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LLC Managers on the Board Illegally

Started by HaroldV • 24 replies • 1746 views

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HaroldV (Florida)
Posts: 1
Posted:
Our community still has 12 units owned by an LLC. When checking with SUNBIZ.org we see there is only one manager listed for the LLC. The manager of the LLC claims that his daughter and wife are also managers and that they are eligible to run for board seats in the annual election. Since the LLC has 12 out of 36 votes, he has a very good chance of controlling the board. Is SUNBIZ.org the site we should be checking to see if the wife and daughter are also managers?
DouglasK1 (Florida)
Posts: 2,046
Posted:
Is the "LLC" the developer, aka declarant? If so, do the governing documents give the declarant any special rights, such as more than one vote per lot?

Do your governing docs even require directors to be members? Some don't, so if that's the case, it doesn't matter if the family members have any part of the corporation.

I am not really sure who is eligible to be on the board in the case of corporate lot ownership, but I would think that any employee would be able to, not just "Managers" or officers of the corporation. Unless the LLC is the developer with more than one vote per lot, the other homeowners outnumber it 2 to 1, you just need to get them to vote.
Escaped former treasurer and director of a self managed association.
GenoS (Florida)
Posts: 4,276
Posted:
I think it's reasonable to require - if the LLC is a Florida entity - that the person casting the vote be listed on the LLC's annual report filed on SunBiz. If they're not, the only way to reasonably determine that a person is entitled to cast votes for that LLC is either a voting certificate or a corporate resolution drafted by the LLC naming someone who is authorized to cast the vote for the LLC. I wouldn't take anyone's word for it that he or she was authorized to vote for a dozen units without some sort of written authorization from the company.

This requirement may have to be in your Bylaws to be valid. If there's nothing there then I would seriously consider getting an attorney's opinion on the matter.
JohnC46 (South Carolina)
Posts: 14,265
Posted:
In our docs if a unit(s) is owner by a Corporation or LLC, the Corporation has to name a person to be the voting party for that unit. We do not care who or what the named person is, just name him.
DouglasK1 (Florida)
Posts: 2,046
Posted:
Quote:
Posted By GenoS on 05/05/2017 12:44 AM
I think it's reasonable to require - if the LLC is a Florida entity - that the person casting the vote be listed on the LLC's annual report filed on SunBiz. If they're not, the only way to reasonably determine that a person is entitled to cast votes for that LLC is either a voting certificate or a corporate resolution drafted by the LLC naming someone who is authorized to cast the vote for the LLC. I wouldn't take anyone's word for it that he or she was authorized to vote for a dozen units without some sort of written authorization from the company.

This requirement may have to be in your Bylaws to be valid. If there's nothing there then I would seriously consider getting an attorney's opinion on the matter.

The OP question is not who can vote for the corporation, it's what representatives from the corporation can be elected and serve on the board.
Escaped former treasurer and director of a self managed association.
MelissaP1 (Alabama)
Posts: 13,836
Posted:
LLC's are tricky little beasts... Your basically dealing with multiple owners. A general rule of thumb is the name on the deed is the official owner and thus HOA members. However, if it's in the name of a LLC then turns a bit trickier. The LLC's most likely has to vote amongst themselves who will represent the LLC.

The setup of a LLC to me means "Pick the one who will go to prison for all". Tried to collect back dues from one once. It was a nightmare trying to file a lien. There were 3 members of the LLC and each pointing fingers at each other...

I would say that them owning that large amount of homes doesn't necessarily "stack the deck". They still have one vote per home as owners. However, as a board member they will also only carry 1 vote. Owner votes are used for things like changing rules, electing board, and removing boards. The board votes on every day items and operations of the HOA. So it's not like a Developer who controls/owns the place who does have a "stacked deck" with double voting rights. They will have single vote as owner and board. Which kind of may make it easier to pass rule changes as the majority rules. It's often difficult to get a majority member vote on anything.
Former HOA President
GenoS (Florida)
Posts: 4,276
Posted:
Quote:
Posted By DouglasK1 on 05/05/2017 11:15 AM
The OP question is not who can vote for the corporation, it's what representatives from the corporation can be elected and serve on the board.

