Florida requires HOAs to be registered as nonprofit corporations.
If an HOA allows its registration with the state to lapse into dissolution: Does its officers and agents bear liability for any action and not the association?
Any citation of relevant precedents is appreciated.
Short Answer
The question sounds simple, but the answer is quite involved and would depend upon factors not identified as being present or absent in the question.
There might be isolated fact patterns in which there could be liability imposed, but usually, no economic harm that couldn't be remedied by reinstatement would occur, and fairly specific factual circumstances (including intentional or willing misconduct by the officer or director) would have to be present to impose liability at all.
In all likelihood, a court would disfavor an attempt to impose liability in these circumstances even though the relief of compelling the HOA to reinstate its registration (or to have a receiver appointed for it if the directors or officers resigned first) would be easily accomplished.
Long Answer
The requirement alluded to appears to be this Chapter, Section, and Subsection of Title XL of the Florida Statutes (emphasis added):
720.303 Association powers and duties; meetings of board; official records; budgets; financial reporting; association funds; recalls.—
(1) POWERS AND DUTIES.—An association which operates a community as defined in s. 720.301, must be operated by an association that is a Florida corporation. After October 1, 1995, the association must be incorporated and the initial governing documents must be recorded in the official records of the county in which the community is located. An association may operate more than one community. The officers and directors of an association have a fiduciary relationship to the members who are served by the association. The powers and duties of an association include those set forth in this chapter and, except as expressly limited or restricted in this chapter, those set forth in the governing documents. After control of the association is obtained by members other than the developer, the association may institute, maintain, settle, or appeal actions or hearings in its name on behalf of all members concerning matters of common interest to the members, including, but not limited to, the common areas; roof or structural components of a building, or other improvements for which the association is responsible; mechanical, electrical, or plumbing elements serving an improvement or building for which the association is responsible; representations of the developer pertaining to any existing or proposed commonly used facility; and protesting ad valorem taxes on commonly used facilities. The association may defend actions in eminent domain or bring inverse condemnation actions. Before commencing litigation against any party in the name of the association involving amounts in controversy in excess of $100,000, the association must obtain the affirmative approval of a majority of the voting interests at a meeting of the membership at which a quorum has been attained. This subsection does not limit any statutory or common-law right of any individual member or class of members to bring any action without participation by the association. A member does not have authority to act for the association by virtue of being a member. An association may have more than one class of members and may issue membership certificates. An association of 15 or fewer parcel owners may enforce only the requirements of those deed restrictions established prior to the purchase of each parcel upon an affected parcel owner or owners.
Liability of officers who don't actually know that an entity is administratively dissolved for the acts of the entity is not permitted.
Another section of the same title and chapter is also relevant:
720.3033 Officers and directors.—
(1)(a) Within 90 days after being elected or appointed to the board, each director shall certify in writing to the secretary of the association that he or she has read the association’s declaration of covenants, articles of incorporation, bylaws, and current written rules and policies; that he or she will work to uphold such documents and policies to the best of his or her ability; and that he or she will faithfully discharge his or her fiduciary responsibility to the association’s members. Within 90 days after being elected or appointed to the board, in lieu of such written certification, the newly elected or appointed director may submit a certificate of having satisfactorily completed the educational curriculum administered by a division-approved education provider within 1 year before or 90 days after the date of election or appointment.
(b) The written certification or educational certificate is valid for the uninterrupted tenure of the director on the board. A director who does not timely file the written certification or educational certificate shall be suspended from the board until he or she complies with the requirement. The board may temporarily fill the vacancy during the period of suspension.
(c) The association shall retain each director’s written certification or educational certificate for inspection by the members for 5 years after the director’s election. However, the failure to have the written certification or educational certificate on file does not affect the validity of any board action.
(2) If the association enters into a contract or other transaction with any of its directors or a corporation, firm, association that is not an affiliated homeowners’ association, or other entity in which an association director is also a director or officer or is financially interested, the board must:
(a) Comply with the requirements of s. 617.0832.
(b) Enter the disclosures required by s. 617.0832 into the written minutes of the meeting.
(c) Approve the contract or other transaction by an affirmative vote of two-thirds of the directors present.
