HOAleader.com - Tip of the Week - July 9, 2021
Published: Fri, 07/09/21
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HOA President Stalls Removal of Director Who Breached Fiduciary Duty: What Now?
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What to do when a director has engaged in a quid pro quo with a vendor, admits it on camera, but the president won't act to remove the director even though state law says that's a requirement?
Sticky. Very sticky.
In this week's tip, we answer an HOAleader.com reader's question spelling out that scenario, first from the perspective of Florida, where the reader is located, and then from the perspective of other states' laws.
"This isn't something that comes up in Florida often, and I find it shocking that the statute the reader cites allows a director to be removed from the board by the board," says Alessandra Stivelman, who is board-certified in condo and planned development law and a partner at Eisinger Law in Hollywood, Fla. "I'd never read the statute that way, but it does seem like the intent is to not just remove an officer but to remove a director.
"There's no case law on that view of this statute, and I've never seen such a removal done," she adds. "Here, I think this issue is difficult because you have a split board. Even though you have a legal letter, and this person really did apparently have a quid pro quo arrangement, unless the majority of the board takes action, there's nothing that can be done.
"The statute says that if this is violated, the board shall immediately remove the director, and the vacancy shall be filled," she continues. "It doesn't say removal is automatic. The board has to take action by a majority vote.
"In the reader's case, it looks like they have two directors who seem to think this director needs to be removed, two who refuse to do that, and the director at issue, who's an interested director and wouldn't be able to vote," explains Stivelman.
"Because this reader's question states this is an HOA, the Florida Department of Business and Professional Regulation doesn't have jurisdiction, so it's not like this board member can make a complaint to the DBPR against the other director," she notes. "The only other option is to have the membership do a recall of this officer by a majority vote. If there are sufficient votes for that, the owners will serve that on the board, and the board members would arguably have to approve the recall."
Stivelman says litigation may also be an option. But that's complicated, too. Find out why, and read what experts from three other states say would have to happen to remedy this director's breach, in our new article: https://www.hoaleader.com/members/4352.cfm
Best regards,
Matt Humphrey
President
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