BOD stealing votes from Membership-Common Property

In the past 3 years, our Board of Directors have voted to "steal" 3 votes from common properties and appoint a Director to cast three (3) votes at the Annual Member Election meeting. This effectively nullifies 3 Member votes and put the BOD's finger on the scales in favor of their agenda. This has been pointed out to them, but they or their Association attorney does not understand that the BOD is not a member of the corporation entitled to vote.

(As an aside, the reason they choose these 3 parcels rather than the total # of common property parcels, which is around a dozen, is because these 3 parcels are residential parcels that have been acquired for the Association as 2 drainage lots and 1 utility lot.)

Despite challenging the authority of the Directors to self-designate as a voting member, the BOD continues. Here is the relevant language of definition of Members in the Bylaws:

ARTICLE (111) MEMBERS

Section 1. All of the owners or lessees under 99-year leases of lots
or parcels of said lands described in the Articles of Incorporation that are subject to this corporation by plat, lease, conveyance or Declaration of covenants and restrictions shall be members. Upon recording of a deed or by any other means which establish a change of record title to a lot or parcel by operation of law or otherwise, the new owner shall become a member of the corporation and the prior shall be thereby terminated.

Section 2. The owners of individual lots or parcels shall be entitled
to a vote in the affairs of the corporation as set forth in the Articles of
incorporation.

Section 3. No other person or legal entity shall be a member of the corporation or vote in its affairs.

The processed used to capture the 3 votes is self-proclaimed and there is no mechanism described in bylaws or any other governing document which addresses the authority to remove parcels from the plat and designate certain common parcels as voting parcels for the BOD.

Has anyone ever heard of such a scheme? Is so, what would the language of the governing document look like? In the absence of any process outlined in governing documents, would the above definition of Members be sufficient basis to challenge the practice?

The mechanism used to exercise this "power" is self-proclaimed by motion and BOD majority vote. It is speculated that the board is increasingly disturbed by decline in voting by membership and is looking for justification to increase votes favorable to its agenda and/or lower voting threshholds to pass amendments.

The BOD should not be legally allowed to use those parcels as a voting machine.

As far as I read in the Covenants, the parcels subject to the Covenants are all those lands on the plat, which would include the common property and the 3 parcels in question. The covenants further state that "purchasers" of said parcels will be subject to the Covenants. Technically, this makes the Association a "purchaser" as the 3 parcels were purchased by the Association for common use.

I rather think it is parsing words in a tortuous way to say that the Association, as a purchaser of residential parcels converted to common use, would be considered a "Member" and entitled to vote. But this is an interesting point of view and it made me go back and look for the references "subject to" in the Covenants. The Association is also an owner of a dozen other properties within the platted subdivision and so far, has not converted them into BOD votes.

As far as members, there is only one class of membership in this FS720 HOA.

Another relevant aspect of the membership status is the loss of the ability to vote when a parcel is behind in assessments. This further supports the notion that membership is tied to individuals or entities that pay assessments and not to subservient common properties.

The Association attorney has construed that owners that are corporations are members and allowed to vote. However, I think it is a sophomoronic opinion and likely it did not come from a competent attorney.

Who is paying property taxes on the purchased land? Is it the HOA or are the taxes rolled into homeowners' tax bills (as happens in condos)? I assume somebody is paying.

It's an odd situation, and I can see reasons for allowing the HOA to vote based on their ownership of those plats (especially if they're paying taxes). I can also see reasons for not allowing it.

The only way you'll know if the HOA's attorney is competent or not is to hire your own attorney and see what they have to say.

Property taxes are paid by the Association; these 3 parcels do not pay assessments. The parcels are taxed at a different rate because they are zoned as "residential" vacant parcels whereas the other dozen parcels are exempt.

If the Association is an additional class member by virtue of the parcels held by it, would that not be set out in the Bylaws and Articles and wouldn't there would be a specific mechanism and process described for the voting privilege by the elected members, (who each "own" the same share as all the other owners). On the other hand, the 3 parcels were acquired 40 years after the Declarant sold them to individuals and it is likely that it was never considered to address this in the bylaws. But, the Declarant did provide for the release/removal of parcels from covenants for unspecified reasons with no provision in bylaws for the votes attached to released parcels.

