Condo Board Members Conflicts of Interests and Service Providers in Florida
Updated: Sep 9, 2018
In Florida, the directors and board officers of a condo association, together with the members of their family and anyone who holds financial relationships with the officers and/or directors are entirely prohibited from forming any form of agreement with their condominium association under the terms of new regulations which have been put in place since mid-2017.
The Old Statute
Before 1st July 2017, there was only a single statute with regard to conflicts of interest which was applicable when it came to certification. This statute enabled the association to form a transaction or contract with either the association’s board members or any entity which any of the association’s directors had a financial interest in. By permitting this, the Statute required only compliance with Chapter 617.0832 of the requirements set out for conflict of interest (the statute relating to not-for-profit corporations) and therefore required only approval from two thirds of the association’s directors in order to approve such a conflict.
The Current Situation
After 1st July 2017, however, when Florida Statutes took effect, prohibition was set forth herein with regard to contracts with service providers. The new regulations state with regards to conflicts of interest and service providers that any association (other than a timeshare condominium association) is unable to contract with or employ a service provider which is operated or owned by any board member of the association, or with anyone who holds any form of financial relationship with one of the association’s officers or board members. This regulation, however, is inapplicable to any service provider where one of the association’s officers, board members, or relatives of any board member or officer with a consanguinity of a 3rd degree by marriage or by blood owns under 1% of equity shares in the association.
The Exception to The Rule
This therefore demonstrates that there is only a single exception when it comes to conflict of interest and service providers, and this is when the ownership which gives rise to such conflict makes up under 1 percent of equity shares in the association.
The question then turns to the definition of the term “service provider”. However, there is no clear definition provided, leaving the association responsible for determining whether or not specific contracts come under the umbrella of “service contracts”. This decision should never be reached without taking counsel’s advice, and once the decision is finalized, it should be made to err on caution’s side until some legal precedent becomes available to define “service” as a term in this context to avoid falling foul of the latest statute.