Governance Framework · Lifecycle Stage V · Board Education
When an Association Can No Longer Fund Its Own Existence
A mature community's greatest asset is that it works without anyone reading the paper. That is also its greatest liability, because the paper is what survives the people. This is what happens at the end of a lifecycle — and what a board three stages earlier should take from it.
Educational notice. This information is educational in nature and should not be construed as legal advice. Consult qualified association counsel regarding legal interpretation specific to your jurisdiction.
Stage V in CIC-SC Working Paper No. 2026-01 is called Maturity & Reiteration. The community has operated for decades. There is real institutional memory, and real institutional momentum — the polite phrase for "we have always done it this way." The stage's work is to sustain the governance culture built across the four preceding stages, write it down so the next generation can inherit it, and prepare for reiteration: the moment when earlier-stage dynamics return through redevelopment, conversion, termination, or a generational turnover of ownership. The paper's named failure mode is complacency — documents are not refreshed, the pipeline is not cultivated, and when the turnover event arrives, the institution discovers that its operating culture lived in a few specific volunteers who are no longer there.
This article works through the terminal end of that stage using a litigation record that is unusually complete, because the community in question spent a decade in federal court. Every court holding described below is drawn from the published opinions themselves. Where a fact rests on secondary reporting instead, it is identified as reported.
The Structure That Was Written in 1973
The Colony Beach & Tennis Club was formed in 1973 on eighteen acres on Longboat Key, Florida. The account that follows is taken from the federal courts' own opinions in the litigation that consumed it.
Per Colony Beach & Tennis Club, Ltd. v. Colony Beach & Tennis Club Ass'n, 456 B.R. 545 (M.D. Fla. July 27, 2011), each purchaser of a unit was both a member of the Association and a limited partner in a partnership that operated the resort hotel, with the founder as general partner controlling the partnership and the hotel. The partnership agreement granted each owner thirty days of rent-free use of the owner's own unit annually and authorized the partnership to operate the unit as a hotel accommodation for the balance of the year. It granted each limited partner a share of a "preferential amount" — the first $1.398 million of annual hotel profit — plus half the profit above that, and immunized each limited partner from liability for any loss from the hotel's operation.
Alongside that structure sat a second instrument. Per In re Colony Beach & Tennis Club Ass'n, 454 B.R. 209 (M.D. Fla. July 27, 2011), on November 29, 1973 — before the first unit was sold — the Association entered a ninety-nine-year lease of the resort's recreational facilities. The founder and a partner were general partners in the developer entity that was the lessor; both signed on behalf of the lessor, and the same partner signed as president of the Association, the lessee. The lease required an initial annual rent of $153,000, escalating every ten years with the consumer price index; by 2003 the escalated rent stood at $653,000.
And then the fact that defines the entire case. From November 1973 until October 2008, the partnership paid both the annual rent and the Association's other expenses out of hotel revenue. In the district court's words: for more than thirty-five years the lessor never charged and the Association never paid rent — not a cent.
The Year the Money Question Arrived
Per the 456 B.R. 545 record: in December 2004 the Association's board discussed the common elements' urgent need for extensive repair. The Association's president at the time testified that the dilapidation had been obvious long before that discussion. The board hired an engineering firm, which estimated $10 million in repair and renovation.
The same opinion records two further facts that belong on every mature board's wall. The hotel's general manager testified that she kept the board's members aware that major repair to the common elements would cost more than the Association's reserves — and the board and the Association consistently voted to waive reserves anyway. The court found that the board knew both that those estimates were low and that a property built in 1973 would eventually need extensive repair.
In December 2005 the owners voted to reject a $10.6 million emergency assessment. In December 2006 they rejected a second proposed assessment and elected three new directors. (The 2014 opinion in the same matter describes the proposal as exceeding $12 million and records that owners rejected it twice.) The new board did what a board correctly reading a transition would do: it audited the operator and ceased reimbursing the partnership for many operating expenses that were the Association's responsibility under the declaration. In 2007 the partnership sued in state court for damages and for an injunction compelling the Association to assess. Eighteen months later, shortly before the state trial, the Association filed for Chapter 11 — October 29, 2008 — and removed the suit into bankruptcy court.
For the financial mechanics that produce this exact sequence in ordinary communities, see deferred maintenance is a loan and holding the assessment flat is a budget cut.
The Association Won Below. Then It Lost.
This is the part of the record that is most often reported incorrectly, and it is the part that matters most.
The Association won at trial, twice. After an eight-day bench trial, the bankruptcy court entered a November 9, 2009 judgment disallowing the partnership's claims, finding a 1984 payment agreement ultra vires and the damage calculation speculative. Separately, on January 15, 2010, that court declared the ninety-nine-year recreational lease unconscionable under Fla. Stat. § 718.122 and at common law, and disallowed the lease-rejection damages claims.
