Condominium amalgamation requires 100% unit owner approval

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Dear Poliakoff,

We are a multi-ownership association made up of eight individual associations. Six of the eight individual associations consist of similar buildings, each with 32 units. These six associations plan to merge into a single association. If we were to sync their reserves, fund balances, and maintenance fees (i.e. the same values), what would it take to combine them?

They all share the same status. The six declarations of co-ownership are very similar or could be made similar, and it takes a vote of 75% of the owners to change them. Condominium law suggests that associations could be combined with less than 100% owners’ vote, but since their proportional share of common expenses would change, would that dictate 100% approval of all 192 owners? Their statements do not appear to define approvals from voting interests to change the proportions or percentages by which owners share common expenses.

Signed PS

Dear PS,

You use the term ‘association’ in a number of different ways in your question, but what I think you’re saying is that there is an association (the legal entity responsible for managing and maintaining the property) that governs eight individual condominiums. Six of the eight condominiums, which are largely identical, would like to consolidate into a single condominium in order to share the charges.

I think that, unfortunately, that would be practically impossible. As you pointed out elsewhere in your letter, Section 718.110, Fla. Stat. provides that no amendment to a declaration may (among other things) change the dependencies of the unit or change the proportion or percentage by which the owner of the unit shares the common expenses of the condominium and owns the common surplus without 100% approval of unit owners units and all registration privilege holders. This is unlikely to happen except in the smallest condominiums. You would effectively need to terminate five of the six condominiums and amend the declaration of the sixth to incorporate all other properties and units. The common elements of the condominium belong jointly and severally to the owners of the individual units, so you change not only this adjoining property, but also the shares of the common expenses of all the units. As such, I believe this triggers the 100% approval rule and any single rejection would prevent the merge.

You are already a condominium association, which in this situation I think is the best you can achieve, in terms of cost savings and operating expenses.

Dear Poliakoff,

We have a unit owner, who is not a member of the board of directors, who has prepared the budget for the association for the past few years. In carrying out this work, this person had access to the finances of the association. My question is, can the board of directors, by majority vote, appoint this person, who is not a member of the board of directors, as an officer (for example, chief financial officer), granting him a official status and providing D&O insurance coverage? The law suggests this is possible, and our bylaws seem to confirm this, where it says that “the board of directors shall from time to time elect such other officers and designate such powers and duties as the board deems necessary or appropriate to manage the Association Affairs Officers do not need to be unit owners.

I realize that an officer who is not a director of the board does not have the right to vote and that only directors elected by unit owners can vote on matters brought before the board.

Signed PS

Dear PS,

A two for one this week, because you sent in another great question! You’re absolutely right – nothing in state law would require directors or officers to own units. Generally, the governing documents will specify whether directors and/or officers are required to own units. Most (but not all) incorporation documents provide that directors must be members of the association (or sometimes also the spouse of a member); but the vast majority allow some or all of the officers to be non-owners (most often the chairman must be a director, but there are usually no restrictions on other officers). You may be suggesting making this person a “Financial Agent”, but note that unless otherwise prohibited, you could also simply make this person the Treasurer. Note that large public companies usually have separate directors and officers, and it is only common practice and practice that most co-owned boards only use directors as officers. In fact, according to the statutes, an association could even hire a person to serve as treasurer; for example, an accountant or other financially competent person. It’s a rarely used right, but a potential boon for smaller associations that need a well-trained person to oversee certain officer duties. This is something I see more frequently in country clubs, where the club manager is sometimes a manager or an officer.

You should know that most D&O insurance policies cover volunteers, as well as officers and directors. It is therefore quite possible that this person is covered by your insurance as is.

Ryan Poliakoff, Partner at Backer Aboud Poliakoff & Foelster, LLP, is a Certified Specialist in Condominium and Planned Development Law. This column is dedicated to the memory of Gary Poliakoff, a pioneer in the community association legal industry, tireless advocate and author of treatises, books and hundreds of articles. Ryan Poliakoff and Gary Poliakoff are co-authors of New Neighborhoods—The Consumer’s Guide to Condominium, Co-Op and HOA Living. Send your questions to [email protected]. Please be sure to include your location.

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