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June 1, 1995 MEMORANDUM TO CLIENTS
CONDOMINIUM AND HOMEOWNERS ASSOCIATION LAW AMENDMENTS Though not publicized, during the final hours of the 1995 legislative session, the legislature amended Chapter 718, the Condominium Act and Chapter 617, the Florida Corporation's Not-For-Profit Act. The final version of the bill which was available just as this Memorandum was prepared, is 186 pages. The firm anticipates providing clients a summary of the pertinent amendments by the end of this month. 1995 CORPORATE ANNUAL REPORTS NOW PAST DUE
As discussed in the February 1, 1995 Memorandum to Client, every corporation, whether profit or not-for-profit (including condominium, homeowner and other incorporated associations) is required to file an Annual Report. The report must be on the Department of State, Division of Corporations form. The form must be timely received in Tallahassee with the annual report fee. Forms not completed or forms submitted without the fee will be returned to the corporation. The due date was May 1, 1995. If you did not file your form, do so now, and include the penalty. Note that fees and penalties are different for the type of corporation, whether profit, not-for-profit, or charitable. If you did not receive your form, or if you are uncertain whether you filed the form, then contact your counsel. Corporations which fail to file and pay the fee will be involuntarily dissolved. The effect of dissolution may be disastrous! RECALL: HOW, WHEN AND WHY
Should a director worry about a dissident owner who shouts "recall" or "impeachment"? Relatively new statutes and administrative rules complicate the process of recalling or removing a director. Because the process is extremely difficult most members lose interest in the recall process. The methods for recalling directors differ slightly for condominium and cooperative associations, charitable, and other not-for-profit corporations such as homeowners associations. Thus, each will be discussed separately. This article will not discuss recalling a director in a for-profit corporation because for-profit corporate director recalls are generally affected by individual shareholder agreements.
Recalls in "Homeowners Associations" The rules governing recall in non-condominium and non-cooperative corporations are generally found in a relatively new provision of the Florida Not-For-Profit Corporations Act entitled "Removal of Directors", §617.0808 Fla. Stat. (1993). Though a not-for-profit corporation's articles of incorporation and bylaws may have different provisions, generally the statute will prevail. While cause for removal is not required, at least a majority of the members must vote or agree to the removal. The process is somewhat technical. If the recall is at a members' meeting, then the notice of meeting must specifically state the names of the specific directors sought to be removed. There shall be a separate vote or petition for each director sought to be removed. If the recall is successful, then a vacancy exists for each director recalled. If the recall occurs at a meeting, then the members elect a new director for each vacancy at the same meeting. A removed director is ineligible from serving as a director until the next annual members' meeting. The recalled director must promptly return corporate property to the association, including all records. Legal challenge to a recall shall occur in Circuit Court on a summary basis. The recall of a director of a charitable organization follows the same rules, except that removal without cause may occur only after a majority of the directors recommend the recall. Recalls in Condominium and Cooperative Associations Although the procedures for removal of a condominium or cooperative association director are similar to those for general not-for-profit corporations, the Condominium and Cooperative Acts and Florida Administrative Code provide for some additional, more difficult requirements. When a condominium or cooperative association's bylaws and/or articles of incorporation conflict with the Condominium or Cooperative Act, the appropriate Act's provisions prevail. If the necessary vote for a recall is achieved, then the board of directors must notice and hold a directors' meeting within five full business days of the adjournment of the recall meeting, or receipt of the recall petition by certified mail or personal service. Note that Fla. Admin. Code R. 61B-23.0028 provides specific requirements for a petition seeking to recall a condominium association director. The purpose of the board meeting is for the directors to either certify the recall or proceed with binding arbitration. The recall is effective immediately. If the board of directors does not certify the recall, then within five business days after the directors' meeting the association must petition for binding arbitration with the Division of Land Sales. Unit owners who voted at the recall meeting or who sign a recall petition constitute one party under the petition for arbitration. If the arbitrator certifies the recall as to any director or directors, the recall will be effective upon mailing of the final order of arbitration to the association. If the association fails to comply with the arbitrator's order, the Division may take administrative action. If the recall is successful a director vacancy will exist. The rules for filling the vacancy are slightly more complex than those for homeowners associations and depend upon how many directors have been recalled. When less than a majority of the directors are recalled a vote of the majority of the members may fill the vacancy. However, if more than a majority of the directors are recalled, then the vacancies shall be filled in accordance with the procedures adopted by the Division of Land Sales. ON THE MOVE IN NEW YORK CITY
Joanne Gelfand, of counsel to Gelfand & Arpe, P.A., has also become of counsel to the Manhattan law firm of Snow, Becker, Krauss, P.C., heading that firm's bankruptcy, creditors' rights and insolvency law department. Complementing Ms. Gelfand's work with Gelfand & Arpe, P.A., Snow, Becker, Krauss, P.C. has a recognized practice emphasis representing cooperatives and condominiums. The New York City firm also offers a wide range of services including real estate, corporate and securities, litigation, international trade and maritime, trusts and estates and tax. Ms. Gelfand will continue to maintain a presence in South Florida through her continued of counsel relationship to Gelfand & Arpe, P.A.
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