Bankrolling the Board A Question of Compensating Board Members

Condo board membership can be a grind. Board members are faced with tough decisions regarding the betterment of their communities, decisions that often result in criticism and disdain without so much as a complimentary pat on the back. They're working on their off hours, often in addition to their regular nine-to-fives. So it's only natural for some to wonder why this position is one that has for so long gone traditionally uncompensated for.    
As Attorney Michael Ungerbuehler, shareholder at Association Law Firm in Orlando states, “The issue of director compensation—whether for a condominium or a cooperative—is established in the association's bylaws. Most residential condominium associations and cooperative associations have been created as not-for-profit corporations managed by a volunteer board of directors, with the bylaws specifically prohibiting director compensation. As such, the directors are volunteering their time and efforts, and thus could not be paid, or they would not be considered volunteers.”
But that's not to say that compensation is entirely outside the realm of possibility. While rare, and even unlikely, board member compensation falls mostly under the realm of an association's bylaws. “Florida statute chapters 718, 719, and 720 currently all expressly provide that directors serve without compensation unless their membership votes to allow it,” explains Richard D. DeBoest, a  co-founder and shareholder attorney with the law firm of Goede, Adamczyk, DeBoest & Cross, PLLC in Fort Myers. “The Florida Condominium Act established as Chapter 711 in 1963 provided that the bylaws must provide for 'compensation, if any, of officers and boards,' so it has been this way since the beginning.”
However, while the bylaws can technically allow for board members to profit from their service, most documents refrain from doing so. As Allen M. Levine, a shareholder attorney with the law firm of Becker & Poliakoff in Fort Lauderdale puts it, “A great majority of associations hire a licensed community association manager to handle the day-to-day activities of the association, and have a volunteer board to oversee such activities as to protect their constituents' interests. Eligible candidates have, for decades, continued to vie for positions on their condominium and cooperative boards without the promise of compensation.”

Get Money

Those Floridian associations that do offer compensation to their board members are parts of a rare breed, according to the three aforementioned attorneys. Ungerbuehler, for his part, has never encountered a single one. “The firm is not personally aware of any residential condominium association board or cooperative association board being compensated for serving as directors,” he says. “However, the applicable statutes for both condominiums and cooperatives do contemplate that a director may be paid, as long as that association's bylaws allow it.”
Levine, on the other hand, has encountered a condominium association “where there was a payment to certain officers,” as he puts it. “I cannot recall the amount, but it was a once-per-year stipend of a few hundred dollars that was written into the bylaws.”
By comparison, DeBoest is an old hand at working with compensated boards, having done so on a whopping two occasions. He attests that the payment “usually is in the form of a stipend equivalent to the annual assessments, or some portion of the assessments. The figure is determined by the owners who approve the payment. I have also had situations where the directors are being paid, but it has not been approved by the owners. This is, of course, not legal.”

All's Fair?

Should a board's bylaws allow for director compensation, and all players involved decide that it would be a good idea to implement same, a new issue emerges: namely, how best can a payment structure be incorporated that receives equal approval from both board members and owners?  And, should there not be any language approving payment in the bylaws, can a board go about amending them to include some? It can be quite the tricky needle to thread.
“In order to permit compensation, bylaws may need to be amended,” confirms Levine. “In the great majority of cases, the membership would be required to approve any such amendment. This can be a hurdle as, in many communities, there are likely those who would be more than willing to donate their time and expertise on a voluntary basis,” thus rendering payment unnecessary and even unappealing. The amendment should also make clear who is going to be compensated—whether it be the entire board, officers only, or a select group of officers and how much they will receive. “As board service is a volunteer position, any compensation, if amended into the bylaws, would be best done as a one-time stipend rather than as an hourly wage,” continues Levine. “The amount, if approved, would be inserted into the budget as an annual fixed line item in this scenario.”
Ungerbuehler concurs, and elaborates further: “The bylaws ought to also establish general guidelines as to the method for determining compensation amounts, as well as a specific compensation range (that would include an ability for adjustments over the course of time, perhaps tied to inflation or other common standards),” he says. “Additionally, the bylaws ought to include minimum performance expectations—including minimum amounts of time devoted to work for the association, and, possibly, prohibiting work for other corporations—as well as periodic reviews conducted by a committee comprised of members that are not officers or directors of the association.” By installing provisions that promote transparency and allow owners full disclosure of any payment methods in place, an association can prevent favoritism and minimize conflicts of interest.

Perk-o-lating

So, while a cash stipend for board diligence is rare but possible, does the same hold true for other perks as a reward for a job well done? Maybe premium parking spots for directors? After-hours swimming privileges in the community pool? General palm-frond fanning and throne-based idolization? The answer, perhaps unsurprisingly, is no.
“Unless the perks are expressly provided for in the governing documents, it is improper to give a special benefit to a director that is not also available to all owners,” says DeBoest. “I have not seen such perks formally provided to directors, but I have witnessed situations where directors will accept or take special benefits, which is, again, improper. Moreover, chapters 718, 719 and 720 of [Florida] statute expressly provide that a director cannot accept gifts or perks from vendors seeking to do business—or are currently doing business—with the association.”
And Ungerbuehler clarifies that, while non-monetary, any sort of perk allotted to a director beyond just cash for his or her board service is still technically “compensation.” “If an association prohibits compensation to its directors, then those directors cannot accept, receive or ask for anything of value without having properly paid for same. Otherwise, such would violate that association's prohibition against director compensation.”
When it comes down to it, the desire to serve on a condo or co-op board should stem from a desire to increase the quality of life for both one's self and one's neighbors. By adding compensation into the mix, an association also risks planting seeds of dissent, animosity and accusations of preferential treatment. While not technically illegal, depending on an association's bylaws, offering board members monetary compensation when many owners would assuredly take to the position for free is probably best considered legal, but ill-advised.   
Michael Odenthal is a staff writer for The South Florida Cooperator.

Related Articles

Participation by Proxy

Handling Proxy Voting in Your Building or HOA

Cooperator Expo South Florida Returns to Ft. Lauderdale

South Florida's Biggest & Best Condo, HOA & Apartment Expo

The Chain of Communication

Establishing Connections – and Boundaries – Between Board and Residents

 

Comments

  • I am the President of my Association. Recently one of our owners who lived alone, died in his unit and was not discovered until his body started smelling. I got the authorities involved and they did their investigation. After the investigation, the association was given the keys to the unit. We have no next of kin information in our files. Where should we go from here?