters into a contract for goods or services with the association.

(b) A director or an officer, or a relative of a director or an officer, holds an interest in a corporation, limited liability corporation, partnership, limited liability partnership, or other business entity that conducts business with the association or proposes to enter into a contract or other transaction with the association.

 

(2) If a director or an officer, or a relative of a director or an officer, proposes to engage in an activity that is a conflict of interest, as described in subsection (1), the proposed activity must be listed on, and all contracts and transactional documents related to the proposed activity must be attached to, the meeting agenda. If the board votes against the proposed activity, the director or officer, or the relative of the director or officer, must notify the board in writing of his or her intention not to pursue the proposed activity or to withdraw from office. If the board finds that an officer or a director has violated this subsection, the officer or director shall be deemed removed from office. The vacancy shall be filled according to general law.

(3) A director or an officer, or a relative of a director or an officer, who is a party to, or has an interest in, an activity that is a possible conflict of interest, as described in subsection (1), may attend the meeting at which the activity is considered by the board and is authorized to make a presentation to the board regarding the activity. After the presentation, the director or officer, or the relative of the director or officer, must leave the meeting during the discussion of, and the vote on, the activity. A director or an officer who is a party to, or has an interest in, the activity must recuse himself or herself from the vote.

(4) A contract entered into between a director or an officer, or a relative of a director or an officer, and the association, which is not a timeshare condominium association, that has not been properly disclosed as a conflict of interest or potential conflict of interest as required by s. 718.111(12)(g) is voidable and terminates upon the filing of a written notice terminating the contract with the board of directors which contains the consent of at least 20 percent of the voting interests of the association.

(5) As used in this section, the term “relative” means a relative within the third degree of consanguinity by blood or marriage.

               So, 718.111 says no contract between a board and a board member or his family is allowed.  718.3027 makes it clear that it is allowed, as long as it is disclosed, and the board member leaves the room during the board vote, and the board approves it —- it is perfectly legal.  So what is it?  To make matters worse, if the idea was to make it harder for board members to enter into contracts that hire their own business, The Florida Legislature should have left the statute alone.  Before it was amended, the statute required a vote of 2/3 of the uninterested directors, not it seems only a majority is required

The confusion continues………Last week, someone wrote to me and said they are technically gifted.  They serve on a “communications committee” in their community.  They were smart enough to create a website and a TV channel that this volunteer maintains free of charge.  Apparently, the condo attorney now says that in light of the new law, the board and this committee member cannot have this relationship any longer and the board must contract with a new party and pay for these services.  I simply don’t see anything in the new law which prevents the relationship from continuing.

How about answering this?  Does the new law prevent a board member from becoming an employee of the association directly?  Are you sure?  Does the law need to be clarified?

We’ll talk about some other confusion the new laws have created next week as well.  However, I would love your thoughts on the above confusion and if you think there are other provisions of the new law which need clarification.

Leave a reply

Your email address will not be published.