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House Bill 623

By April 20, 2020 No Comments

Florida law currently prohibits associations from entering into contracts with service providers owned by board members or their family members.  House Bill 623 proposes striking some provisions protecting association members from board members self-dealing.

All legislative proposals originate from someone with the money to donate to campaigns, pay lobbyists, and push an agenda usually with a financial benefit to the sponsor.  This proposal is probably not coming from a grass roots campaign by homeowners to support the businesses of their board representatives or the squeaky-clean board members serving for the right reasons.  Although most board members serve with pure intentions to help their community, some businessmen serve on boards to promote their businesses and some board members serve in order to find business opportunities for themselves.  This legislation helps them both at the expense of homeowners.

Associations are essentially not for profit public corporations owned by homeowners in equal shares and governed by their Articles, Bylaws, and Declarations.  The transparency required from for profit public corporations powers the US capital markets.  Their shareholders expect board members to act in their interests and take comfort in the legal restrictions prohibiting directors from using their positions for their own self interests.

But federal legislation such as Sarbanes Oxley doesn’t prohibit board members from operating businesses that provide services to the public companies they serve.  In general terms, board members are required to disclose their financial conflicts of interest and recuse themselves from voting on matters involving them.  Maybe a similar structure would better serve Florida association members than an outright ban on dealing with board members.

If that’s the case, then the proposed statutory change doesn’t go far enough as it only repeals the current prohibition and doesn’t replace it with requirements for board members to disclose their financial interests and recuse themselves as they come into play.   Ultimately homeowners can protect themselves and vote self-dealing board members out of office – if they can ever figure out how a board member is self-dealing in the first place.  With this statutory change, nothing will require board members to inform the voters of their self-interests or prohibit them from contracting with an association to provide services.  Any increased costs from this situation will be borne by the homeowners.

LM Funding’s business model depends upon our ability to improve community association finances and increase property values.  Full disclosure — self-dealing board members contracting secretly with their communities damages the financial well being of communities and our business model. Therefore, we join the homeowners who oppose this legislation.