Leasing Commons Areas to Owners Outside of the HOA Community
My question involves an HOA located in the State of: Florida
My HOA is currently under the control of the Developer. Having recently sold all remaining lots they are about to turn the entire thing over to the owner HOA. However, prior to doing that they are proposing that we lease our recreational commons areas to neighbors outside of our HOA. As a board member I am supposed to vote tomorrow. In the past, we had an attorney l tell us this is bad idea. But the developer and their attorney are of course trying to convince us how great it would be to have that additional money in the till. (I suspect that since they also owned those neighboring areas that they told those buyers they could use our amenities and then realize oops, that was not the case.....) Naturally, having a majority vote until they turn it over, they will do whatever they want, but I am wanting to weigh the pros and cons here......
For one I am thinking of an increase to our liability insurance because there will be more people. I also seem to recall our previous attorney saying something about generating money some how affecting our HOA status.....
Also, they have sold the majority of the lots (over 90%) but have not yet had the official turn over. Are they still entitled to a majority of the vote? There are three developer members and two homeowner members. If you know the answer to this, please enlighten me so i will seem smart at the meeting tomorrow!
Re: Leasing Commons Areas to Others (Good or Bad)
You don't know what pickle it is till you get in it. On the other hand the extra income would be nice if it's no trouble. If they will do what they will do, the best you can do is get favorable terms. I would insist on a 30 day no fault termination clause in the agreement. This way if you don't like it in the future and it becomes a problem, you can end it with 30 day notice.
Re: Leasing Commons Areas to Owners Not in the HOA
Is this question actually about condos, or did you pick the wrong forum?
Re: Leasing Commons Areas to Owners Outside of the HOA Community
Quote:
Quoting
marcimc
My question involves an HOA located in the State of: Florida
My HOA is currently under the control of the Developer. Having recently sold all remaining lots they are about to turn the entire thing over to the owner HOA. However, prior to doing that they are proposing that we lease our recreational commons areas to neighbors outside of our HOA. As a board member I am supposed to vote tomorrow. In the past, we had an attorney l tell us this is bad idea. But the developer and their attorney are of course trying to convince us how great it would be to have that additional money in the till. (I suspect that since they also owned those neighboring areas that they told those buyers they could use our amenities and then realize oops, that was not the case.....) Naturally, having a majority vote until they turn it over, they will do whatever they want, but I am wanting to weigh the pros and cons here......
For one I am thinking of an increase to our liability insurance because there will be more people. I also seem to recall our previous attorney saying something about generating money some how affecting our HOA status.....
Also, they have sold the majority of the lots (over 90%) but have not yet had the official turn over. Are they still entitled to a majority of the vote? There are three developer members and two homeowner members. If you know the answer to this, please enlighten me so i will seem smart at the meeting tomorrow!
They have the majority of the vote simply because they have the majority of board members. They simply can outvote you 3 to 2.
Generating money does not effect your HOA status in terms of performing the duties of an HOA. However, income through leasing your recreations facilities does effect your tax status. Your HOA would have taxable income. And yes, you would also have to make sure that your HOA had sufficient liability insurance.
Re: Leasing Commons Areas to Owners Outside of the HOA Community
There are ways to offset some taxable income. Granted in won't work if there is a lot of income. But we get taxable laundry income. This is offset by audit fees, bank fees, utility bills and I forget what else qualifies. But nevertheless just because you have to pay taxes, it's not all bad. Or everyone will just stop working so they don't have to pay taxes...
To the point where they can't outvote you 3 to 2. That depends on whether the board has the power to lease. If the board has that power, then they can outvote you. If the board does not have that power and the whole membership has to vote, then they cannot outvote you. We here for example have the power to lease but do not have the power to buy units for which we need 3/4 the of membership.
Finally when shopping for insurance, I don't remember questions about whether we are leasing something. I do remember questions about the pool and whether it's fenced and how tall the fence is....
I don't know for sure that it won't make a difference on your insurance but I do know that having a life guard vs. no life guard on duty at the pool made zero difference to our insurance. I was getting a lot of scare tactics including that our insurance will go up when I pushed to get rid of the 22K contract.... I suppose to find out, ask the current insurance broker. Ours was able to tell us that having life guard vs. not having one, won't make a difference.
Re: Leasing Commons Areas to Owners Outside of the HOA Community
Florida Statute 617.0832 deals with conflicts of interest for directors of non-profit corporations (ie: condos and HOAs). It provides that “no contract or other transaction between a corporation and one or more of its directors or any other corporation, firm, association, or entity in which one or more of its directors are directors or officers or are financially interested shall be either void or voidable because of such relationship or interest” provided that 1) the fact of such relationship or interest is disclosed or known to those who are entitled to authorize the contract or transaction and 2) that the contract or transaction is fair and reasonable at the time it is authorized.
As long as this type of contract or transaction is before the board of directors for approval and is authorized by the affirmative vote of a majority of those directors who do not have a relationship or interest in the transaction (and as long as it is more than a single disinterested director that approves), the transaction will be deemed properly authorized under the statute. It should also be noted that the mere presence or casting of a vote by a director having a relationship or interest in the transaction does not invalidate the process so long as the transaction is otherwise properly authorized.
If the developer is the contracting party on the other side of the contract, the lease will have to be approved by the majority of independent directors in order not to be voidable.