Is this not a dilution of Members' aggregate vote? It's equivalent to giving a board member 3 freebie votes that could potentially swing a ballot proposal

There was never any discussion before members about this; it just happened and the motion blew by. But, I did not miss it and questioned it. I put it up here because there are many really good brains in this group and I always find a new way to think about something. I also don't think that this is a lawful practice and wanted other opinions based on experience. Thanks to all for input!

Wait, so your HOA has a mechanism for a property to get out of the HOA and deed restrictions? Interesting. Did this happen with these 3 lots? If so, they they are no longer 'members' of the HOA and don't have a vote.


Regarding taxes, its totally ok if its taxed at a different rate. If you bought an empty lot with plans to build, your tax rate undeveloped is different than your neighbors developed house.


No, sorry,. CCorporation sare people too. Just the same as if you owned 3 extra lots, you would be able to cast 3 extra votes

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So, thinking about this further:
It seems sometime in the past, you (the membership) decided to use your $$$ to purchase 3 lots. That means the HOA owns 3 membership units and must keep paying the dues on them x3. Seems very expensive and silly and not something I would want my personal dues to pay for, but whatever floats your boat. That means that the President, as the CEO of the HOA, gets to cast x3 votes at Meetings of the Members (note, votes in his capacity as the President, which is different than his personal vote as a Member).

Most HOA's have a CCR/Bylaw that says the Members must be current on their dues or they lose privileges, like voting. If this is the case and your HOA hasn't paid dues x3, then they don't get a vote. If not, then your President gets to cast x3 votes.

My first blush is if the HOA is voting the lots then they should be paying dues on the lots. No dues, no vote.

This sounds messier and messier. :-)

Usually if a Declarant sells parcels to individual owners, they are considered members of the HOA although they often pay a minimal assessment and may have restricted voting rights. If the Declarant removed the parcels from the covenants, that sounds like they were removed from HOA and should have no assessments or voting rights. If the HOA is paying property taxes, I'd expect them also to pay some minimal assessments as well. For instance, these lots would be served by private streets, HOA-owned water and utility lines, and the like. IMHO they should be treated about the same as any residential lot owned by an individual who hasn't built a house yet.

The big issue to me is that all of this to-ing and fro-ing should have been accompanied by changes to the covenants (CC&Rs). These normally have to be approved by a majority of the voting interests - although when the Developer/Declarant is in control, that person typically has a voting majority and in practice can do whatever they want. But the changes do need to appear as legal amendments to the CC&Rs and these generally have to be recorded in your county in order to take effect. Amendments that are not recorded usually are not legally binding and are unenforceable.

I think you're right to ask questions since it sounds like some steps may have been missed. But as I said, I'm not a lawyer and there's a lot I don't know about the situation. Your association's attorney may be on the ball or may not, so consulting your own lawyer may give you a good idea on how to pursue things. Florida seems to have more options for resolving legal issues without resorting to lawsuits right off the bat.

If the Association were to pay dues on those 3 parcels, they would be paying out of owner assessments. MY money to pay for assessments on 3 parcels.

If the Association can lawfully take those 3 parcel votes from common property, why not take ALL the votes on ALL the common properties? That would be about 15 votes for the use of the board to weight the scale. There are about 800 residential parcels but only 797 residential parcels pay assessments. There are an additional 11 common properties that are supported with owner assessments and so far, the BOD has not seized those votes. But, it may only be a matter of time...

Gwen

You are concerned about 3 votes out of 797. I spill more then that at the bar when I drink.

JohnC46 Surely you jest. Three votes can change your life. A covenant change had to be recounted triggered by the bylaw threshhold. It meant the difference between 75% vote of membership versus 50%. The ballot item passed with 5 affirmative votes. It could just as well have been 3 votes.

By paying full boat, none of those parcels are exempt from taxes. They are all still zoned residential building lots, they are deed restricted and building is prohibited on the two drainage lots but they are taxed as vacant residential and the owners pay these taxes through their assessments. Appealing to the county to Lower the tax assessment is something that should have been done ages ago, but this HOA leadership does not seem to care about lowering costs to members.

