Holiday Q&A: Things Board Members Should Know Holidays

As the holidays approach, you may be wondering what are some important things to know concerning government documents or legal issues when it comes to board member rights and responsibilities. Check out this article where three common questions are answered about your HOA and board members.

Q: Can a board of directors members receive a holiday bonus?

A: This is not a good idea, and it is usually not legally permissible.

Section 720.303(12) of the Florida Homeowners’ Association Act generally prohibits directors and officers from directly receiving a salary, compensation, or other financial benefits. However, payment is permissible where it is expressly authorized in the association’s governing documents or approved in advance by a majority vote of the members.

Section 718.112(2)(a)(1) of the Florida Condominium Act similarly provides that the directors and officers are to serve the association without compensation “unless otherwise provided in the bylaws.”

Even if such a payment is authorized as required by law, it still might not be a good idea to execute. The general theory of the relatively broad immunities in the law for association directors is that they are volunteers. Even a token that goes against that theory could raise concern for someone looking to hold a board member liable for some issue. Also, paying directors raises questions about the need for licensure under the statutes governing community association managers.

Individual members can certainly bestow gifts on whom they choose, including board members during the holidays as a token of appreciation for their service. Also, these limitations and issues do not apply to employees of the association, where holiday bonuses are relatively common.

Q: Can my condominium association use 50/50 raffles to raise funds for our committees and use the monetary earnings to host holiday gatherings?

A: The straight answer: no, 50/50 raffles are not allowed.

Under Florida law, raffle-type games, including 50/50 raffles, are prohibited and considered unlawful gambling. However, this is a low-priority crime with many law enforcement agencies. A community association sponsoring, conducting, promoting, advertising, or assisting with illegal activities could expose employees, board members, officers, and others to potential criminal prosecution.

If one pursued a violation, potentially legal problems could arise. These issues include loss of the presumption of indemnification entitlement in the event one brings on legal proceedings and possible denial of insurance coverage under policies that typically provide defense coverage for legal actions brought against the association.

Q: My condominium association holds an annual holiday party at a nearby restaurant. The association uses common funds to pay for everything, including the banquet hall, food, and refreshments. Is this a reasonable typical expense?

A: Maybe.

Your condominium association’s governing documents likely include a definition of “common expenses.” If this definition explicitly includes social event expenses, like the expenses referenced in your question, these expenses will likely be considered a reasonable ordinary expense. If, however, your governing documents do not include social event expenses within the definition of everyday expenses, these expenses may not be considered a good ordinary expense. Like many community association legal issues, the specific facts of a given situation will dictate the answer.

The Division of Florida Condominiums, Timeshares, and Mobile Homes has jurisdiction to investigate complaints from owners who allege that their condominium association is impermissibly spending common funds. As part of any investigation, the Division will closely scrutinize the subject expense and the scope of the ordinary expenses, as defined by the governing documents. If the Division feels that the subject expenses exceed the authority contained in the governing documents, they have the right to pursue enforcement efforts against the association. The amount of the social event expenses and the use of the costs will be relevant factors in any Division investigation.

Many condominium associations governing documents do not include social event expenses within the scope of the standard expense definition. However, for those associations who wish to pay for social event expenses via common funds, avoid the risk of a legal challenge or penalty imposed by the Division and pursue an amendment to the governing documents.