Florida 617 vs 720 on Director Qualifications

I am new president of a very small HOA (14)...So, pleas excuse me if I appear to be rambling...but trying to give the entire picture....

recently Majority of the Board resigned (2 of 3) the 3rd one was Treasurer and said she only stayed because "the bill have to be paid", but will NOT run again at the of their term... due to one single member's unending and unmerciful, and verging on Harrassing attacks on them....So, I stepped up and volunteered to help and make sure we could keep functioning until the end of the year. Another past Board member who was President, and other positions for years did the same...so we both were "appointed" due to the vacancies.

However, this person...we will call them (X) now says that the other Person (Director) is ineligible...because she owns her property under an LLC... she won't tell us where she is coming up with this (Because WE SHOULD KNOW ALL THE LAWS)-(X) says...and "DEMANDS" this person be removed immediately, and then states that our HOA can not perform any business because removal of this person would mean we don't have a board at all....and are now in violation of our Corporate standing....

The Director is a member of our association.....has paid dues and is in good standing....and our Bylaws or Inc, or CCR's do not address this except that that all Directors must be member of the HOA...

If I am understanding 720 correctly...defines member as:
ss 720.301(10) "Member means a member of an association, and may include, but is not limited to, a parcel owner as association representing parcel owners or a combination thereof, and includes any person or entity obligated by the governing documents to pay an assessment or amenity fee.

Since we were incorporated under 617, I am also referencing...
617.01401(12) "Member" means one having membership rights in a corporation in accordance with the provision of its articles of incorporation or bylaws or the provisions of this chapter.

617.01401(14) "Person" includes individual and entity.

Only thing I can find in combing 617...is this and if I am reading it correctly...it makes it definition to include "natural" person...but then it recants this for ch720....
ss 617.0802 (1) Directors must be a natural person who are....(etc...then in same paragraph it says)...as amended, but not for a corporation regulated by ...chapter 720, ... 0r a corporation for which membership in such corporation is required ....etc....

Our Doc's say a member in good standing may be on the Board of Directors.

My thoughts are (X) selectin a single word from 617 out of context of the entire subsection...:

617 uses word "natural" person....but then recants when it goes into...but not for corporations regulated by ...chapter 720...or a corporation for which membership is required...

Then, as I continue to read the 617.0802(2) and its discussion about Trusts...I have this question additional question on that matter:
We have several homes (4 to be exact)under Trusts of different kinds...Living Trusts, etc... and the persons named on the trusts do not live in the home..so does this section of 617 mean that they CAN NOT be on our board? (we're getting down to very few board members to qualify...) In the past several of the Trustee's have been on our board???????

Can anyone give me insight on this...or maybe some case law I can reference?
Thank you in advance

Look at this link, https://www.davis-stirling.com/HOME/H/HOA-Member-Defined

It is from California and halfway down is a passage for corporations. LLC's will be treated in the same manner.

So you have the law firm who is against condo safety in Florida as the legal authority for your comment?

So you're saying a corporation can't vote or service on a board in Florida?

How does an LLC retain the rights of membership if the governing don't provide a mechanism. Scratching my head.

No one should then complain about California. California probably wouldn't have sat on their thumbs in the case of Surfside like Florida has.

California thirsts. California burns. California towns black out.

I appreciate the information. I looked at Sterling....It appears like this addresses California situations...do they address other state specific issues on their site...maybe I missed something...

Since I am in Florida...I do appreciate the help, but am unable to see how it will help me...won't I have to use Florida Statues?

can anyone in Florida direct me to something/place similar, or a Florida Trial Case??
Thank you again for your help.

I am rechecking my bylaws, CCR, Inc Doc 720, and 617....

Florida HOA president here. This is an excellent recent article that gives a little more information. https://www.paveselaw.com/condominium-board-candidate-eligibility/

I also happen to know the attorney who wrote this article and I would trust him more than the other law firm (other article cited) that works both sides of the story - they represent COAs and HOAs and then lobby in the legislature on behalf of developers. Enough said about that.

FS 617 says that the director of a non-profit must be a natural citizen, but says 617 only applies if it is not in conflict with FS 718. Chapter Section 718.101(29) defines voting certificates, which can be used to designate the representative of a corporation as the entity entitled to vote on behalf of the corporation, as long as they reside in the unit.

The most important thing here is the original poster's documents. If the documents are silent on voting certificates, it appears that 718 can give the director who owns via an LLC the right to serve on the board as a director because they are the voting entitity. If the documents have contradictory language, then the documents rule over 718.

