Not too long ago, Briny Beezes, Inc., a cooperative association (the “Association”) sought a declaratory statement from the Division of Florida Condominiums, Timeshares, and Mobile Homes (the “Division”) as to whether the Association’s Board of Directors (the “Board”) could use its more than adequate reserve funds to repair a seawall to prevent flooding where the Association’s Bylaws required a majority of the membership vote to approve any expenditure greater than $30,000.00. At the heart of the Association’s request was its engineer’s opinion that the expenditure was necessary for maintenance to the seawall to prevent further flooding. The orders of the Division do not have precedential value similar to district court of appeal cases, but rather its orders are specific to the parties involved in the arbitration petition. While the petitioner in this case is a cooperative, the Division’s resulting May 31, 2013 Order remains both useful and instructive to condominiums, and due to the Order’s logic and common sense approach, perhaps also to homeowners’ associations.
The arbitrator noted that the Florida Statutes regarding cooperative associations and condominium associations provide that the Association has the power to make and collect assessments and to maintain, repair and replace the common areas. (The author notes that so do homeowners associations.) The arbitrator looked to a bankruptcy case, In re Colony Beach and Tennis Club Association, Inc., where the court held that that, “in fulfilling the duty to maintain the common elements, the board may assess members for common expenses without a vote of the unit members.” It was noted that the Board’s statutory duty and authority to maintain the common elements trumps any provisions in the Association’s governing documents requiring member approval for expenditures that are necessary for maintenance. Then the arbitrator looked to state court cases.
In Tiffany Plaza Condominium Association v. Spencer, a 1982 Second District Court of Appeals case, the Court held that, “the board had the authority to authorize the construction of a rock revetment necessary to protect the common elements without the consent of unit owners.” In Ralph v. Envoy Point Condominium Association, Inc., another Second District Court of Appeals case, the Court stated, “[s]imply because necessary work for maintenance may also constitute alterations or improvements does not nullify a condominium board’s authority and duty to maintain a condominium common elements.” The arbitrator also noted that, as recognized in Ralph, “even if expenditures result in alterations or improvements to the common elements, it is within the board’s authority to authorize those expenditures without member approval when they are necessary to protect the common elements.” Finally, the arbitrator referred to guidance from A. N. Inc. v. Seaplace Association, Inc., a 1998 Division Arbitration Order that held, “expenditures which are reasonably necessary for maintenance do not require a vote of the members.”
The arbitrator wisely pointed out that “if the contemplated upgrades to the seawall constitute a material alteration to the common elements that go beyond the necessary repair to protect the common elements, the board’s decision is open to challenge an arbitration or court where the question of fact as to the extent of the changes may be determined.”
PRACTICE TIP: Prior to relying on these cases, if your association requires membership approval before spending thousands on necessary repairs, the board should at least explain the situation to the members at a properly noticed membership meeting and try to obtain the membership vote in favor of the repairs. If the membership does not approve the expenditure, then the board should consult with the association’s attorney to plan the proper course of action. Under no circumstances should the board decide, on its own, to circumvent the requirements of the association’s governing documents.