On July 27, 2011, the United States District Court for the Middle District of Florida reversed both judgments, in two orders issued the same day by Judge Steven D. Merryday.
On the repair obligation — 456 B.R. 545 — the court held the declaration's Article 6.5 command that "maintenance and operation of the common elements ... shall be the responsibility of the Association as a common expense" to be a plain and obvious mandate that nothing in the record overcame. It rejected the bankruptcy court's conclusion that the Association could not assess for repair of the common elements without a majority owner vote, describing that conclusion as "utterly foreign to Florida's statutory regime." A notice requirement, the court observed, is not a vote requirement. And it went further:
Even were a vote required, the bankruptcy court failed to explain on what ground the unit owners may casually "vote away" the obligation of the Association to pay for repairs to the common elements. The governing statute, the governing documents, and common sense reject this notion.
The court also noted that the rejected 2005 and 2006 proposals had been framed as emergency assessments for alteration and improvement — which did require an owner vote under the documents — and that nothing in the declaration or bylaws had prevented the Association from including the cost of repair to the common elements in an ordinary annual assessment. The board had a route it did not take.
On the lease — 454 B.R. 209 — the court held the unconscionability finding unsupported. Under Fla. Stat. § 718.122(g), the statutory presumption required proof that the annual rent exceeded 25 percent of the appraised value of the leased property as improved in the relevant tax year. The Association's own witness acknowledged that measuring against the as-improved value produced a figure of approximately ten percent. The court further held that waiver, release, and laches barred the defense in any event: the record showed the Association knew of the unconscionability argument as early as 1980, when its own lawyer raised it, failed to assert it through more than a decade of litigation and settlements, and accepted the benefit of the lease and each reaffirmation until 2008.
One procedural note in the 454 B.R. 209 order deserves a board's attention even though it is about litigation rather than governance: the district court observed that the bankruptcy judge had adopted nearly verbatim a proposed order authored by the Association's own counsel, and set out at length the Eleventh Circuit precedent condemning that practice. A judgment a party writes for itself is a fragile thing to build a community's future on.
The consequence was arithmetic. On October 24, 2012, the bankruptcy court recommended entry of judgment against the Association in favor of the partnership in the amount of $23,146,503.25, and recommended allowance of the four lease-rejection damages claims in the aggregate amount of $2,223,391.70. Entry of judgment was stayed when three affiliated entities filed their own Chapter 11 petitions on January 11, 2013.
The Association had litigated the inherited obligation to a win, and then to a loss roughly double the assessment its owners had refused to approve.
What Happened to the Property
Per the 2014 bankruptcy opinion, the partnership filed its own Chapter 11 petition on October 5, 2009, after closing the resort on September 23, 2009. It reopened with fewer than half the guest units available and could not provide the accommodations the declaration required. In August 2010 the court entered final judgment ejecting the partnership from the guest units and common area; that same month the partnership's case converted to Chapter 7. The resort ceased operating and remained closed. The court's own summary, written in March 2014, is the most economical statement of a lifecycle ending: for more than thirty years the eighteen-acre resort was a world-famous destination; in the last ten years its physical condition deteriorated, while disputes among its divided owners led to its closing in 2010.
The same opinion records that approximately 59 of the 232 guest units were by then owned by the Association's past president and members of his family, and that the principal secured lender was owed nearly $14 million. Ownership of the eighteen acres had fragmented across the Association, individual owners, two Chapter 11 debtors, the lender, a family trust, and affiliates of the largest owner.
From that point the record is secondary. The Longboat Observer reported that the largest owner's holdings grew to a position sufficient to block a termination vote; that in June 2018 the town's building official condemned every building on the site but one as a life-safety issue; that the buildings came down that November; that a developer settled with the last holdout in September 2020 for a reported figure in excess of $15 million; and that a circuit judge signed an agreed order terminating the Association on January 19, 2021. A luxury hotel opened on the site in 2024. Those figures are reported, not adjudicated, and are stated here as such.
What is not in dispute is the shape of it. Control passed from the community to the courts, then to the lender, then to the largest single owner, then to a developer. Every one of those transfers was lawful. None of them was the community.
