Conducting election of directors during transfer of association control in a community

Johnson_Monica

Monica Johnson

During the transfer of association control in a community from the developer to the members other than the developer, there are times when both the developer and members other than the developer are entitled to elect a member of the board of directors of an association. See §§ 718.301, 720.307.  For example, a declaration may provide that three years after 50 percent of the units have been conveyed to purchasers, members other than the developer are entitled to elect a majority of the members of the board of directors and, as long as the developer holds at least five percent of the units for sale, the developer is entitled to elect at least one member of the board of directors.  In this example, if there are five members on the board of directors, the members other than the developer will be entitled to elect three directors, the developer will be entitled to appoint one director (assuming the developer is selling at least five percent of the units), and the remaining director will be elected by all the members, including the developer.  Because the developer cannot vote to fill all the seats on the board of directors, the developer is considered to have a separate “class” of voting interests.  A normal ballot which lists all candidates and allows all members to vote for all seats being filled will not work. To avoid having to conduct two separate elections, one for a majority of the board positions and one for a minority of the board positions, the Association may use different ballot forms to permit a bifurcated election to occur.

An association’s governing documents usually provide the manner in which to conduct an election of the members of the board of directors. However, with regard to condominium associations, a vacancy on the board caused by the expiration of a director’s term must be filled by electing a new board member by way of secret ballot. See § 718.112(2)(d)(2). Rule 61B-23.0021, Florida Administrative Code, governs secret ballot election procedures for condominium associations and provides, in relevant part, as follows:

Accompanying the ballot shall be an outer envelope addressed to the person or entity authorized to receive the ballots and a smaller inner envelope in which the ballot shall be placed. The exterior of the outer envelope shall indicate the name of the voter, and the unit or unit numbers being voted, and shall contain a signature space for the voter. Once the ballot is filled out, the voter shall place the completed ballot in the inner smaller envelope and seal the envelope. The inner envelope shall be placed within the outer larger envelope, and the outer envelope shall then be sealed. Each inner envelope shall contain only one ballot, but if a person is entitled to cast more than one ballot, the separate inner envelopes required may be enclosed within a single outer envelope. The voter shall sign the exterior of the outer envelope in the space provided for such signature. The envelope shall either be mailed or hand delivered to the association.

(Emphasis added.) Accordingly, an association must provide separate inner envelopes for each ballot permitted to be voted, and if a person is entitled to cast more than one ballot, the separate inner envelopes may be enclosed within a single outer envelope.

Given that a developer may own a large number of units, instead of using a separate ballot and inner envelope for each of the developer’s votes, and to avoid having to conduct two separate elections, the Association may use different ballot forms to permit a bifurcated election to occur. See Sun Resort, Inc., et al., v. Jellystone Park Condominium, Arb. Case No. 96-0007, Partial Summary Final Order (June 13, 1996) (where the developer ballot was specifically identified as pertaining to the developer units, and only one ballot was given although the developer owned as many as 386 units).  An association can use one ballot form in connection with the developer and another ballot form for the non-developer voters.  Rule 61B-23.0021(9), Florida Administrative Code, provides, in relevant part, as follows:

Except…where all voting interests are not entitled to vote for every candidate (class voting), all ballot forms utilized by a condominium association, whether those mailed to voters or those cast at a meeting, shall be uniform in color and appearance. … [I]n class voting situations, within each separate class of voting interests all ballot forms shall be uniform in color and appearance.

(Emphasis added.) When a developer is only entitled to vote for one of the board members in an election, the developer has a separate class of voting interests from the other unit owners.  As the association did in Sun Resort v. Jellystone Park Condominium, the developer ballot can be colored to distinguish it from the white, non-developer ballots. See Sun Resort v. Jellystone Park Condominium, Arb. Case No. 96-0007 at *1.  Using the one ballot, the developer can vote all of its votes for the candidate of its choice.  Although the secrecy of the developer’s votes may be compromised by the color variation of the ballots, the arbitrator in Sun Resort v. Jellystone Park Condominium held the following:

An unintended and unavoidable consequence of a bifurcated election under these circumstances was to compromise a measure of the secrecy otherwise afforded to the voters; however, this effect is not a factor which is within the ability of the association to control, and the election will not be set aside on these grounds.

Id. at *2.

In conducting such elections, we recommend associations adopt this process of using two separate castings of secret ballots, one being a colored ballot for the developer, to distinguish the votes for a majority of the board positions from the votes for a minority of the board positions. Also, minutes should reflect which seat is the seat for which the developer participated in the election.  This is necessary to the extent a resignation takes place, when an association will need to know whether the developer can participate in the appointment of a new director.

If you have any questions on how to conduct an election when both a developer and members other than the developer are entitled to representation on the board of directors, please contact Monica H. Johnson, Esq., at mhjohnson@slk-law.com or 813-221-7159.