Agenda Items: Removal of Directors + Alternative Dispute Resolution
October 17, 2003
A. Removal of Directors - Whether specific provisions for removal of directors by homeowners should be provided under Chapter 720, Florida Statutes, and if so, whether disputes involving removal of directors should be subject to binding arbitration.
Like all other issues in this matter, it can't be solved without a regulatory agency enforcing the statutes. Despite the fact that certain industry partisans are claiming that this will resolve disputes in associations, this is a very difficult matter. As in most other issues, the deck is stacked against the homeowners.
Entrenched boards, with the help of their
attorneys and management companies, will do everything to avoid being ousted.
Attorneys and management companies will do nearly everything to prevent
this from happening, because they fear the loss of this account.
The worst example I know in recent times is the case of the SOUTHCHASE PARCEL 45 COMMUNITY ASSOCIATION
This is a case from Orlando, where the wide majority of homeowners was looking to remove the sitting board. Attorneys from both sides agreed on Special Meeting and the necessary procedure. Meeting was held according to signed agreement. Board was ousted by vote of a big majority. Nevertheless, the ousted board filed lawsuit against new board, represented by well-known law firm of Wean & Malchow. In Circuit Court the judge stated in his decision: "This Court further finds that the expense to the Association which has been generated by the Board of Directors which has been ousted is an unnecessary, defiant expense, raising non-justifiable issues of fact and law that created additional expense for the homeowners association." (end quote!) But the law firm, representing the ousted board, took the case even further, ignoring the statement quoted, and lost again in the Florida Court of Appeals - Distr.5: CASE NO. 5D02-818
Result so far: The association spent more
than $140,000 in legal fees.
In another case, homeowners voted in a director at the annual meeting. A majority of seated directors didn't like him. Solution found: Remove by petition, despite the fact that petition is not mentioned in documents. Even the petition was totally flawed, when many households signed twice and both were counted to gain a majority vote. Nevertheless, the board removed the unwanted director by a selective petition vote. Many members were intentionally not informed and were not given the opportunity to participate. The CAM, taking part in the meeting as the loudspeaker of the board, even intimidated one board member by forcing her to vote. Quote: "You can't abstain, you have to vote!"
The CAM, pointing to the attorney's legal opinion, which actually is not available in writing, blocked questions about the legality of this "removal" with the excuse: Client/attorney privilege.
Is this what we have in mind for homeowners and are calling it a "peaceful environment for families in Florida"?
There are many more examples available. This case shows just how determined these entrenched boards can be, when they are threatened with losing their "power."
We need laws where people, including attorneys, are held financially responsible for their actions, so the normal homeowner is protected from abuse.
Any kind of binding arbitration will not solve this problem, since it will not necessarily reduce the cost. Seated boards and their attorneys will try everything in their power to create lengthy and costly arbitration. Arbitration can't provide a Temporary Injunction.
A supervising agency would be able to stop abuse in its tracks and find low-cost solutions for the homeowners. We should always consider that these communities are called homeowners' associations, not attorneys' association.
B. Alternative Dispute Resolution - Whether an organized arbitration and mediation unit, similar in format and function to condominium arbitration, should be established to hear a limited range of disputes, such as covenant enforcement, elections, recalls, access to records, meetings, and voting.
Alternative Dispute Resolution can be an effective form of resolving many daily problems -- only if done by an agency with enforcement powers. If the homeowners are faced with high attorneys' fees in case the complaint is turned down, ADR clearly has serious disadvantages and can get more expensive than a lawsuit.
The condominium arbitration is definitely not favoring the individual owners. Complaints filed against boards often end up in fines paid by the same owners who filed the complaint.
Boards will use their attorneys, paid for by homeowners' dues, to prolong the procedure. ADR doesn't have any real enforcement power and can go on forever. Please don't forget that this is the only kind of legal set-up, where parties to a lawsuit pay as well for the cost of the other party -- without losing the case.
If a homeowner files a lawsuit against the association, he must pay his own legal fees. He must contribute as well to the defense of this lawsuit by paying association dues. On the other hand, if the association sues a homeowner, he will see his dues used to pay for the legal fees of the association. In the end, there are no real winners but the attorneys. Homeowners will always pay the cost -- win or lose.
As long as there is no government supervision by a regulating agency with enforcement powers, the heated arguments will go on and will cost homeowners and taxpayers millions of dollars a year. Please see our proposals dated 9 – 24 – 2003.
As long as the ugly headlines don't stop, but get even bigger by the day, some of the industries involved should really look out for their own interests.
Community developers and homebuilders should offer potential homebuyers a product without all these flaws. Realtors will have an easier job selling homes, when potential buyers do not reject homes in HOAs. Mortgage companies would rather see their customers protected than left with huge legal bills, which could cause them to default on their mortgages. The question here is obvious: Will protecting a few attorneys -- the only winners in this power game -- be worth losing potential business?
CONDO SELECT COMMITTEE