If an annual HOA meeting is not posted for ten days, and none of the applicants for board positions are distributed with proxies to the owners, so 7 people and the 5 board members arrive and vote themselves in, is this a legal meeting?
First of all, most public meetings – and homeowners associations are certainly public meetings, in that they have long been legally recognized as having quasi-government authority and responsibilities – have a requirement of quorum. That is, in order for any business to be conducted, there must be a minimum number of participants present.
This is a custom that goes back to the ancient world, and is a very important part of due process. Otherwise, insiders could simply conspire among themselves to hold secret votes, with no accountability and no public input, and vote themselves and their cronies benefits at the expense of the populace as a whole.
A quorum of a simple majority of board members is pretty standard, and is usually defined in your association’s bylaws. I don’t know if the five board members present constitute a majority or a quorum in your case. I also don’t know if your bylaws count any vacant seats on the board against the quorum. You’ll have to check your bylaws for that.
But if they don’t have a quorum, you likely have a legal case to contest any decision they make as it affects you, and possibly bring a lawsuit against the Board.
The bylaws may also require a quorum of homeowners present at the meeting, in addition to the Board members themselves. Again, check your bylaws. 7 people may be grossly inadequate, or it may be more than sufficient – although since you state there was no notice given on the meeting, or insufficient notice, that tingles my spidey-sense, and not in the fun way.
Not all HOA meetings are open
Occasionally, a homeowners association meeting may have a closed board. This may be the case when they are deliberating on a disciplinary or personnel action of an HOA employee, for example.
But any business that affects homeowners or unit owners should generally be open and suitably and properly advertised in advance to all owners, in accordance with the rules in the bylaws, and any applicable state or local laws.
In the HOA context, proxy statements come in handy where a given owner cannot attend a meeting in person. In this situation, he or she may provide a “proxy statement” authorizing another individual to vote in his or her stead. The proxy statement should specify the meeting and the date, as well as the individual authorized to cast votes on the proxy statement issuer’s behalf.
Do proxies count toward an HOA meeting quorum? Again, that’s a matter for your bylaws to resolve. However, unless this meeting is in response to some emergency or other, the fact that there was no notice given to the community should draw a skeptical eye.
Here’s a general mention of some best practices when it comes to handling proxy votes:
Some states allow HOAs to dictate a specific form for proxy votes, while others bind HOAs to recognize and count all proxy statements as long as certain elements are present on the form. Check your state laws to see whether this circumstance applies to you.
Some states also limit the number of proxy votes a single member or owner can cast.
One thing to be aware of is the practice of a single individual seeking election to the board to go around soliciting for proxies on the side, away from public notice – a practice known as “proxy hoarding.” Then, this individual may seek to limit advertisement to the HOA meeting to depress attendance.
Then the candidate for election or reelection shows up with a couple of buddies who each have a pocket full of proxy statements voting for him, or for his preferred position, together with a small meeting attendance. This is a common way unscrupulous board members game the system. One such episode is described here.
Is this the case in your particular situation? I don’t know. But all the elements for abuse of the rules seem to be there.
A few suggestions:
- Proxies should be distributed by the property management company, and returned to the property management company, directly. Don’t allow board candidates to collect them directly.
- If you do have people collecting proxies, limit them to two or three or some other small number in relation to the total number of units and votes. This limits the power of proxy hoarders and they cannot
- Insist that all Board meetings be advertised directly to owners – possibly by registered mail, so that the HOA has a record of having notified each owner. This can go a long way to preventing challenges later.
- HOAs should use their own proxy forms when state law allows. They can be watermarked or encoded to prevent counterfeit proxies.
- All owners should be able to inspect any proxy votes cast on their behalf.
- Consider letting owners vote for board members or on key issues in absentia without proxies, by verified email or direct mail.
Due process is important in HOA management and governance. Board owners should strive for transparency, and HOA owner/members should demand no less. An open process in strict accordance with published procedures and restrictions, in compliance with bylaws and local laws, protects both board members and owners alike.
Writing about personal finance and investments since 1999, Jason Van Steenwyk started as a reporter with Mutual Funds Magazine and served as editor of Investors’ Digest. He now publishes feature articles in many publications including Annuity Selling Guide, Bankrate.com, and more.