(d) At the next regular or special meeting of the members, disclose the existence of the contract or other transaction to the members. Upon motion of any member, the contract or transaction shall be brought up for a vote and may be canceled by a majority vote of the members present. If the members cancel the contract, the association is only liable for the reasonable value of goods and services provided up to the time of cancellation and is not liable for any termination fee, liquidated damages, or other penalty for such cancellation.
(3) An officer, director, or manager may not solicit, offer to accept, or accept any good or service of value for which consideration has not been provided for his or her benefit or for the benefit of a member of his or her immediate family from any person providing or proposing to provide goods or services to the association. If the board finds that an officer or director has violated this subsection, the board shall immediately remove the officer or director from office. The vacancy shall be filled according to law until the end of the director’s term of office. However, an officer, director, or manager may accept food to be consumed at a business meeting with a value of less than $25 per individual or a service or good received in connection with trade fairs or education programs.
(4) A director or officer charged by information or indictment with a felony theft or embezzlement offense involving the association’s funds or property is removed from office. The board shall fill the vacancy according to general law until the end of the period of the suspension or the end of the director’s term of office, whichever occurs first. However, if the charges are resolved without a finding of guilt or without acceptance of a plea of guilty or nolo contendere, the director or officer shall be reinstated for any remainder of his or her term of office. A member who has such criminal charges pending may not be appointed or elected to a position as a director or officer.
(5) The association shall maintain insurance or a fidelity bond for all persons who control or disburse funds of the association. The insurance policy or fidelity bond must cover the maximum funds that will be in the custody of the association or its management agent at any one time. As used in this subsection, the term “persons who control or disburse funds of the association” includes, but is not limited to, persons authorized to sign checks on behalf of the association, and the president, secretary, and treasurer of the association. The association shall bear the cost of any insurance or bond. If annually approved by a majority of the voting interests present at a properly called meeting of the association, an association may waive the requirement of obtaining an insurance policy or fidelity bond for all persons who control or disburse funds of the association.
Florida non-profit corporations are governed by Chapter 617 of Title XXXVI of the Florida Statutes. Homeowner's Associations are taxed under Section 528 of the Internal Revenue Code (i.e. 26 U.S.C. § 528), so normally, directors and officers of an HOA are not entitled to Florida's very broad exemption from civil liability for officers and directors of non-profits that are charities. Fl. Stat. 617.0834. Therefore, the unmodified standard of liability for directors and officers apply.
The standards of conduct for other non-profit directors in Florida are as follows:
617.0830 General standards for directors.—
(1) A director shall discharge his or her duties as a director, including his or her duties as a member of a committee:
(a) In good faith;
(b) With the care an ordinarily prudent person in a like position would exercise under similar circumstances; and
(c) In a manner he or she reasonably believes to be in the best interests of the corporation.
(2) In discharging his or her duties, a director may rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:
(a) One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented;
(b) Legal counsel, public accountants, or other persons as to matters the director reasonably believes are within the persons’ professional or expert competence; or
(c) A committee of the board of directors of which he or she is not a member if the director reasonably believes the committee merits confidence.
(3) A director is not acting in good faith if he or she has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (2) unwarranted.
(4) A director is not liable for any action taken as a director, or any failure to take any action, if he or she performed the duties of his or her office in compliance with this section.
Also relevant (in pertinent part) is this section:
617.0831 Indemnification and liability of officers, directors, employees, and agents.— . . . . ss. 607.0831 and 607.0850 apply to a corporation organized under this act. . . . Any reference to “directors” in those sections includes the directors, managers, or trustees of a corporation organized under this act. . . . However, the term “director” as used in ss. 607.0831 and 607.0850 does not include a director appointed by the developer to the board of directors of a condominium association under chapter 718, a cooperative association under chapter 719, a homeowners’ association defined in s. 720.301, or a timeshare managing entity under chapter 721. Any reference to “shareholders” in those sections includes members of a corporation organized under this act[.]
Any member of the association would have standing to bring suit with an award of attorney fees if that person prevailed, but an obligation to pay attorney fees if the person bringing the suit loses. This section, however, imposes additional limitations on suits against officers and directors limiting them to "Any director or officer of an association who willfully and knowingly fails to comply with these provisions", rather than to anyone who has violated duties established elsewhere.
