COPING WITH FL H.B. 1237 (2017)

COPING WITH FL H.B. 1237 (2017)

by Steven J. Weil, Ph.D., EA, LCAM, Royale Management Services, Inc.

Whenever the Legislature puts new laws on the books, in order to avoid becoming involved in expensive litigation, managers and board members are obliged to sort out what it all means along with what steps should be taken to address the real meaning, terms and conditions that the courts and judges conclude were the Legislature’s intent.

Florida’s Governor signed Florida House Bill 1237 (2017) into law on June 26, 2017.  The legislation went into effect on July 1, 2017 and added several requirements and prohibitions to the Florida Condominium Act (Chapter 718).

For example, HB 1237, now the law of the land in Florida, states, “Board members may serve 2-year terms if permitted by the bylaws or articles of incorporation. a board member may not serve more than four consecutive 2-year terms, unless approved by an affirmative vote of two-thirds of the total voting interests of the association.” The law also includes an exception if there are not enough eligible candidates to fill all board positions which allows current board members to continue beyond the otherwise prescribed period.

What is yet to be determined is whether this means a board member may serve no more than eight one-year terms, or, if association rules limit terms to one year, the four-term limitation still applies? Other questions still left unanswered include: When do these terms start? Is the law to be enforced retroactively, or are board members prior terms excluded from the new rule?

Another new rule states that a condo board member, despite good intentions, could be subject to penalties for violation of this caveat:  “An association may not employ or contract with any service provider that is owned or operated by a board member or any person who has a financial relationship with a board member.”  Under a strict interpretation of this update to the law, if a board member runs a pool service and is taking care of the association’s pool maintenance for only the cost of chemicals, that board member could end up facing criminal penalties for trying to help out.

Conflicts of interest (such as a board member providing a proposal from a company they are affiliated with) may have long existed, and while board members always should have abstained from any vote where it could be perceived that they had a financial conflict of interest, it could now be a criminal offense.

This is not the only place a condo officer, director or manager could find themselves facing the threat of criminal penalties.  While we all know, or at least should know, kickbacks of any kind are wrong, often accusations made by a unit owner are not grounded in reality and instead are based on little more than spite and mistrust.

However, The updated Florida Statute 718.111 now reads “[A]n officer, director, or manager may not solicit, offer to accept, or accept any thing or service of value or kickback for which consideration has not been provided for his or her own benefit or that of his or her immediate family, from any person providing or proposing to provide goods or services to the association. Any such officer, director, or manager who knowingly so solicits, offers to accept, or accepts any thing or service of value or kickback is subject to a civil penalty pursuant to s. 718.501(1)(d) and, if applicable, a criminal penalty.”

The updated statute goes on to require that an officer or director who is charged with certain crimes (primarily crimes of dishonest character) shall be removed from office and provides requirements for filling the vacancy left by any such removal. The silver lining here is that you have to be charged with a crime before you can be removed, a mere accusation is not enough.

Will these and other provisions that have been added to the law make it even more difficult to find volunteers who are willing to serve as board members? No one really knows yet. What we do know is, it will probably take years for the legislature and the courts to sort this new law out.  We also know that those who serve on our boards of directors are most often well-meaning volunteers who want to do the right thing and serve their fellow owners.  All we can do is hope that none of these changes make it harder to get these good people to serve, and the law works as intended keeping those with a self-serving agenda from throwing their hat in the ring.

We are not attorneys, and anything said here should not be construed as legal advice. This article is purely for educational purposes, with the goal of helping associations better understand current updates to the law. Royale Management Services team members are Licensed Community Association Managers (LCAM) who work with associations to manage, to navigate and to comply with the law.  As you can see, these changes raise several questions, and you can be sure that until these issues are addressed by a court, no one will really know the correct answers. Nevertheless, it is always advisable to seek legal counsel if an issue arises.