The HOA is not paying dues on any of these 3 units. And if they were, it would be coming out of member assessments. These are treated like any other common property--they consume resources and do not contribute. Owners pay MORE assessments because there are 3 fewer lots contributing.

To clarify, there is no doubt that a corporation can own property. The question is "Is the HOA a Member of itself with the right to vote?"

PS To the commenter about "releasing lots". YES that is a provision in the Covenants; i.e. lot(s) can be released from all restrictions in the Declaration with the approval of 75% of membership. Needless to say, a membership vote was NOT held when these parcels were removed/released and repurposed.

JohnC46 Surely you jest. Three votes can change your life. A covenant change had to be recounted triggered by the bylaw threshhold. It meant the difference between 75% vote of membership versus 50%. The ballot item passed with 5 affirmative votes. It could just as well have been 3 votes.

By paying full boat, none of those parcels are exempt from taxes. They are all still zoned residential building lots, they are deed restricted and building is prohibited on the two drainage lots but they are taxed as vacant residential and the owners pay these taxes through their assessments. Appealing to the county to Lower the tax assessment is something that should have been done ages ago, but this HOA leadership does not seem to care about lowering costs to members.

The HOA is not paying dues on any of these 3 units. And if they were, it would be coming out of member assessments. These are treated like any other common property--they consume resources and do not contribute. Owners pay MORE assessments because there are 3 fewer lots contributing.

To clarify, there is no doubt that a corporation can own property. The question is "Is the HOA a Member of itself with the right to vote?"

PS To the commenter about "releasing lots". YES that is a provision in the Covenants; i.e. lot(s) can be released from all restrictions in the Declaration with the approval of 75% of membership. Needless to say, a membership vote was NOT held when these parcels were removed/released and repurposed.

JohnC46 Surely you jest. Three votes can change your life. A covenant change had to be recounted triggered by the bylaw threshhold. It meant the difference between 75% vote of membership versus 50%. The ballot item passed with 5 affirmative votes. It could just as well have been 3 votes.

By paying full boat, none of those parcels are exempt from taxes. They are all still zoned residential building lots, they are deed restricted and building is prohibited on the two drainage lots but they are taxed as vacant residential and the owners pay these taxes through their assessments. Appealing to the county to Lower the tax assessment is something that should have been done ages ago, but this HOA leadership does not seem to care about lowering costs to members.

The HOA is not paying dues on any of these 3 units. And if they were, it would be coming out of member assessments. These are treated like any other common property--they consume resources and do not contribute. Owners pay MORE assessments because there are 3 fewer lots contributing.

To clarify, there is no doubt that a corporation can own property. The question is "Is the HOA a Member of itself with the right to vote?"

PS To the commenter about "releasing lots". YES that is a provision in the Covenants; i.e. lot(s) can be released from all restrictions in the Declaration with the approval of 75% of membership. Needless to say, a membership vote was NOT held when these parcels were removed/released and repurposed.

JohnC46 Surely you jest. Three votes can change your life. A covenant change had to be recounted triggered by the bylaw threshhold. It meant the difference between 75% vote of membership versus 50%. The ballot item passed with 5 affirmative votes. It could just as well have been 3 votes.

By paying full boat, none of those parcels are exempt from taxes. They are all still zoned residential building lots, they are deed restricted and building is prohibited on the two drainage lots but they are taxed as vacant residential and the owners pay these taxes through their assessments. Appealing to the county to Lower the tax assessment is something that should have been done ages ago, but this HOA leadership does not seem to care about lowering costs to members.

The HOA is not paying dues on any of these 3 units. And if they were, it would be coming out of member assessments. These are treated like any other common property--they consume resources and do not contribute. Owners pay MORE assessments because there are 3 fewer lots contributing.

To clarify, there is no doubt that a corporation can own property. The question is "Is the HOA a Member of itself with the right to vote?"

PS To the commenter about "releasing lots". YES that is a provision in the Covenants; i.e. lot(s) can be released from all restrictions in the Declaration with the approval of 75% of membership. Needless to say, a membership vote was NOT held when these parcels were removed/released and repurposed.

Sorry on the double post, "Sausage Finger". Wish this platform had editing...

