Compensation for Association Directors and Officers May be Provided in Governing Documents

April 15th, 2016

Posted in Business & Corporate Law

Serving the association as a director or officer can sometimes require a great deal of time and energy by the director or officer, and associations often face the question of whether directors or officers should be compensated for their services.  Alternatively, some associations find it difficult to fill positions due to the lack of interest in serving on the board of directors or as an officer, and consider some sort of compensation that would incentivize owners to become involved in the community.

The general rule is that directors and officers serve the association without compensation.  However, Chapters 718, 719, and 720 of the Florida Statutes governing condominium, cooperative, and homeowners associations, respectively, provide methods by which directors and officers may receive compensation for their services.

Both Sections 718.112(2)(a)1 and 719.106(1)(a)1 of the Florida Statutes provides that unless otherwise provided in the bylaws, the officers shall serve without compensation and at the pleasure of the board of administration. In addition, unless otherwise provided in the bylaws, the members of the board shall serve without compensation.

In regards to homeowners associations, Section 720.303(12) of the Florida Statutes provides that a director, officer, or committee member of the association may not directly receive any salary or compensation from the association for the performance of duties as a director, officer, or committee member and may not in any other way benefit financially from service to the association UNLESS the fee or compensation authorized in the governing documents or is authorized in advance by a vote of a majority of the voting interest voting in person or by proxy at a meeting of the members.

Although an association’s governing documents can allow for director or officer compensation, most association documents expressly prohibit it.  If compensation is allowed by the governing documents, the conditions for compensation should be strictly followed.  In addition, associations should be wary of the unintended, negative ramifications for allowing director or officer compensation.  For example, providing for director or officer compensation may have the unintended result of attracting candidates to the Board whose main priority is compensation and not service to the community, which could lead to poor governance and other related negative consequences for the association.  Accordingly, an association should consider the potential negative ramifications in addition to the benefits before providing for director or officer compensation.  Thus, associations are encouraged to contact legal counsel to review their governing documents and discuss the positive and negative consequences of director and officer compensation before amending their governing documents.

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