This week's tip answers a question posted on the HOAleader.com

discussion forum. Can a single board member bind a condo or

homeowners association to a contract without the rest of the

board's approval?

"It boils down to the law of actual versus apparent authority,"

explains Bob Tankel, principal at Robert L. Tankel PA in Dunedin,

Fla., a law firm that advises associations.

"Under Florida law, the president of a corporation--and in

Florida all condo associations and most homeowners associations

have to be incorporated--the common law of corporations is that

the president has apparent authority to sign a contract." Most

states follow that common law rule, but check with an attorney

in your state to know your specific law.

Bob explains what that means in lay terms. "When Bill Gates was

running Microsoft, if he'd have called me up and said, 'Bob, I

want you to do some work for Microsoft,' I could have reasonably

assumed he had the authority to bind his company," he says.

"Third parties don't have to look any further when a president of

a corporation contacts them. They have the right to rely on the

apparent authority of that president and can hold the

association's feet to the fire."

That doesn't mean the president is off the hook. "If the president

didn't have the authority to bind the corporation, the president

runs the risk of a breach of fiduciary duty action."

What if the board member isn't the HOA's president? "Third

parties who rely on anyone else do so at their danger," says Bob.

"There's specific language in Florida law that says owners have

no right to act on behalf of the association simply by virtue of

being owners. As a matter of corporate law, it's my position that

a simple director who's not the association's president has no

apparent authority, and no third party has a right to rely on any

representation from other directors."

To learn more, and to get 6 steps your HOA board can take to

control its negotiating process and reduce liability, see our new

article. Go there now »

Best regards,

Matt Humphrey

President