I just read the OP again and I'm not sure what the exact question is.
JanetB2 (Colorado)
Posts: 4,219
Posted:
Quote:
Posted By HaroldV on 05/04/2017 4:42 PM
Our community still has 12 units owned by an LLC. When checking with SUNBIZ.org we see there is only one manager listed for the LLC. The manager of the LLC claims that his daughter and wife are also managers and that they are eligible to run for board seats in the annual election. Since the LLC has 12 out of 36 votes, he has a very good chance of controlling the board. Is SUNBIZ.org the site we should be checking to see if the wife and daughter are also managers?

Any owner of any property has an appropriate vote for each unit owned. Essentially if you personally owned three units and rented two are you stating you would not have the right of having three votes??? A vote per unit is fair and equitable.
JohnC46 (South Carolina)
Posts: 14,265
Posted:
The original question was can the person appointed by an LLC as the voter for that LLC unit run for the BOD?

Our Bylaws say:

In the case of an Owner which is a corporation or partnership, the person designated in writing to the Secretary of the Association as the representative of such corporation or partnership shall be eligible to serve as a director.
GenoS (Florida)
Posts: 4,276
Posted:
My interpretation of the original question is, can MORE than one manager/employee/designee run for the BoD at the same time and potentially capture more than 1 seat. This would be similar to, can husband and wife owners both run for the board and, if elected, serve on it at the same time. I contend it depends on what the governing documents say.

But the OP seems to actually ask if Florida's online SunBiz page is a good place to visit in order to find out who the managers of the LLC are.
DouglasK1 (Florida)
Posts: 2,046
Posted:
Quote:
Posted By GenoS on 05/06/2017 2:28 PM
My interpretation of the original question is, can MORE than one manager/employee/designee run for the BoD at the same time and potentially capture more than 1 seat. This would be similar to, can husband and wife owners both run for the board and, if elected, serve on it at the same time. I contend it depends on what the governing documents say.

But the OP seems to actually ask if Florida's online SunBiz page is a good place to visit in order to find out who the managers of the LLC are.

One major difference between this and the typical husband/wife scenario is that the LLC owns twelve lots, so is a member 12 times, not a single member.

Is "manager" even an official corporate title? The OP has never responded, but a lot depends on their governing docs, 1) whether directors have to be members, 2) whether the developer has more than one vote per lot, assuming the LLC is the developer, which we don't know.
Escaped former treasurer and director of a self managed association.
GenoS (Florida)
Posts: 4,276
Posted:
In Florida Managers and Managing Members are the only names required to be on the annual reports filed with the Sec'y of State (plus registered agent).
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Quote:
Posted By JohnC46 on 05/05/2017 7:08 AM
In our docs if a unit(s) is owner by a Corporation or LLC, the Corporation has to name a person to be the voting party for that unit. We do not care who or what the named person is, just name him.

ADD ON/CLARIFICATION

Per the OP's question. In our association the Corporation appointed party can run for the BOD. If the LLC owned 3 units, they could appointed say the father, the daughter, and the son as the voting party for different units and they could each be elected to the BOD.

Each unit gets one vote and if one party owned (or was named by the corporation as the voting member) of say 6 units, they would get 6 votes.
JanetB2 (Colorado)
Posts: 4,219
Posted:
The OP and other neighbors just need to make sure if they do not want the LLC to have majority of Directors to all show up and cast their votes otherwise. The LLC only has 12 votes in a 36 unit HOA; therefore, the other owners have majority
RichardP13 (California)
Posts: 3,868
Posted:
IF the LLC is the developer, then the developer still has a majority based on the numbers of votes per unit, generally three per unit. Their 36 to the others 24.
JanetB2 (Colorado)
Posts: 4,219
Posted:
Quote:
Posted By RichardP13 on 05/08/2017 10:46 PM
IF the LLC is the developer, then the developer still has a majority based on the numbers of votes per unit, generally three per unit. Their 36 to the others 24.

Where did OP make such statement? My last developer had one vote per unit ... not three.
DouglasK1 (Florida)
Posts: 2,046
Posted:
Quote:
Posted By JanetB2 on 05/09/2017 12:02 AM
Posted By RichardP13 on 05/08/2017 10:46 PM
IF the LLC is the developer, then the developer still has a majority based on the numbers of votes per unit, generally three per unit. Their 36 to the others 24.


Where did OP make such statement? My last developer had one vote per unit ... not three.

