HOA Directors May NOT Be Compensated For Service

As a result of SB 1196, the law now prohibits HOA directors, officers, or committee members from receiving any salary or compensation from the association for the performance of his or her duties as a director, officer, or committee member.   This is basically the same rule that applies to condominium association directors.

However, Section 720.303(12), Florida Statutes significantly expands the restrictions upon HOA directors, officers and committee members.  In addition to the above, the law also says that a director, officer, or committee member “may not in any other way benefit financially from service to the association.”  The reference to “service to the association” in this second part of the sentence is not limited to those services performed in connection with the duties of the director, officer or committee member.  That is a substantial change in the law.  Read strictly, this means that HOA directors, officers, or committee members:

  • cannot work as association employees;
  • cannot serve as a paid manager; and
  • cannot provide services through firms or business entities in which such persons hold a financial interest.

The previous law allowed the association to enter into contracts with companies involving ‘interested directors’,  if the director disclosed his or her financial interest, if the contract was fair and reasonable, and if the interested director refrained from voting.

There are exceptions.  If your community has and still employs or contracts with companies in which a director has a financial interest (stands to gain from the contract), there are two options laid out in the statute.  Compensation is permitted if it is authorized by the governing documents or if the members vote to authorize compensation.  The vote should take place in advance of hiring or contracting with an ‘interested director’.

Reimbursement for out-of-pocket expenses is specifically allowed.  If your community has not developed a procedure for application and payment for out-of-pocket expenses, now is a good time to create your procedures and formally adopt them at a meeting.  Most governing documents authorize the board to reimburse directors (and others) for expenses, but do not specifically outline what types of expenses may be incurred, whether certain types of expenses require advance approval, what documentation must be submitted or who approves the reimbursement, etc.

There are other exceptions for directors appointed by the developer, for recovery of insurance proceeds and if all members benefit financially from some action taken by the association.

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