The Legislative Session for 2009 did not result in significant changes being made to the Condominium Act (Chapter 718 F.S.) or to the Homeowners’ Association Statute (Chapter 720 F.S.). However, changes were made to the Not-For-Profit Corporation Act (Chapter 617 F.S.), in Senate Bill 2330, which affect associations in general. These changes are effective as of October 1, 2009. The following is a summary of changes to Chapter 617 F.S. that will affect association operations.
Some clarification has been added in the definition section of 617.01401 F.S., adding a new (16), entitled “Voting power”, and defining it as the total number of votes entitled to be cast for the election of directors at the time that the determination of voting power is made. It further provides for clarification in class voting situations and when directors are not elected directly by the members.
Section 617.0505 F.S. has been amended to add a new subsection (5), which expressly acknowledges the entitlement of a corporation regulated by chapters 718, 719, 720, 721 or 723 to make refunds, give credits, disburse insurance proceeds or disburse or pay settlements to its members without violating the prohibition on not-for-profit corporations making distributions.
A new section 617.0607 F.S. has been added (having particular application to cooperatives), which provides for specific requirements of corporations that will expel, terminate or suspend a member from the corporation. The procedure to be used in such even must be fair and reasonable and carried out in good faith. Written notice is required in advance of the action and any proceeding challenging the expulsion, suspension or termination must be commenced within one (1) year of the effective date of the expulsion, suspension or termination.
Section 617.0701(4) F.S. , which provides for the procedure for taking action by written consent instead of a meeting, has been revised to extend the time within which to collect the written consents to 90 days after the date of the earliest dated consent. It also extends to 30 days the time within which the corporation must notify those owners who did not submit a written consent of the action that had been taken.
Section 617.0721(3) F.S. has been added to allow the board of directors to authorize and create guidelines and procedures to allow members and proxy holders who are not physically present at a meeting to participate by means of remote communication.
The addition of a new Section 617.07401 F.S. is the most significant change to the Statute this year. It creates, in a not-for-profit corporate setting, member derivative actions, which previously only existed in for profit corporations. This allows any member to bring an action on behalf of all of the membership, as a class representative, against the corporation for alleged wrongful conduct or negligence. The new statutory provisions set up standards and guidelines for qualification which must be met in order to bring such an action.
Section 617.0808 F.S. has been revised as it relates generally to the removal of directors. How this will apply in condominium, cooperatives and homeowner associations remains to be seen. This Section has been divided into subsections, with the new subsection (1) containing provisions of note. Subsection (1)(b)3 provides that if articles of incorporation or bylaws provide that the director may be removed for missing a specified number of board meetings, the board may remove the director for failing to attend the specified number of meetings, but requires a majority vote of the directors then in office to approve the removal. Subsection (1)(i) provides that a director elected or appointed by the board may be removed without cause by a vote of two-thirds of the directors then in office, or such greater number as is set forth in the articles or bylaws. This can be interpreted to mean that if the board appoints a replacement director, the board could conceivably remove that director with the appropriate percentage vote, without requiring the owners to vote for recall.
Section 617.0809 F.S. has been revised to add a new subsection (2), which provides that when a vacancy occurs on the board with respect to a director elected by a class, the vacancy is to be filled only by the members of that class or by a majority of the directors then in office elected by that class. The revised numbered subsection (3) has been changed to provide that the term of the appointed individual to fill a vacancy runs until the next annual meeting at which directors are elected, changing it from the unexpired term. (This likely conflicts with Section 718.112(2)(d)8 F.S., so for condominiums, this change would likely not apply as further discussed below.)
A new Section 617.1703 F.S. has been added, entitled “Application of chapter”, and provides that in the event of any conflict between the provisions of Chapter 617 and: Chapter 718 regarding condominiums; Chapter 719 regarding cooperatives; Chapter 720 regarding homeowner associations; Chapter 721 regarding timeshares; or, Chapter 723 regarding mobile homes, the provisions of the other chapters rather than Chapter 617 will apply.
Should you have any question regarding any of the specific provisions as it relates to the operation of the association, please contact this office.
