Condo Officer/Director Liability in Florida

By John Viggiani, Esq.*

Over the last 20 or 30 years, condominium living has increased. With this increase has come the need for condominium associations and, with it, the need for owners to step up and serve as officers and board members of these associations. However, due to the litigiousness of society, fewer and fewer of these owners want to volunteer to serve as an officer or board member for fear of being sued. Potential and current officers and board members should be aware of what protections the Florida legislature and courts have granted to protect them.

In Florida, officers and board members are provided a certain level of immunity from suit. Actions against condominium associations and its officers and board members are governed generally by the “Condominium Act,” Fla. Stat. §718.101, et seq. This Act discusses the obligations and responsibilities of officers and directors of condominium associations. It also addresses under what circumstances they can and cannot be made a party to a lawsuit for acting as an officer or board member. In pertinent part, the Act specifically states:

Each unit owner, each tenant and other invitee, and each association is governed by, and must comply with the provisions of, this chapter, the declaration, the documents creating the association, and the association bylaws by which shall be deemed expressly incorporated into any lease of a unit. Actions for damages or for injunctive relief, or both, for failure to comply with these provisions may be brought by the association or by a unit owner against:

(d) Any director who willfully and knowingly fails to comply with these provisions.

The Fla. Stat. §718.303(1) further provides an outline of the duties and responsibilities of the association and its board members under Fla. Stat. §718.111. That section states:

[A]s required by s. 617.0830, an officer, director, or agent shall discharge his or her duties in good faith, with the care an ordinarily prudent person in a like position would exercise under similar circumstances, in a manner he or she reasonably believes to be in the interests of the association. An officer, director, or agent shall be liable for monetary damages as provided in s. 617.0834 if such officer, director, or agent breached or failed to perform his or her duties and the breach of, or failure to perform, his or her duties constitutes a violation of criminal law as provided in s. 617.0834; constitutes a transaction from which the officer or director derived an improper personal benefit, either directly or indirectly; or constitutes recklessness or an act or omission that was in bad faith, with malicious purpose, or in a manner exhibiting wanton and willful disregard of human rights, safety, or property.

Fla. Stat. §718.111(1)(d).

In reading the above, one would initially think that, to establish officer/director liability, the plaintiff must prove “willful and knowing” conduct, as referenced in the Condominium Act. See, Fla. Stat. §718.303(1)(d). However, that is not the case. For a not-for-profit condominium association, Fla. Stat. §617.0834, part of the “Florida Not for Profit Corporation Act,” actually provides immunity from civil liability for officers and directors as follows:

(1) An officer or director of a nonprofit organization…is not personally liable for monetary damages to any person for any statement, vote, decision, or failure to take action, regarding organizational management or policy by an officer or director, unless:

(a) The officer or director breached or failed to perform his or her duties as an officer or director; and

(b) The officer’s or director’s breach of, for failure to perform his or her duties constitutes:

1. A violation of the criminal law unless the officer or director has reasonable cause to believe his or her conduct was lawful or had no reasonable cause to believe his or her conduct was unlawful… ;

2. A transaction from which the officer or director derived an improper personal benefit, directly or indirectly; or

3. Recklessness or an act or omission that was committed in bad faith or with malicious purpose or in a manner exhibiting wanton and willful disregard of human rights, safety, or property.

Fla. Stat. §617.0834(1)(b) further defines the term “recklessness” as “the acting, or omission to act, in conscious disregard of a risk known, or so obvious that it should have been known, to the officer or director; and known to the officer or director, or so obvious that it should have been known, to be so great as to make it highly probable that harm would follow from such action or omission.” Fla. Stat. §617.0834(2)(a).

Based upon these statutes, Florida courts have repeatedly held a condominium association’s officers and directors are immune from liability, absent a crime, fraud, self-dealing or unjust enrichment. Perlow v. Goldberg, 700 So. 2d 148, 150 (Fla. 3^rd DCA 1997); Munder v. Circle One Condominium Association, 596 So. 2d 144 (Fla. 4^th DCA 1992); Sunny Boy, LLC v. Asnani, 879 So. 2d 25, 27 (Fla. 5th DCA 2004). In appying these standards, it has been determined that additional conduct above simple negligence is required to impose individual liability. See Sonny Boy, L.L.C. v. Asnani, 879 So. 2d 25, 27 (Fla. 5th DCA 2004) (“It is well established in Florida that absent fraud, self-dealing and betrayal of trust, directors of condominium associations are not personally liable for the decisions they make in their capacity as directors of condominium associations.”); Perlow, 700 So. 2d at 150 (affirming dismissal of complaint against individual directors of condominium association where “[t]here was no allegation in the owners’ complaint of criminal activity, fraud, willful misconduct or self-dealing”); Munder, 596 So. 2d at 144; Olympian West Condominium Ass’n, Inc., 427 So. 2d at 1039 (directors not personally liable for failure to correct construction defects); Bodin Apparel, Inc., 328 So. 2d at 533 (directors not personally liable in tort action despite failure to provide workers compensation insurance for employee).

In Sonny Boy, the plaintiff filed a cause of action seeking to hold the board of directors of a condominium association personally liable. The plaintiff alleged the association failed to “maintain and repair specifically alleged items of common elements and that failure caused [the plaintiff] to suffer damages from the loss of use and rental income of units[.]” The Fifth District Court, in reviewing and applying Fla. Stat. §718.303(1)(d), noted that “Florida courts have adopted the ‘Business Judgment Rule’ when faced with determining whether a director . . . breached a fiduciary duty in maintaining, repairing or replacing association property.” This rule requires that directors’ decisions “will not be questioned unless there is a showing of fraud, self-dealing, dishonesty or incompetency.” (Emphasis added).

As is evident from the above statutes and case law, the burden of imposing personal liability on an individual officer or board member is a high hurdle to overcome. However, this has not stopped plaintiffs from trying to impose liability on these individuals. As a further attempt at trying to deter these types of claims or suits, the Florida legislature has included, in Fla. Stat. §718.303, an attorney fee provision which provides that “the prevailing party . . . is entitled to recover attorney’s fees.” Fla. Stat. §718.303(1). Considering all of the above, it is important for officers and board members of a condominium association to rely on experienced counsel to help them when faced with these types of claims.

*John, a shareholder in our Jacksonville, Florida, office, can be reached at 904.358.4221 or jjviggiani@mdwcg.com.

Defense Digest, Vol. 20, No. 3, September 2014

Defense Digest is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2014 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. This article may not be reprinted without the express written permission of our firm.