Frankly, in this case it would be worth an hour of the association's attorney's time to figure this out. Especially since no one else seems to want to step up right now and you need to keep the association running.

-- No. I am saying that in Florida, being a HOA member is not the only requirement for being a director. Per FS 617.0802 and inter alia, directors must be "natural persons." Florida statutes have no provision for a corporation qualifying as a "natural person" under the circumstances given here.

By contrast, California state statutes expressly say that a corporation, that owns a home in a HOA or condominium association, may do such-and-such to meet the requirement of being a natural person for certain situations at the HOA or COA.

The use of the phrase "natural person" in statutes is a big enough deal that California does not treat the phrase lightly. By my reading, nor does Florida treat the phrase lightly. But they do treat who qualifies as a natural person differently.

To the OP:

Based on your posts to date, I believe you will not be able to understand the law as it is explained to you here. I advise you and the other director to hire an attorney to answer your questions and settle your differences. Attorneys for HOAs often serve as wonderful educators.

Intended or not your response comes across as arrogant and pompous.

So, let me take it just one question at a time...the issue of eligibility of Director....

I have researched our CCR, and find no definition there...It only says...

CCR: ..."who shall elect a new board of management from among the owners thereof. Thereafter annual elections shall be held for the purpose of electing the board of management under such rules and regulations as shall be adopted by such board." (so, sounds like CCR is handing off to Aricles of Inc. ...and Bylaws)

ARTICLES OF INCORPORATION of our Association: "ARTICLE III: MEMBERSHIP AND VOTING RIGHTS: Every person, whether an individual, corporation or other entity, which is the record owner of a lot that is subject to assessment pursuant to the Declaration shall become a member of the Association upon the recording of the instrument of conveyance."

ARTICLES OF INCORPORATION of our Association: 'ARTICLE VI; MANAGEMENT: The affairs for the Corporation shall be managed by its Board of Directors, which shall consist of not less than three (3) nor more than five (5) individuals, the precise number to be fixed in the Bylaws....etc...
Officers may be Directors, Officers and Directors must be members in good standing, of the Association."

BYLAWS: ARTICLE III: MEMBERSHIP: SECTION 1: Owners of record of......are members as further specified in the Declaration .....
Section 2: Each lot shall be entitled one (1) vote regardless of the number of persons who may own the home.
ARTICLE IV: BOARD OF DIRECTORS: The Board of Directors shall consist of four directors elected for a term of one year by the members...then it goes into their dutues....but does not give any further definition of their qualifications...

Our Bylaws give no reference to any qualifications...it only refers to membership. (which appears to go back to definition in the CCR...which appears to give to the Articles of Corporation)

I see where our Articles of Incorporation in ARTICLE III...seems to say that it is OK.....

Then, we come into the question...does it really matter anyway?....Since 720 defers to governing documents, and governing document is our Incorporation document....617....WHO IS ON TOP? 617 or 720 or our Corporation document?

I mean Sheila.

2016 Article about states that require corporate directors to be natural persons and states that do not:

https://danashultz.com/2016/11/01/corporate-officers-need-not-human-beings/

Excerpt:

Please note, however, that there are states where corporate officers must be human beings. These include, most notably, states that have based their corporate laws on a version of the Model Business Corporations Act. ... [I]n states that have adopted the MCBA (assuming that the relevant provisions thereof have not been modified), corporate officers must be natural persons.

Come on. Where state statutes require natural persons to serve as directors, the directors of the original board were not corporations and LLCs. The developer/declarant can often be (or is always) a corporation, including an LLC. The bylaws and statute sections for those HOAs/COAs still under declarant/developer control then provide that the Declarant/Developer simply selects the living breathing people (a.k.a. "natural persons") who serve as directors.

Looking at this from the outside and without wading through the laws...

... given how many LLCs or other entities own rental properties in Florida communities, I can't imagine how such a glaring hole in their rights would not have been challenged legally and successfully resolved.

Further supporting evidence: during the Great Recession a number of Florida condo communities were de-converted after investors bought up controlling interests in their associations. The LLCs/etc. that owned the individual units would have to have had a seat at the table - otherwise how would they have convinced the remaining natural persons (who were faced with losing their homes) to do their bidding?

Institutional investors are also buying up properties in HOAs. Do you honestly think they'd sit still for their agents being prohibited from serving on the board?

We have to be missing something.

Please note that Aug's most recent cite refers to "officers," not directors.

Hey there. Please read the article. The article refers repeatedly to "director. To help make its point and among other things, the article quotes certain state statutes that say "directors" must be "natural persons."

