By Jeffrey A. Rembaum, Esq. / Published September 2023
What duty does a community association board member owe to their association? What happens if that duty is breached? During the 2023 legislative session, legislation was proposed that would have made directors criminally liable for failure to timely respond to official records requests, among other provisions. The legislation in House Bill 919 was proposed by Representative Porras in response to the alleged $3.4 million dollar embezzlement scheme that took place at the Hammocks Community Association, located in Miami-Dade County. Parts of this proposed bill were well-intentioned; however, several provisions were commonly viewed as too broad and expansive.
On November 15, 2022, the Miami-Dade State Attorney’s Office announced charges related to the Hammocks’ criminal case, including racketeering, organized scheme to defraud, money laundering, grand theft, and fabricating physical evidence against five board members. These board members have been accused of the following:
If found guilty, these board members overtly breached their fiduciary duty to their association.
During the 2023 legislative session, House Bill 919 initially contained significant criminal penalties to punish board members who failed to provide official records when they otherwise should have, criminal penalties for kickbacks, and criminal penalties for improper election interference, among other provisions. Such laws, while well intended, went overboard as evidenced by the creation of criminal penalties for failure to provide official records, as such severe criminal penalties for operational matters would likely only deter good people from running for the board. Recognizing this potential issue, parts of HB 919 were tempered a bit prior to it becoming law. That said, in the opinion of this author, new laws with new criminal penalties are not the answer. Bad people do bad things, and no number of laws will significantly change that. So, what is the answer?
One answer is to shore up the educational and certification requirements for board members. At present, there are two ways to be certified as a board member. One method is to take a State-approved class, which provides an overview of the voluminous information board members need to know in order to perform their duties. The other method is to sign a piece of paper that the board member has read the governing documents, will abide by them, and will faithfully discharge their duties. This second method should be eliminated as there is no method to confirm compliance, and this method does not have any educational component. In addition, continuing education requirements should be required for any board member serving consecutive years.
During a board certification class, time should be spent discussing the term “fiduciary duty.” While the term is repeatedly used in Chapters 718 and 720 of the Florida Statutes, it is not expressly defined in these statutes. Section 718.111, Florida Statutes, makes reference to Section 617.0830, Florida Statutes, which provides for general standards for directors of not-for-profit corporations, such as community associations.
Section 617.0830, Florida Statutes, provides the following:
Still, though, there is no express definition of the term “fiduciary duty.” The purpose of studying fiduciary relationships is to identify the areas where it exists and gain an insight into the duties of a fiduciary. After all, every board member is a fiduciary for their community association. Common definitions of the term “fiduciary” include the following:
In other words, a good community association board member puts the interest of their association above their own personal interests. Thus, while we may not be able to stop bad people from doing bad things, through continuing education we can help good people do better.
To recap, there are three things that can be readily accomplished that would make a positive difference for Florida’s community associations.
Partner, Kaye Bender Rembaum
Attorney Jeffrey Rembaum has considerable experience representing countless community associations that include condominium, homeowner, commercial, and cooperative associations throughout Florida. He is a board-certified specialist in condominium and planned development law and is a Florida Supreme Court circuit civil mediator. Every year since 2012 Mr. Rembaum has been inducted into the Florida Super Lawyers. He was twice awarded as a member of Florida Trend’s Legal Elite. Kaye Bender Rembaum P.L. is devoted to the representation of community and commercial associations throughout Florida with offices in Palm Beach, Broward, Hillsborough, and Orange Counties (and tMiami-Dade by appointment). For more information, visit kbrlegal.com.