GwenG,

What your BOD is doing would be compliant with our state laws, CC&Rs, and By-laws. I see no issue with it. An attorney gave their opinion, which you dismissed, that it would be okay in Florida.

You may not like it but it appears to be congruent with the legal framework in which HOAs live in.

For the sake of discussion, I will assume the HOA corporation owns certain lots that have voting rights lawfully assigned to the lots.

Not for one second do I believe directors on the board have the legal right to vote for themselves in an election (for seats on the board) under the guise of speaking for the corporation with their vote, allegedly on behalf of the lots owned by the corporation. The conflict of interest is staggering.

Directors are not to vote on matters where they have a personal stake unless certain conditions are met. By my reading of FS 617.0832, these conditions cannot be met.

In my opinion, the votes appurtenant to the lots in question should not be counted.

Board members have the legal right to vote for themeselves in every election, because they are homeowners as well as board members.

What if they also own a rental unit in the same homeowners association? Then they get two votes - one as a homeowner and one as a rental unit owner.

In this case, the BoD represents the corporation that owns the land. The corporation gets one vote per unit of land that they own, or three votes. Thus, the BoD has three votes. The key thing is that they all have to agree on how to vote. You can't have half a vote going one way and half a vote going a different way.

I see no legal objection.

In this instance, board members are not voting in their capacity as directors. They are voting in their capacity as members.

The way I see it:

First, A conflict of interest arises when a director stands to benefit directly from a vote on an issue that is before the board.

Second, the Florida HOA statute recognizes the problems with conflicts of interest on HOA boards. The statute places certain, express restrictions on directors when such conflicts arise.

Third, the corporation owns certain lots. For the sake of discussion, I ask that we assume that votes are appurtenant to these lots.

Fourth, I think it is self-evident that a director stands to benefit directly when she or he casts a vote, in her or his capacity as a director and on behalf of the corporation, for him- or herself for the annual election.

Fifth, therefore the restrictions that the Florida statute places on directors when a conflict of arises must be considered.

Sixth, by my reading, no director can possibly get past these restrictions.

Aside 1: Designating one director to vote the lots is plain and simple jabberwocky and still raises the conflict of interest problem.

Aside 2: If none of the present directors are up for re-election, then maybe it would be legal to have the board vote on behalf of the lots. IOW, I do not think I can find a conflict of interest when none of the incumbent directors are running for re-election and the board votes on behalf of the lots for the candidate it thinks would best serve the corporation.

Aside 3: For votes that do not involve the election of directors at the annual meeting, I tend to think the Board is allowed to 'advance its agenda' and vote on behalf of the lots, presumably doing so in the best interests of the corporation. "Advancing the Board's agenda" is kind of a loaded phrase. Every vote a board conducts is "advancing the board's agenda."

Why are you saying this? The Lead director transacts the LLC's business in the capacity of the LLC, not as their personal identity.
Also, why they/plural? Typically an LLC has a single Director transact the business. Every director doesn't hold hands when they sign the check to the landscaping company. Just like they don't all hold hands and cast their 3 votes together. Yes, they might meet and discuss and vote as a business topic about which candidate they want to use their 3 votes on, but a single person (President) would be casting the vote.


Please describe how voting for a director position meets the Florida definition of Conflict of Interest.
Also, I think you missed the details of this conversation. The HOA has 3 membership votes. Meaning it has 3 votes at meetings of the members. A board member does not get 3 extra votes at a board meeting. Members do not on issues before the board.


Correct, and the statute explicitly describes these conflicts as contracts and business.


no comment except for word choice... ;)


Please describe how a Director will benefit from being elected as a Director.
Please describe how this benefit meets the definition in Fl statute.


sigh. where is the contract?


i'm losing count and my eyes are rolling in my head reading your list.

Just because you have it hot and heavy for what you think is a conflict of interest is irrelevant to what the law reads. Also, your arguments fail logically to all the analogs provided previously by myself and many others.

BobD4 I did post the very lengthy and longitudinal thread on MRTA expiration. Your observation is subject of a new comment I just posted to it concerning the flawed revitalization due to HOA failure to comply with state MRTA law and index the revitalized documents to each owner name. In the case of my HOA, it only referenced the lands, which is not sufficient. I gather that is what you are referring to. The indexing to owner name is statutorily required. As it happens, it now appears that the Revitalization was not properly recorded and there are new and very unfamiliar concerns. My property was purportedly encumbered by the revitalization, but I have been advised that the revitalization was ineffective.

HenryS7 Clearly, directors can vote for themselves in a general election and cast a vote or votes equivalent to the parcels they own. Does the voting privilege extend to taking on the cloak of ownership of the common properties and voting 3 more times for themselves or casting extra votes for common properties on a ballot proposition? If an HOA has 14 or 20 common parcels, does a board director vote their own personal vote PLUS 14 or 20? Is this actually done in HOA's? There is no power or mechanism for this process that I can identify in any governing documents or statute.

Augustin D You stated a premise that the HOA assumed voting rights and that IS at the heart. The HOA bought the lots from owners for the common good of all members and I am certain that owners had no expectation that voting rights would be appurtenant to these common properties. The HOA has not, thus far, extended its "voting rights" to the additional dozen common properties in the subdivision. I am in agreement that there should be no votes for these 3 parcels because the Association does not have a
second member class that describes the authority, notice and mechanisms to effect the voting. The HOA has "made it up" in the absence of a bylaw establishing more than one class of membership

BobS38 The lots have been functionally (but not formally by affirmation of 75% of members) released from the HOA and do not pay any assessments. They are entirely supported by member assessments. The lots remain zoned and taxed as vacant residential parcels, but the drainage lots cannot be developed, per special deed restriction. This IS a key component of voting rights and owners who are over 90 days deliquent are not permitted to vote. It is actually funny that you describe a sovereign lot in the middle of HOA-land and there is ONE parcel with a home that never had a Declaration encumbering the lot! I stumbled on this during my MRTA adventure but the owner is unaware and pays assessments.

About the LLC: I thought you meant an LLC that owned several units at a HOA.

The Florida nonprofit corporation yada statute does not apply to LLC's. I see no point in discussing how LLCs operate here at HOATalk.com . If this forum were LLCTalk.com, then maybe your post would be worth someone's time. But still not mine.

FS 617 does not define "transaction" or "conflict of interest."

FS 617.0832 does speak simply of "transactions" where the director has "an interest."

Are you seriously saying that a director, who has chosen to be a candidate for a board seat, does not have "an interest' in seeing himself/herself elected?

"Appurtenant" is a legal term. If you think I used it incorrectly, say so. But look it up first.

My former HOA actually owned one unit/lot. The HOA shamelessly (and probably in violation of the covenants) bought the unit during the Great Recession and then rented it out for ten years. This unit never had a vote cast for it at elections. Even the incompetent directors entrenched for years knew counting a vote from the unit in their favor at the annual election of directors was not kosher.

It's also quite clear that directors get to exercise their voting rights, as long as they abide by the restrictions in FS 617. If they do not abide by the restrictions, they do not get to exercise their vote.

BobS38,

Regarding what a conflict of interest is, here's the pertinent part of FS 617.0832:

No contract or other transaction between a corporation and one or more of its directors or any other corporation, firm, association, or entity in which one or more of its directors are directors or officers or are financially interested shall be either void or voidable because of such relationship or interest, because such director or directors are present at the meeting of the board of directors or a committee thereof which authorizes, approves, or ratifies such contract or transaction, or because his or her or their votes are counted for such purpose, if:

Parsing, I get:

No... transaction between a corporation and one or more of its directors... shall be either void or voidable because of such relationship..., because such director or directors are present at the meeting of the board of directors or a committee thereof which authorizes, approves, or ratifies such... transaction, or because his or her or their votes are counted for such purpose, if:

You and I disagree that there has to be a financial aspect for a conflict of interest to exist. Hence there's no point to further attempts by you and me to discuss this. Besides, it's only my opinion. I hear you that yours is different.

Else I appreciate that you think the whole forum is waiting for my answer. I am pretty sure this is not the case.

BobS38, I think a lot of people would agree with you that the said corporate vote, for directors and by these same directors, is not a "transaction." I think a lot of people also believe that a board vote involving a covenant violation against a director is a vote in which the accused should not participate. I think your ad hominems are over the top and not necessary. I believe reasonable people can disagree with civility.