Preparing For Annual Meetings

Every homeowner and condominium association is required to have an annual meeting of the members. The primary purposes of the annual meeting are:

-Present annual budget to members -Elect Directors -Deliver Committee Reports -Strengthen the Community

1. Determine Notice Requirements

There are three types of meetings in community associations: annual, special, and board. Each type of meeting will have different notice requirements. Make sure you comply with the annual meeting notice requirements contained in your Bylaws.

For Oregon associations, notice of the annual meeting must be sent no less than 10 days and no more than 50 days prior to the meeting date. (ORS 100.407 / 94.650) Washington homeowners associations must send notice not less than 14 days and not more than 60 days. (RCW 64.38.035)  Annual meeting notices must be sent to all members at the last address provided to the association.

2. (Oregon) Include Reduced Quorum Language

Oregon has a unique statute which allows for a reduced quorum for ownership meetings. For condominiums, the statute is ORS 100.408, for planned communities, the statue is ORS 94.655.

If the membership meeting cannot proceed because of a lack of quorum, you may adjourn the meeting. The meeting may then immediately re-start with a reduced quorum. The reduced quorum is 1/2 of the quorum requirement or 20%, whichever is greater.

So, if your quorum requirement is 50%, the reduced quorum would be 25%. If your quorum requirement is 30%, the reduced quorum is 20% (remember, 1/2 or 20%, whichever is greater). If your quorum requirement is 20%, it stays at 20%. Keep in mind that the notice of the meeting must contain a statement that the quorum will be reduced and what the percentage will be if reduced. The language should also state that the meeting will be immediately recalled with the reduced quorum percentage (otherwise, you must wait 48 hours).

To take advantage of this statute, place a statement in the notice indicating that if quorum is not met, the meeting will be adjourned and immediately restarted with the reduced quorum. Indicate the percentage of the reduced quorum.

3. Prepare Proxies

A proxy should contain the following information:

1. Name of association 2. Name of proxy giver 3. Proxy giver’s unit, lot or address 4. Name of proxy holder 5. Date when proxy giver signs 6. Expiration date 7. Signature

Click here for a sample proxy: https://calaw.attorney/wp-content/uploads/2015/01/Sample-Proxy.doc

4. Use A Nominating Committee

Some association documents require the use of nominating committees prior to the annual meeting. In most cases, nominating committees make nominations and the election a much more efficient process. A good nominating committee will solicit names, determine if those individuals are willing to serve, gather biographies of the candidates, and present the information to the board and owners prior to the meeting. Keep in mind, unless prohibited by your governing documents, members can always nominate individuals from the floor at the actual meeting.

5. Prepare Agenda

Oregon and Washington law require annual meeting notices to state the time and place of the meetings, items on the agenda, including the general nature of any proposed amendment to the governing documents, any budget changes, or any proposals to remove directors.

Based on the recommendations in Robert’s Rules of Order, community association annual meeting agendas should include the following:

Announcement of Quorum Reading and Approval of Minutes Reports of Officers, Boards and Committees Election of Directors Unfinished Business and General Orders Announcement of Election Results New Business Adjournment

6. Know Voting Requirements

If certain items on the agenda require a vote of the owners, make sure you know beforehand the required voting threshold. For example, if the agenda includes a vote on levying a special assessment, look at your governing documents to see how many owners must vote in the affirmative. Some votes require a majority, some require a “super-majority”, and others may only require a plurality.

If your governing documents allocate votes by square footage or allow for cumulative voting, have an electronic spreadsheet ready with pre-set formulas to quickly tally votes. Also, if your Declaration or Bylaws prohibit delinquent owners from voting, make sure the names or units of those owners are excluded from voting.

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The Importance of Reserves

Adequate reserves are important to maintain property values and avoiding large special assessments. Most importantly, reserves increase the marketability of homes or condo units. Savvy buyers will base much of their purchase decision on whether or not there are adequate reserves. Typically, the amount of reserves is based upon a reserve study. The reserve study identifies all of the common property or common elements which the association is obligated to maintain, repair or replace. For single family home communities, this often includes entrance gates or monuments, play structures, fences or roads. For condominium communities, reserves are used to maintain or replace roofs, siding, clubhouses, decks and other limited or general common elements.

There are two components to reserves: the financial and the physical. A qualified professional first identifies all of the physical components of the community. Next, a reserve study and financial analysis are prepared showing how much money must be reserved. For example, if the professional indicates that the condominium roof must be replaced in 18 years, the reserve analysis will indicate how much money the association must save on a regular basis so that in 18 years it will have the necessary funds to pay for a complete roof replacement.

When choosing a reserve study provider, make sure the company carries liability insurance. If the association has complicated reserve items, it’s usually best if an engineer or architect conducts the site visit and reserve study.

