By Gary M. Singer
Sun Sentinel (MCT)
QUESTION: I live in a large condominium. The association recently foreclosed one of the units and is planning to sell it to the president of the association. In fact, he’s already moved in before the deal has closed. Is this allowed?
ANSWER: It might be, but it all depends on the details. The association’s board members have a fiduciary duty to the community, meaning they must act for the benefit of the association and its members. As long as they act diligently and in good faith, they are protected from personal liability by a legal doctrine known as the “business judgment rule.“ While I don’t recommend that the president or other board members conduct business with their own association, there is no specific ban on their doing so. But they must act in a way that is in the best interest of the association and can’t benefit from a “sweetheart deal.“
In your case, the president must be buying the property at full market value, and should be paying appropriate rent until he actually buys it. In my opinion, to avoid the appearance of impropriety, the board should fully disclose the details of the sale to the members and seek competing offers for the condo.
If the president rented or bought the property for much lower than market value, he would not be protected by the business judgment rule and could be personally liable for the difference between what he paid and what the property should have sold for. It is possible for a member of the association to bring this sort of lawsuit, but it’s usually filed by the next elected board after it reviews the actions of its predecessors.
Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He is the chairperson of the Real Estate Section of the Broward County Bar Association and is an adjunct professor for the Nova Southeastern University Paralegal Studies program. Send him questions online at http://sunsent.nl/mR20t7 or follow him on Twitter GarySingerLaw.
The information and materials in this column are provided for general informational purposes only and are not intended to be legal advice. No attorney-client relationship is formed. Nothing in this column is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction.