Term of Office for Holdover Directors

June 10th, 2016

Posted in Business & Corporate Law

For homeowners associations, an election of the board of directors may not occur if the association is not able to obtain a quorum at the annual/election meeting.  For condominium associations, elections may not occur due to the lack of requisite voters (the Condominium Act does not require a quorum for elections, but requires 20% of the association’s authorized voters to participate).  In those cases, unless otherwise provided in its governing documents, directors whose seats were up for election remain on the board of directors as “holdover” directors.  Certain questions arise when directors are sometimes forced to remain on the board of directors.  Does a holdover director serve until the next available election or does he or she serve for a whole new term?  If a candidate is elected to fill a seat that was occupied by a holdover director, does the successful candidate serve for a new term or only serve the remaining time left in the respective term?

Florida arbitration cases have provided some insight into answering the above questions and found that unless otherwise provided in the governing documents, holdover directors are not automatically appointed to a new term, but only serve a portion of the term until a replacement director can be elected.  Drish v. Ivy Lake Estates Ass’n, Inc., Arb. Case 2008-03-9462; Romano v. Emerald Preserve-Sumerlin Homeowners Ass’n, Inc., Arb. Case 2010-02-2497.  In support thereof, the arbitration cases cited Section 617.0806 of the Florida Statutes governing Florida not-for-profit corporations, which states that “[e]ach director shall hold office for the term to which he or she is elected or appointed and until his or her successor has been elected or appointed and qualified or until his or her earlier resignation, removal from office, or death.” (emphasis added).  Moreover, the arbitration cases held that, unless otherwise provided in the governing documents, it was necessary to hold an election at the next available election meeting for any seat for which the term of service expired, which included those seat(s) held by the holdover directors.  Lastly, the arbitration cases held that the successful candidates should not serve new terms but only serve the remaining time left in the respective terms.

Associations are encouraged to consult with legal counsel if an election was unable to be held due to a lack of quorum or failure to obtain the requisite voters.  Moreover, associations are encouraged to review its governing documents and consult with legal counsel to determine if an amendment is necessary.

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