HOAs, Condos, and Cooperatives: What’s the Difference?
As a Florida community association lawyer, I am often asked about the legal differences between the various types of community associations: Homeowners’ Associations (HOAs), Condominium Associations (Condos) and Cooperative Associations (Co-ops). Sometimes, the differences seem apparent. A standard planned neighborhood of single-family homes is nothing like a high-rise condominium. Other times, it is hard to tell. Some communities of detached single-family homes are organized as condominiums. We call them “land-o-miniums”. Other planned neighborhoods look like HOAs, but are instead operated as Co-ops. What is the legal difference?
The answer is found in the statutory definitions of Co-ops (Section 719.103(12), Florida Statutes), HOAs (Section 720.301(9), Florida Statutes), and Condos (Section 718.103(11), Florida Statutes). A Co-op is the easiest to legally identify. It exists when the land in a neighborhood is owned by a legal entity (i.e. a corporation) and the lot owners have both a membership interest in that entity (i.e. stock) and the right to possess their lot on a continuing basis (i.e. a long-term lease). Co-op members do not own their lot. Instead, they are generally stockholders in the Co-op with a long-term lease to their parcel.
Condos are the next easiest type of association to identify. A condominium is a form of ownership created pursuant to Florida’s Condominium Act in which owners own both their unit and an undivided share in the common elements (everything outside their unit). While condominiums can look like other types of communities, they are generally easy to spot because the units are created by a Declaration of Condominium, sometimes coupled with a condominium plat, which is expressly referenced in each unit’s deed (i.e. Unit B, according to the XYZ Declaration of Condominium).
HOAs are more nuanced. To be an HOA, the association must first be a Florida corporation responsible for operating a community made up of parcel owners. Next, membership in the association must be linked with, and inseparable from, lot ownership. Lastly, the association must have the right to impose liens on homeowners’ property if assessments are unpaid.
It is important to know what type of association you are dealing with because different rules apply to each. Condos are the most heavily regulated and even have a whole chapter of the Florida Administrative Code to themselves. HOAs tend to be less regulated, though new laws are enacted every year to reduce their operational flexibility. If you are not sure what type of community you live in, take a look at the statutory definitions. They may provide the answer.
Participation by Proxy – An Option for Socially Distant HOAs, Condominiums and Cooperative Associations
In these precarious times, attending a meeting of your cooperative, condominium or homeowners’ association (HOA) may be the last thing on your “to do” list. However, your community is important to you, and on some issues, your vote needs to be heard. The most common method of participating at a meeting, without actually being there, is through a proxy.
“Proxy” is a fancy word for agent – someone who is authorized to act as a substitute for another. A proxy form is the document by which the agent (aka the “proxy holder”) is named and appointed. In the context of cooperative, condominium and homeowners’ association meetings, proxy forms come in two types: general and limited. A general proxy allows the proxy holder to vote however she sees fit on any matter that comes up at the meeting. A limited proxy lists the issues on which the proxy holder may vote and instructs her how to vote.
In Florida corporations not-for-profit, the use of proxies (whether limited or general) by members is generally authorized if not prohibited by the Bylaws or Articles of Incorporation. Section 617.0721(2), Florida Statutes. This rule holds true with homeowners’ associations. Section 720.306(8) states that members “have the right, unless otherwise provided…in the governing documents, to vote in person or by proxy.” In order to be valid, an HOA proxy form “must be dated, must state the date, time, and place of the meeting for which it was given, and must be signed by the authorized person who executed the proxy.” Id.
The use of proxies in condominiums and cooperatives is more limited. First, proxies may not, generally, be used to elect board members. Sections 718.112(2) and 719.106(1), Florida Statutes. This prohibition can be lifted by the affirmative vote of a majority of the total voting interest in a cooperative association, or in a condominium with ten or fewer units. Id. Second, general proxies may not be used except in limited circumstances, such as to establish a quorum. Id. Third, the proxy form must substantially conform to the form adopted by the Division of Florida Condominiums, Timeshares, and Mobile Homes of the Department of Business and Professional Regulation (DBPR Form CO 6000-7). Id.
If you are interested in utilizing proxies for an upcoming meeting, bear in mind that a proxy form is not generally valid for a period longer than 90 days after the date of the first meeting for which it was given. Sections 718.112(2), 719.106(1) and 720.303(6), Florida Statutes. Also, you will need to check the Bylaws and Articles of Incorporation to ensure that any additional requirements are met, such as delivering a copy of the proxy form to the association’s Secretary in order to allow him to keep track of how many members will be attending by proxy. Finally, while association members may use proxies as outlined above, directors may not use them to vote at board meetings. Sections 718.111(1), 719.104(8) and 720.303(2).
These are indeed strange times for community associations. While large in-person meetings may be avoided for the time being, that does not mean that members lack the ability to participate or ensure their voice, and their vote, is heard.
HOAs & Condos: When is a verbal resignation valid?
In representing condominiums (condos) and homeowners’ associations (HOAs), I am often asked whether the resignation of a board member or officer is valid. Invariably, the person in question has either announced “I quit” at an open meeting, or simply told another officer of the fact. Is a verbal resignation from the board of a non-profit HOA or condo valid?
The answer to is emphatically NO, unless the bylaws or articles of incorporation expressly allow it. In my experience, community association governing documents generally reference resignation, but do not spell out how it should to occur. If that is the case with your association, the issue is governed by the Florida Not For Profit Corporation Act (Chapter 617, Florida Statutes). Two provisions are relevant. The first is Section 617.0807(1), which states that “[a] director may resign at any time by delivering written notice to the board of directors or its chair or to the corporation.” The second is Section 617.0141(1), which requires any “[n]otice under this act to be in writing, unless oral notice is: (a) expressly authorized by the articles of incorporation or the bylaws.”
