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Requirements for Contracts Entered Into by Florida Condominium Associations
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Requirements for Contracts Entered Into by Florida Condominium Associations

November 16, 2016 Community Association Industry Legal Blog

Reading Time: 3 minutes

Contracting with vendors and service providers is part of the normal course of business for many condominium associations in Florida. Generally, section 718.3026, Florida Statutes provides for certain requirements when an association contracts for products and services. If a contract for the purchase, lease, or renting of materials or equipment, or for the provision of services, requires payment by the association in the aggregate that exceeds 5 percent (5%) of the total annual budget (including reserves), the association shall obtain competitive bids for the materials, equipment, or services. Nothing contained in the Statute requires the association to accept the lowest bid for the products or services. When analyzing the bids for the work, the association can consider such factors as quality of the vendor, responsiveness of the vendor, and any other non-monetary factors. The board members will generally be protected for such decisions under the business judgment rule.

Contracts with employees of the association and contracts for the association attorney, accountant, architect, community association manager, timeshare management firm, or any engineering or landscape architect services are not subject to the provisions requiring competitive bids. The provision also does not limit the purchase of services and products in an emergency or if the business entity is the only source of supply within the county serving the association. Further, all contracts that are not to be fully performed within one year after their execution for the purchase, lease, or renting of materials or equipment shall be in writing, and so shall contracts for the provision of services.

Service on condominium association boards provides an inside look at the operations of a community. Board members are given insight into association vendors and even possible units that may be up for foreclosure. Some board members may see this as an opportunity to secure some benefits for themselves. From time to time, a board member may be involved in a business that can provide services to its association. For example, a board member that owns a landscaping company may want to give the business to his company. What are the lines and boundaries that association board members need to know when presented with such situations?

Section 617.0832, Florida Statutes states that no contract or other transaction between a corporation and one or more of its directors in which one or more of its directors or officers are financially interested shall be either void or voidable because of such relationship or interest. This is subject to some board member requirements:

(1) The board member discloses the relationship in an open board meeting;

(2) The board member does not vote on the matter; and

(3) The contract or transaction is fair and reasonable as to the corporation at the  time it is authorized by the board.

A conflict-of-interest transaction is only authorized, approved, or ratified if it receives the affirmative vote of a majority of the directors on the board of directors, or on the committee, who have no relationship or interest in the transaction. The disclosures required by s. 617.0832 shall be entered into the written minutes of the meeting. An understanding of board governance and operations is critical to effectively serving any association.

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