I suspect the author mistakenly figured that "officers" included both "directors" and "officers." Or the author felt the title of the article was easier on the layperson's mind if he/she used "officers" in the title?

To serve on the board, said designated person has to be a "record owner." To protect themselves from liability, partners in LLCs have pointedly, expressly chosen not to be "record owners."

Quote: "617.082: "Directors must be natural persons ..." Herein seems the contraction???? Still, " The articles of incorporation or the bylaws may prescribe additional qualifications for directors." Sheila's Docs have membership as aa qualification to be a director. "

I don't see that as a contradiction. An LLC or a trust is a legal entity and can't do things that a natural person can. But it can appoint a natural person/agent to act on its behalf when such actions are needed. In HOAs, these agents can attend the annual meeting, vote on matters put before the membership, and hold board seats. This is common and widespread, and I'm surprised that some people don't know it.

But apparently one director in the original post *doesn't* know it and is reading the "must be natural persons" to say that LLCs and trusts lose certain rights, such as sitting on the board.

This makes no sense and contradicts other things we know.

For one, it would create a second class of ownership, which would need to be defined in the CC&Rs. I bet that it's not.

Two, as I'd said earlier, with Florida being such an attractive area for investment properties, that director's reading of the law would never have gone unchallenged. Investors, who typically operate as LLCs or other corporate entities, would be unable to buy up controlling interests in communities and de-convert them if their agents couldn't hold board seats. Seats on the board are the whole point. Investors would never allow themselves to be disenfranchised, and lawmakers who had the bright idea to do so would find themselves replaced by more "business friendly" legislators. Rightly or wrongly, it's how the world works.

When I've commented in the past that LLCs et al. have advantages over natural person owners, I was referring to mainly to liability. For instance, if an association had a huge uninsured loss, individual owners' personal assets would be at risk while an LLC's losses would be capped at the value of whatever assets were held by that particular entity (often only a single unit or units within a single community). An LLC can walk away from a catastrophe that would cripple an individual.

But it's not reasonable to think that the laws would be written to hamstring LLCs in other ways in order to compensate for this advantage. Trying to right a wrong by creating a different wrong is fundamentally unjust and leads to litigation. And the LLC's advantage isn't a "wrong" in the legal sense, it's just a natural consequence of how the laws are written. Individual owners need to understand this.

Whenever you get an answer to a question that contradicts other things you know to be true, keep looking because you've missed something.

CathyA3,

-- In the context of HOAs and COAs, what does the phrase "record owner" mean to you?

-- Jane Doe's name is on the deed of a home in a HOA. Her husband John's name is not on the deed. Do some states prohibit John from serving on the board, due to his not being an owner?

-- Anthony is a single man and sole record owner of a unit at a COA. Anthony owns the unit outright (that is, there is no mortgage). Anthony gives Power of Attorney to Susanna. Susanna is not married to Anthony. Susanna does not own any unit in the COA. The COA requires ownership of a unit to be a member. Can Susanna use the Power of Attorney to serve on the COA Board?

-- A law firm that says in Florida, for a HOA with the OP's governing documents, John (above) may not serve on the board, due to not being a "record owner": https://www.floridatoday.com/story/news/2019/02/15/whose-name-deed-partner-spouse-matters-lot/2879479002/

(This is the same law firm that wrote https://www.orlandosentinel.com/os-i-want-to-be-a-director-on-my-condominium-or-hoa-board-am-i-eligible-20141110-story.html , linked above by me . )

-- As noted above, the reality that many states prohibit non-natural persons from serving as directors is corroborated here:
https://danashultz.com/2016/11/01/corporate-officers-need-not-human-beings/

-- So far I do not see a contradiction.

As we all seem to agree, ultimately it's off to an attorney the OP and her fellow director should go. Hopefully well prepared, since I think getting this wrong is not a small matter.

The contradiction I'm seeing is that investor groups have bought up controlling interests in communities and then de-converted them. This couldn't have happened if the investor groups were unable to sit on the board.

Maybe this was limited to condo communities only, and HOAs are treated differently?

Maybe it varied by state? Although it definitely happened in Florida...

Maybe persons in position of control handle cognitive dissonance just fine?

Maybe everybody was asleep at the switch?

Dunno. But trust me, as someone who does not do cognitive dissonance AT ALL, I say there's a contradiction in here.

And I boldly predict that this alleged prohibition on LLC's serving on HOA boards is going to come under scrutiny when the corporate investors start buying up property in Florida. If it interferes with their ability to profit on their investments, they are going to do something about it.