Unfortunately, the OP has never come back with any of the clarifications that have been requested, so we really have no idea one way or the other. Unless we do hear back from the OP, this thread is pretty useless.
Escaped former treasurer and director of a self managed association.
RichardP13 (California)
Posts: 3,868
Posted:
Quote:
Posted By JanetB2 on 05/09/2017 12:02 AM
Posted By RichardP13 on 05/08/2017 10:46 PM
IF the LLC is the developer, then the developer still has a majority based on the numbers of votes per unit, generally three per unit. Their 36 to the others 24.


Where did OP make such statement? My last developer had one vote per unit ... not three.

HOW does a developer control the Board if they don't have those multiple votes?
DouglasK1 (Florida)
Posts: 2,046
Posted:
Quote:
Posted By RichardP13 on 05/09/2017 7:03 AM
Posted By JanetB2 on 05/09/2017 12:02 AM
Posted By RichardP13 on 05/08/2017 10:46 PM
IF the LLC is the developer, then the developer still has a majority based on the numbers of votes per unit, generally three per unit. Their 36 to the others 24.


Where did OP make such statement? My last developer had one vote per unit ... not three.

HOW does a developer control the Board if they don't have those multiple votes?

It's not clear in this case that the LLC is the developer. It could just be an investor that's bought a bunch of properties. The OP does say "lots still owned by an LLC", but that isn't definitive. That's why I asked in one of the first replies for clarification, and the OP has never come back.
Escaped former treasurer and director of a self managed association.
AloceJ (California)
Posts: 4
Posted:
After reading the whole post, I have learned more about this topic. Thank you so much.
JanetB2 (Colorado)
Posts: 4,219
Posted:
Quote:
Posted By DouglasK1 on 05/09/2017 9:49 AM
Posted By RichardP13 on 05/09/2017 7:03 AM
Posted By JanetB2 on 05/09/2017 12:02 AM
Posted By RichardP13 on 05/08/2017 10:46 PM
IF the LLC is the developer, then the developer still has a majority based on the numbers of votes per unit, generally three per unit. Their 36 to the others 24.


Where did OP make such statement? My last developer had one vote per unit ... not three.

HOW does a developer control the Board if they don't have those multiple votes?


It's not clear in this case that the LLC is the developer. It could just be an investor that's bought a bunch of properties. The OP does say "lots still owned by an LLC", but that isn't definitive. That's why I asked in one of the first replies for clarification, and the OP has never come back.

Richard ... In many states the developer is only supposed to control to a certain extent. Even at one vote per unit the developer would control until almost complete. Generally in many states after 75% of units are sold the Board is turned over to homeowners. Personally any State who allows a developer multiple votes per unit in my opinion is allowing Theft and Real Estate Fraud agains BOTH Owners and Secured Creditors to purchased and lend large sums of money regarding what has been implied and expressed. Kudos to States who do not allow a developer "free for all". After all Developers can choose anything under the sun what they want to build; however, after they have made their choice they do not have the right after going on a fishing trip to reel in consumers and mortgage lenders to turn around and defraud those entities.

I agree with Douglas ... It is not clear if the LLC is the Developer/Declarant. It potentially could just be a developer who purchased multiple units.
RichardP13 (California)
Posts: 3,868
Posted:
This is the text from the CCRs where I resided. The same text is in a number of KB Home developments in California.

Class B. The Class B Member shall be Declarant who shall be entitled to three (3) votes for each Residential Unit owned by Declarant and any Merchant Builder and which is subject to assessment. The Class B membership shall cease and be converted to Class A membership on the happening of the earliest of the following to occur:

(a) The second anniversary of the first close of escrow for the sale of a Condominium in a Phase of development for which a public report has been most
recently issued; or
(b) the fourth anniversary of the first close of escrow in the initial Phase of development.

As the OP has not come back on to clarify, we don't know if the developer is still in charge. Almost or close only counts in horseshoes.
GenoS (Florida)
Posts: 4,276
Posted:
8 days since HaroldV made the OP (Original Post). A dollar says he's not coming back.
JanetB2 (Colorado)
Posts: 4,219
Posted:
Richard ... At least that gives a two to four year time span for control. I could live with that
TimB4 (Tennessee)
Posts: 21,059
Posted:
Quote:
Posted By RichardP13 on 05/11/2017 10:13 PM

Almost or close only counts in horseshoes.

hand grenades and nuclear weapons as well.

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