Q&A: Unauthorized Spending

Q I am a director, and during this past summer, a fellow director, along with our president who has been given approval privileges, have been spending and making unnecessary repairs without the knowledge or votes of the other 5 directors. Our treasurer had no knowledge. I only found out when making summer visits and saw with my own eyes what was going on. Our president just keeps signing the checks.

What can we do and can they be held responsible for this spending which was not authorized by the board and was performed without our knowledge? They seem to think that it is their own building and they are making their own updates and spending. I hope you have some answers on what can be done. I would like to see them punished. This is unfair to the owners.

—Wasteful Spenders in Wesley Chapel

A “There are several options that are available to a unit owner in this predicament,” says Russell M. Robbins, a managing partner with the law firm of Mirza Basulto & Robbins, LLP, in the Coral Springs office. “There is an opportunity to inspect books and records of the association (see §718.111(12), Florida Statutes), filing a written inquiry requiring a substantive response (see §718.112(2)(a)(2), Florida Statutes), petitioning the board to address the issue at a meeting (see §718.112(2)(c)(1), Florida Statutes). Sometimes the addressing of the issue in the open is sufficient for the board to see the ‘error of their ways’ and ensure such action does not occur in the future. If unsuccessful, an owner may file a complaint with the Department of Business and Professional Regulation’s (DBPR’s) Bureau of Compliance or if the facts merit, with the local police or sheriff’s department. Consequently, the board is afforded protection by their Directors & Officers (D&O) insurance policy and the ‘business judgment rule’ codified in Florida Statutes, unless such actions constitute gross negligence, criminal activity, a conscious disregard for the best interest of the corporation, or an improper personal benefit to the director(s).”

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Comments

  • In regard to Board of Directors unauthorized spending, you indicate "unless such activity constitutes gross negligence". So if the activity DOES constitute gross negligence, what can be done ?". Thank you