Imagine this scenario: there is a certain corporation with 400 business units. Each business unit generates $500 per month in income. So, that is a $2.4-million-per-year corporation ($500 x 400 units x 12 months). Now consider that this corporation is run by a board of directors that rotates every year and is elected by the employees or owners of the company. They are not elected necessarily because they are the most capable leaders of the corporation, but more likely because they are the most likable people in the company. Also, almost none of the elected directors are business professionals or necessarily have any experience whatsoever in running a multi-million-dollar real estate company. Additionally, all the elected directors are unpaid volunteers, and many of them have other full-time jobs that keep them from devoting their full efforts to running this corporation. This is clearly not a great recipe for a successful business.
This is exactly how the Homeowners’ Associations (HOAs) and Condominium Owners’ Associations (COAs) are run in the state of Florida – and virtually every other state in the U.S. The decision-making authority of these associations – which often control millions of dollars in owner funds – is vested in a popularly-elected board of directors. These people are volunteers who are generally unskilled in the management of a business enterprise and often have little time and attention to devote to running their respective associations. Their power and authority over the association and its business transactions, while limited by stature and association documents, is almost unchecked by any regulatory agency or by absentee or apathetic individual owners. These owners also don’t have the time and wherewithal to pay close attention to association matters.
As a result of this unreliable structure, significant legal issues often arise regarding the management of HOA and COA affairs. There are disputes between individual owners or a group of owners and their HOA/COA or disputes between the HOA/COA and contractors or other third parties. There are even disputes between the HOA/COA and the association management company they have hired to professionally manage their affairs. These can all be very costly to individual owners and disrupt the smooth running of the association along with the properties it manages and oversees.
The purpose of this series of articles is to provide useful legal and practical information to all individuals or business entities who own, manage, or are otherwise involved in a HOA or COA. While the articles in this series and the links to statutes, regulations and other useful information contained therein are meant to give readers an overview of the laws and issues, there is no substitute for competent and professional legal advice.
In matters related to HOAs and COAs, an ounce of prevention is worth a pound of cure. Owners, directors, and officers of HOAs and COAs, as well as association management professionals, will benefit greatly from seeking the advice of an attorney before minor potential legal issues turn into complex and costly legal problems.
Real estate and business litigation attorney David Charitat focuses a large percentage of his practice on HOA and COA legal issues. He has over 30 years of legal, real estate, and organization management skills related to these issues with an eye to preventing problems and resolving them efficiently and favorably when they do arise.
Please contact David at dcharitat@uslegalteam.com if you are seeking additional assistance.