When read together, these statutes require a resignation to be in writing unless the association’s bylaws or articles of incorporation expressly allow a verbal resignation. Recent arbitration decisions issued by the Florida Department of Business and Professional Regulations arrive at the same conclusion.
- Sanville v. Venetian Mgmt. Assn., Inc., Case No. 16-04-7565, 2016 WL 7667624, at *3 (Fla. D.B.P.R. Summary Final Order, Nov. 17, 2016) (“Since oral resignations are not explicitly authorized by the Association’s governing documents, resignations from the Association’s board of directors must be in writing and properly delivered to the Association to be effective.”)
- Brand v. Sundance Assn., Inc., Case No. 16-00-5242, 2016 WL 4939974, at *2 (Fla. D.B.P.R. Summary Final Order, July 6, 2016) (“Since oral resignations are not explicitly authorized by the Association’s governing documents, resignations from the Association’s board of directors must be in writing and properly delivered to the Association to be effective. Therefore, Petitioners’ verbal resignations at the November 17, 2015 board of directors meeting were ineffective.”)
- WPB Berkshire a Condominium, Inc. v. Unit Owners Voting for Recall, Case No. 05-04-7905, 2005 WL 3966672, at *4 (Fla. D.B.P.R. Summary Final Order, Oct. 11, 2005) (“Mr. Gilbert erroneously believed that Mr. Ostrovsky had resigned because of certain comments that Mr. Ostrovsky made to Mr. Gilbert. Mr. Ostrovsky did not submit a letter of resignation as required by § 617.0807(1), Florida Statutes, and he has continued to serve as a board member.”)
In sum, for HOAs, condos and other non-profit community associations, “I quit” is not generally enough. Make sure the resignation is in writing and specifies the date it is to be effective. Otherwise, we might not know who is actually on the board!
Chilton to Host Lakeland HOA Seminar
On January 24, 2020, Robert Chilton will host a free HOA seminar at the Lakeland Public Library on Lake Morton. The event, which begins at 3:00 p.m., will focus on legal issues facing Florida homeowners’ associations and include topics such as meeting procedures, estoppel requests, covenant enforcement and statutory updates. Mr. Chilton has been certified to provide HOA board member education courses by Florida’s Department of Business and Professional Regulation.
All are welcome. However, as space is limited, please contact the firm by January 20, 2020 to reserve your place.
HOAs! Beware The Marketable Record Title Act (MRTA)
For unwary homeowners’ associations, a danger is lurking beneath the water’s surface. If one is not careful, it will strike, swallowing whole a community’s restrictive covenants.
I speak, of course, of MRTA, which was enacted to simply real estate transactions. Before MRTA, a Florida parcel’s title history would theoretically need to be researched back to the initial Spanish land grants. MRTA streamlines that process, providing that certain interests in land are extinguished after 30 years, with limited exceptions, unless those interests are preserved in the manner provided by law. In essence, MRTA eliminates stale claims against property. These can include an HOA’s recorded Declaration of Covenants, Conditions and Restrictions (“CCRs”).
The yardstick for MRTA is the “root of title”. The term “root of title” means “any title transaction purporting to create or transfer the estate claimed by any person which is the last title transaction to have been recorded at least 30 years before the time when marketability is being determined.” § 712.01(6), Fla. Stat. Under MRTA, “when a record owner, alone or with its predecessors in title, has been vested with an estate in land of record for 30 years or more, such owner has marketable title free and clear of all claims [and restrictions] except matters preserved by section 712.03.” Martin v. Town of Palm Beach, 643 So. 2d 112, 114 (Fla 4th DCA 1994).
If MRTA has not already extinguished a community’s CCRs, the HOA has several options to preserve them, including:
- Formal Notice – By recording a formal notice preserving the CCRs, following written notice to each affected owner, pursuant to §§ 712.05(2)(a) and 712.06.
- Summary Notice – By recording a summary notice of preservation approved by the board of directors pursuant to §§ 712.05(2)(b) and 720.3032(2); or
- Valid Amendment – By recording an amendment to the CCRs that is indexed under the association’s legal name and that references the recording information of the CCRs to be preserved pursuant to § 712.05(2)(b).
If MRTA has extinguished the CCRs in a neighborhood, covenant revitalization is possible. §§ 720.403-720.407.
Officers and directors must be wary. They may not turn a blind eye to MRTA. The Homeowners’ Association Act now requires that each year, at its first board meeting (excluding an organizational meeting to select officers) following the homeowners’ annual meeting, the board of directors “shall consider the desirability of filing notices to preserve the covenants or restrictions affecting the community or association from extinguishment under the Marketable Record Title Act[.]” § 720.303(2)(e). Failure to do so could, in certain circumstances, be construed as a breach of the duties each association, director and officer owes homeowners.
In short, beware of MRTA. Ask your attorney to conduct a MRTA analysis. If steps have not been taken to preserve your community’s CCRs, action may be needed.
Chilton to Host Bartow HOA Seminar
On August 30, 2019, Robert Chilton will host a free HOA seminar at the Bartow Public Library. The event, which begins at 2:45 p.m., will focus on legal issues facing Florida homeowners’ associations and include topics such as meeting procedures, estoppel requests, covenant enforcement and statutory updates. Mr. Chilton has been certified to provide HOA board member education courses by Florida’s Department of Business and Professional Regulation.
All are welcome. However, as space is limited, please contact the firm by August 16, 2019 to reserve your place.