Firm Partner Roberto C. Blanch wrote an article that appeared in today’s edition of the Daily Business Review, South Florida’s exclusive business daily and official court newspaper, about the implications for Florida condominium associations of the recent ruling by the Second District Court of Appeal in the case of The Retreat at Port of the Islands LLC v. Port of The Islands Resort Hotel Condominium Association. His article reads:
The acquisition of condominium units by investors, including bulk-buyer unit purchasers, has served a critical role in the recovery of the South Florida real estate market. These concerns acquired scores of units at condominium developments during the height of the foreclosure crisis and enabled the associations of many distressed developments to regain their financial footing.
Most of these units were purchased by legal entities, including corporations and limited liability companies, comprised of various shareholders, members, directors and officers. As the recovery of the housing market continues, South Florida’s condominium associations should take a close look at their bylaws and other governing documents regarding the ability of these legal entities to take a majority voting control of their boards of directors.
A recent ruling by the Florida Second District Court of Appeal has clarified that a clause which is commonly found in many condominium association bylaws enables representatives of entity-owned units to have multiple individuals serve as members of the board of directors. In the case of The Retreat at Port of the Islands LLC v. Port of The Islands Resort Hotel Condominium Association, Retreat appealed the circuit court’s summary judgment in favor of the condominium association. The lower court interpreted a provision in the association’s bylaws to limit Retreat’s representation on the association board to one of its representatives, regardless of the number of units that it owned in the property.
His article concludes:
In its reversal of the trial court’s opinion, the appellate panel found that the section of the association’s bylaws in question was devoid of language limiting the number of Retreat’s managing members who may serve as directors, as it was clearly addressing the class of individuals who are qualified to represent a unit owner’s interests on the board rather than the number. The court also noted that the bylaws allow co-owners of a unit to occupy multiple seats on the board if they own more than one unit, so the association already allows for owners of multiple units to occupy multiple seats on the board.
Some condominium association members have traditionally been wary of having one group of owners with shared interests control a majority of their board of directors, arguing that it can be a recipe for problems such as creating favoritism in the board’s decisions and awarding of vendor contracts, as well as facilitating fraud and embezzlement of association funds.
In light of this ruling, association members who wish to restrict entity-owned units, including bulk unit-owners, from having representatives hold multiple board seats and take a majority voting control of their condominium association board of directors should consult with qualified legal counsel to evaluate whether their association’s bylaws and other governing documents should be amended.
Our firm congratulates Roberto for sharing his insights into the implications of this ruling for Florida condominium associations with the readers of the Daily Business Review.