The Terminal Options
An association that cannot fund the maintenance its documents require has a bounded set of paths. The first four are decisions. The fifth is what remains when the first four have been exhausted.
| Path | What it requires | What it costs |
|---|---|---|
| Assess and repair | Authority under the documents, an engineering basis, and an owner communication capable of surviving the number | The largest bill in the community's history, delivered by the board that will be blamed for it |
| Borrow against future assessments | Documented borrowing authority, a lender, and an assessment stream sufficient to service the debt | Converts a one-time shock into a multi-decade obligation on every future owner |
| Sell or redevelop by agreement | A supermajority under the documents, a buyer, and a valuation process owners will accept | Requires near-unanimity in a community that has usually stopped being able to agree on anything |
| Statutory termination | The thresholds in the statute and the declaration, a plan of termination, and in some states regulatory approval | Ends the community as a legal entity; distribution of proceeds becomes the new fight |
| Loss of control | Nothing. It is the default | A court, a receiver, a lender, the largest owner, or a local government exercising life-safety authority makes the decision instead |
Florida. Fla. Stat. § 718.117(2) provides for termination because of economic waste or impossibility: notwithstanding any provision in the declaration, the condominium form of ownership may be terminated by a plan approved by the lesser of the lowest percentage of voting interests necessary to amend the declaration or as otherwise provided in the declaration for termination, if the total estimated cost of construction or repair necessary to restore the improvements or bring them into compliance with applicable law exceeds the combined fair market value of the units after completion, or if it becomes impossible to operate or reconstruct the condominium to its prior configuration because of land-use laws. Section 718.117(3) provides the optional path: before a residential association submits a plan to the division, the plan must be approved by at least 80 percent of the total voting interests; and if 5 percent or more reject the plan by negative vote or written objection, the plan may not proceed — with a 24-month bar on reconsideration after a rejection.
Texas. Tex. Prop. Code § 82.068(a) provides that unless the declaration provides otherwise, and except for a taking of all units by condemnation, a condominium may be terminated only by agreement of 100 percent of the votes in the association and each holder of a deed of trust or vendor's lien on a unit — and that the declaration may not allow termination by less than 80 percent of the votes if any unit is restricted exclusively to residential uses.
Read the two side by side and the governance point emerges. Both statutes route the ultimate question back to the declaration. A community whose declaration is silent, or whose declaration sets a threshold no realistic ownership pattern can reach, has not avoided the question. It has assigned the answer to whoever ends up holding the blocking position.
The Stage Diagnosis
What stage was the community actually in? Stage V, and the framework fits uncomfortably well. Thirty-five years of operation. A 1973 declaration never restated, patched once in 1984. An operating culture that made the documents not matter, living in a founder and a general manager. And then reiteration: the buildings reached end of life and the community was kicked backward into something that looked like Transition — who controls the operator, who audits whom, who pays.
What stage did the board think it was in? There were two boards, and the gap between them is the case. The earlier board operated as though it were in permanent Stabilization: the operator runs the hotel, the owners get their month, the bills get paid. Its own president testified that the dilapidation had been obvious long before the December 2004 meeting, and the board's response to knowing reserves were inadequate was to keep waiving them. The later board diagnosed the moment correctly as a transition — audit the operator, stop the reimbursements, take the seats — and it was right that the community had gone backward.
It was wrong about one thing, and the error was fatal. In a true transition, the developer leaves and the community stays. Here the operator was the community's only operating system: hotel revenue was what had paid the Association's expenses for thirty-five years. When the owners won, they won a resort with no operator, no brand, no reservation book, and a courtroom for a lobby. The founder made the reciprocal error, continuing to operate as declarant in a community that had long since matured past being run that way. Both factions read their own stage correctly; neither read the stage the other was living in. And the documents that would have settled it were not read carefully by anyone until a federal judge read them and told the community what it had actually agreed to in 1973.
What a Board Three Stages Earlier Should Take From This
1. A waived reserve is a decision with a defendant's name on it. The most consequential finding in the whole record is the plainest: the board knew the estimates were low, knew a 1973 property would need extensive repair, and consistently voted to waive reserves. That pattern is available to any board, in any state, in any year, and it is what a court reads first. See reserve funding adequacy standards and the anatomy of a reserve plan.
2. Know which assessment you are proposing. The owners twice rejected an emergency assessment for alteration and improvement — a category their documents did put to an owner vote. The district court found that nothing prevented the Association from funding repair of the common elements through the ordinary annual assessment. Categorizing an assessment correctly, under the association's own documents, is not a formality. It determines who decides. See special assessment authority and procedure and adopting the operating budget.
3. An owner vote is not a release. A board that treats a failed assessment vote as the end of the matter should read the sentence about "casually voting away" the obligation. A rejected assessment does not extinguish the duty; it removes one method of funding it. The duty stays where the declaration put it.