I believe in Florida the "record owner" or the "owner of record" is the entity that is listed on the deed for the property with the local authority. For example, in my county we can do a public records search on a property address onlineat the county tax rolls and easily find the owner of record. Our bylaws define it this way:

2.1 Qualifications. The Members of the Master Association shall be the record Owners of legal title to the Parcels in the Community. Membership shall become effective upon recording in the Public Records of Lee County, Florida, a deed or other instrument evidencing legal title to a Parcel.

In any case, if your unit is held in trust, there is an exception to the "natural persons" rule. Section 617.0802, which provides that the grantor and beneficiary of a trust holding legal title to a condominium unit are considered members of the association and, therefore, eligible to serve on the board of directors. I know this is about condos but the FS 718 and 720 are very close to the same. I think they have this exception since so many properties are held in trust in this state.

I still think the only way to solve this issue over whether a representative of an LLC can serve as a director on a board is to consult the association attorney.

We are lucky - our bylaws already give us a definition. A rep from a corporation can be an officer in our association. Here's the language. We are governed by FS 720.

4.2 Qualifications. Directors must be Members eligible to vote or spouses of Members. When a Parcel is owned by a corporation, a partnership, limited liability company or similar entity, any eligible voter, as described in Article 2.2 of these Bylaws, and the spouses of such persons, shall be eligible for Board service. When a Parcel is held in trust, grantors, trustees and beneficiaries of the trust (provided that the beneficiaries occupies the Parcel), and the spouses of such persons, shall be eligible for Board membership. If a grantor, trustee or beneficiary of a trust, or the spouse of such person, seeks candidacy and such person is not identified on the deed to the Parcel as the grantor, trustee or beneficiary of the trust, a copy of the trust document, affidavit of trust or abstract of trust prepared by a licensed attorney must be provided to the Master Association at least thirty-five (35) days prior to the date of the annual meeting. The trust document can be redacted to keep financial information confidential; however, the document must clearly indicate the grantor, trustee and the beneficiaries of the trust. No two (2) individuals from the same Parcel shall be eligible to serve on the Board at the same time, unless they own more than one (1) Parcel, in which case eligibility is limited to one (1) Director per Parcel.

Our section 2.2 says If a Parcel is owned by a corporation, any officer may vote on behalf of said corporation.

So this would not be an issue in my community.

Record owner would be the person or entity on title.

"ARTICLE III: MEMBERSHIP AND VOTING RIGHTS: Every person, whether an individual, corporation or other entity, which is the record owner of a lot that is subject to assessment pursuant to the Declaration shall become a member of the Association upon the recording of the instrument of conveyance."

Do you agree that the LLC (that owns a home in the HOA) is a member of the HOA?

Do you agree that the LLC is a corporation?

Do you agree that an LLC is not a "natural person"? If you do not know what "natural person" means, please google.

This is not a "shall" or "must" type statute section. Nor does this definition negate the definition of "member" that the OP's bylaws provide.

About LoriM15's and JohnC46's Bylaws: I said they reinforce my opinion. However I am speaking only of my own sense of whether my opinion has merit.

I realize you are firm in believing that the OP's Board can, for one, just appoint as a director any "natural person" representative that an LLC (owning a house in the HOA) chooses. You have a right to your opinion.

Note: In South Carolina, where JohnC46's HOA/COA is, the nonprofit corporation statute requires directors to be natural persons. Which again, seems to explain why JohnC46's bylaws have this special provision. According to CathyA3 and you, no such special provision is ever required, anywhere in the United States.

I asked you, before you asked me, what you think a "record owner" is. Your response was just to ask me the same question. I do not know why you did not answer my question, and instead bounced the question back at me, except maybe to be snarky. If you want to start over, then just answer the question I asked first.

You seem to have ignored both the law firm statement on this and the article that speaks of how some states permit LLCs to have a seat on a board and some states say nope, only natural persons can have a seat on the board. You do not seem to reflect on why some state statute sections require corporate directors to be a "natural person" and some just say "person" (no "natural" modifier). By your reasoning, all state statutes need only have specified "person" (without the "natural" modifier). Why then do some states use the phrase "natural person"? You ignored my comments about husband and wife where only the wife has a name on the title and so in some states, only the wife can be a director (meanwhile the husband and wife are recognized on many levels as a legal partnership). You ignored my Power of Attorney example.

All you have presented to me are your personal interpretations of the governing documents and statute sections here, with a heavy dose of what you think is "common sense."

Impasse (sic).