A dissolved non-profit corporation in Florida still exists as an entity, but is limited in the scope of what it is allowed to do:
617.1405 Effect of dissolution.—
(1) A dissolved corporation continues its corporate existence but may not conduct its affairs except to the extent appropriate to wind up and liquidate its affairs, including:
(a) Collecting its assets;
(b) Disposing of its properties that will not be distributed in kind pursuant to the plan of distribution of assets adopted under s. 617.1406;
(c) Discharging or making provision for discharging its liabilities;
(d) Distributing its remaining property in accordance with the plan of distribution of assets adopted under s. 617.1406; and
(e) Doing every other act necessary to wind up and liquidate its affairs.
(2) Dissolution of a corporation does not:
(a) Transfer title to the corporation’s property;
(b) Subject its directors or officers to standards of conduct different from those which applied prior to dissolution;
(c) Change quorum or voting requirements for its board of directors or members, change provisions for selection, resignation, or removal of its directors or officers or both, or change provisions for amending its bylaws;
(d) Prevent commencement of a proceeding by or against the corporation in its corporate name;
(e) Abate or suspend a proceeding pending by or against the corporation on the effective date of dissolution; or
(f) Terminate the authority of the registered agent of the corporation.
(3) The directors, officers, and agents of a corporation dissolved pursuant to s. 617.1403 shall not incur any personal liability thereby by reason of their status as directors, officers, and agents of a dissolved corporation, as distinguished from a corporation which is not dissolved.
(4) The name of a dissolved corporation is not available for assumption or use by another corporation until 120 days after the effective date of dissolution unless the dissolved corporation provides the department with an affidavit, executed pursuant to s. 617.01201, authorizing the immediate assumption or use of the name by another corporation.
Indeed, it isn't entirely obvious that letting a Secretary of State registration lapse would actually violate Fl. Stat. § 720.303 set forth above, because the HAO would still be a Florida non-profit corporation, even if its registration has lapsed, under the statute above related to the effect of dissolution.
It is also relatively easy to reinstate a dissolved corporation:
617.1404 Revocation of dissolution.—
(1) A corporation may revoke its dissolution at any time prior to the expiration of 120 days following the effective date of the articles of dissolution.
(2) Revocation of dissolution must be authorized in the same manner as the dissolution was authorized unless that authorization permitted revocation by action of the board of directors alone, in which event the board of directors may revoke the dissolution without member action.
(3) After the revocation of dissolution is authorized, the corporation may revoke the dissolution by delivering to the Department of State for filing articles of revocation of dissolution, together with a copy of its articles of dissolution, that set forth:
(a) The name of the corporation;
(b) The effective date of the dissolution that was revoked;
(c) The date that the revocation of dissolution was authorized;
(d) If the corporation’s board of directors revoked a dissolution authorized by the members, a statement that revocation was permitted by action by the board of directors alone pursuant to that authorization; and
(e) If member action was required to revoke the dissolution, the information required by s. 617.1403(1)(b) or (c), whichever is applicable.
(4) Revocation of dissolution is effective upon the effective date of the articles of revocation of dissolution.
(5) When the revocation of dissolution is effective, it relates back to and takes effect as of the effective date of the dissolution and the corporation resumes conducting its affairs as if dissolution had never occurred.
Reinstatement of an administrative dissolution for not keeping current with the Secretary of State is even easier.
So, while there would clearly be a right to compel an HOA to reinstate its state registration, it isn't at all obvious what harm would arise from allowing this to lapse that couldn't be cured, so it is hard to see how a member could be exposed to money damages for not doing so. The statute generally expresses an intent not to impose liability on officers and directors of dissolved entities.
Also, there can be no liability unless the director or officer was acting in bad faith, in a manner believed by that person to be contrary to the interests of the association, or imprudently, when there is also intentional or willful misconduct by the officer or director. So merely screwing up can't give rise to liability.
I could imagine facts under which there might be liability, but they would be quite esoteric, both in terms of a fact pattern that causes economic harm, and in terms of a fact pattern in which the standards for imposing liability were met (as opposed, e.g., to simple confusion about whose job it was to deal with a registration default notice).
N.B. Chapter 718 governs condominiums and Chapter 719 governs cooperative owned real estate, and these generally run more or less parallel to Chapter 720 for home owner's associations discussed above, but there could be subtle differences that I overlooked.