4. Long practice does not amend a document, and it can forfeit a defense. Thirty-five years of the lessor not charging rent did not change the lease. And the Association's decades of accepting the lease's benefit, settling disputes under it, and reaffirming it — after its own counsel had identified the defense in 1980 — were what the court held barred the defense when it was finally raised. Where a board believes an inherited instrument is unenforceable, that belief has a shelf life.
5. Do not remove the operator before you have an operator. A community whose functioning depends on a single counterparty — a founder, a master developer, an affiliated operator, a single manager who has been there since the paint — must plan the succession before it forces the separation. Winning control of an asset you cannot run is not a victory.
6. Litigation is not a funding plan. The Association's path from a $10.6 million assessment to a recommended $23.1 million judgment against it, by way of two trial wins that were reversed, is the clearest available illustration. Litigating an inherited obligation is sometimes necessary. It is never a substitute for knowing how the obligation gets paid if the litigation is lost.
The Governance Principle
If a community's documents do not say how it renews itself and how it ends, then on the day it has to do one of those things, the decision belongs to whoever owns the most units.
A mature association's greatest asset is that it works without anyone reading the paper. That is also its greatest liability, because the paper is what survives the people. At the Colony, the practice was thirty-five years old and the paper was from 1973, and when the practice broke, the paper said something no living participant had ever operated under. Stage V governance is the work of making sure the community, and not the courthouse, holds the pen when reiteration comes — which in practice means four things a mature board can start this year: name the individuals the institution actually lives in and write down what they know; restate the governing documents rather than patching them again; read the renewal, redevelopment, and termination provisions and confirm the thresholds are reachable by the ownership pattern the community actually has; and build the leadership pipeline before the emergency rather than during it. See institutional knowledge as a financial asset, amending the governing documents, and what a long-range planning committee is for.
Where This Sits in the Framework
The five-stage framework is set out formally in CIC-SC Working Paper No. 2026-01, with the board-facing tour in the lifecycle companion article, the evidence-based diagnostic in the stage self-assessment, and the earlier stages in declarant control and the transition that never happened and the special assessment that reprices a building. Further Council research is in the Research Center.
The lifecycle, in the end, did not stop at maturity. The site was cleared, a new declaration was recorded, and a new set of buyers arrived who will never meet anyone who remembers what stood there. That is what the framework means by reiteration — and it is why Stage V is not the end of the arc but the return to its beginning.
When to Consult Counsel
- What the association's declaration and bylaws actually require it to maintain, repair, and replace, and whether that obligation can be modified;
- Which assessments the documents commit to the board and which require a membership vote, and under what notice;
- Whether an inherited lease, service agreement, or operating arrangement is enforceable — and whether any defense to it has been waived by the passage of time or by the association's own conduct;
- What termination, redevelopment, and restatement thresholds apply under the declaration and the applicable statute, and whether they are reachable given the community's actual ownership pattern;
- The consequences, including personal exposure of the association and its directors, of a decision not to fund a known condition.
A board that believes it may be approaching any of these questions is generally better served by asking them while it still has options than by asking them in a filing.
Disclaimer. This article is published by the Common Interest Community Standards Council for educational and informational purposes only. It is not legal advice and does not establish an attorney-client relationship. Court holdings are drawn from the published texts of Colony Beach & Tennis Club, Ltd. v. Colony Beach & Tennis Club Ass'n, 456 B.R. 545 (M.D. Fla. July 27, 2011); In re Colony Beach & Tennis Club Ass'n, 454 B.R. 209 (M.D. Fla. July 27, 2011); and Colony Beach & Tennis Club Ass'n v. Colony Lender, LLC (In re Colony Beach & Tennis Club, Inc.), 508 B.R. 468 (Bankr. M.D. Fla. Mar. 21, 2014). The January 15, 2010 bankruptcy court judgment declaring the recreational lease unconscionable was reversed on July 27, 2011, and no contrary appellate decision has been located; descriptions of that lease in this article reflect the district court's reversal, not the reversed trial ruling. Statutory text is drawn from Fla. Stat. §§ 718.117 and 718.122 and Tex. Prop. Code § 82.068 as published by the respective legislatures. Facts identified as reported are drawn from secondary press coverage, are attributed as such, and are not findings of fact. Descriptions of court holdings are descriptive of those decisions only and are not predictive of how any other dispute would resolve. CIC-SC provides educational resources, governance standards, and practical advisory support. CICSC does not provide legal advice, accounting advice, tax advice, engineering advice, insurance advice, or reserve study services. Board members and associations should consult qualified professionals for matters requiring professional judgment or legal interpretation.
Published by the Common Interest Community Standards Council (CICSC). Companion to CIC-SC Working Paper No. 2026-01, The Five Stages of American Community Association. Part of the CICSC Member Education Library. © 2026 CICSC. Educational use permitted with attribution.