Here’s an overview of the legal requirements in Oregon and Washington:

Oregon

• Reserve account must be established for all improvements which require major maintenance, repair or replacement in more than 1 and less than 30 years.
• Amount of reserves must be based on reserve study or other reliable information.
• Must perform reserve study (or review) annually and update accordingly.
• Reserve study must include:

- All items for which reserves are established - Remaining useful life for those components - Estimated costs of repair, maintenance or replacement

• Association may borrow from reserves for unforeseen expenses, but must do so with a resolution stating how and when the money will be returned to reserves.

Washington

• Non-condominium associations are “encouraged” to have reserves.
• Reserve account must be in the name of the association and administered by the board of directors.
• Amount of reserves is based on reserve study, which must be updated by a visual site inspection every three years by a “reserve study professional.”
• Reserve study must include:

- Component list - Date and statement of compliance with RCW - Level of detail of the reserve study - Association’s reserve balance - Other financial information - Reserve disclosure

• Association may borrow from reserves to pay for unforeseen or unbudgeted costs, but must do so by resolution sent to owners which explains when and how the funds will be repaid into the reserve fund.
• Association may be exempt from reserve requirements if there are 10 or fewer homes or units.

5 Common Collections Mistakes

Assessments are critical for community associations. Regular assessments allow the association to purchase liability insurance, maintain common property, and hire professional management. When an owner in a community fails to pay their share of the assessments, the other owners make up the deficit. Every condominium and homeowners association should have a collections policy that identifies exactly how the association will handle delinquencies.

Here are five common collection mistakes that board members often make: 1. Giving Up After a Foreclosure

Each community association has two enforcement routes to collect delinquent assessments. The first is the association’s right to lien the property or unit of the delinquent owner. The second is to pursue a personal judgment against the individual. The lien right and the personal judgment right are independent of each other. So, if an owner’s home or unit is foreclosed, the association still has a legal right to pursue the delinquent owner for the entire balance due to the association.

2. Failing to Timely Pursue Debt

There is a significant psychological component to debt. The longer a creditor waits to pursue collection efforts, the less likely the creditor will get paid. Each association should have a collections policy in place that explains to each owner exactly when collection efforts will begin after an assessment becomes delinquent. For associations with monthly assessments, collection efforts should begin 15-30 days after due. Associations with quarterly assessments should begin collections prior to the next quarter’s assessment.

3. Communicating About the Debt to Third Parties

Federal law prohibits collections agencies or collections law firms from communicating about an owner’s debt to any third-party. Board members should follow that same policy and never discuss an owner’s delinquency with other owners or third-parties. Discussion of deliquencies should be done in executive session during a regular board meeting.

4. Playing Favorites

Each association has clear guidelines on the amount of assessments, the frequency, interest rate, and late charges. The board should follow those guidelines with every delinquent owner and never make special arrangements with certain owners if those same arrangements are not available to all owners. Granted, when circumstances warrant the board may compromise on the total amount of debt in order to secure a settlement agreement. Legal counsel should be consulted prior to entering into a settlement agreement with a delinquent owner.

5. Not Allocating Assessments Correctly

In most planned communities each lot owner pays an equal share of the total amount of levied assessments. Some condominium associations allocate assessments based on square footage of the unit. In any case, always read your governing documents carefully to ensure assessments are allocated in accordance with the provisions in your Declaration or Bylaws.

8 Considerations for Community Rules & Regulations

Rules and regulations are an important part of the association’s governing documents. When properly adopted, rules carry the same weight as provisions in the CC&Rs or Bylaws. Here are some important things to know when adopting rules and regulations:

1) Rules and regulations must be consistent with the association’s other governing documents. You may not adopt a rule which conflicts with the CC&Rs, Bylaws or state law. In addition, an association may not adopt a rule for which it has no authority to do so. For example, if the CC&Rs do not contain any provisions related to the renting of units or lots, the board may not adopt a rule restricting the number of rentals in the community.

2) Rules and regulations are not recorded with the county recorders office. Because they are not recorded, it’s important that the association ensure that new owners in the community receive copies of all previously adopted rules, regulations and resolutions. If an owner never received a copy of a rule or regulation, it will be impossible to enforce.

3) When drafting rules, always cite to the association’s authority for adopting the rule, and include a statement of why the board is adopting the rule. Avoid legalese and make the rule clear, concise and readable.

4) Consider circulating the proposed rules before the board votes to adopt. Sometimes the board may receive constructive feedback from the owners which may prompt modifications.

5) Be consistent with the enforcement of rules and regulations. Follow the same procedures with all owners. This means applying the same fines for similar violations, allowing owners the opportunity for a hearing prior to levying fines, and equal application of each rule and regulation.

6) In general, boards may rescind rules, regulations and resolutions adopted by previous boards. However, if owners have relied upon a particular rule, the board may not retroactively apply a new, inconsistent rule against those owners. For example, suppose a board adopts a rule allowing white fences in the community and some owners construct white fences in compliance with the rule. If a new board decides only wood colored fences are allowed, the board may not require those owners who constructed white fences to comply with the new rule.

7) Make sure that owners receive due process when enforcing rules and regulations. Washington and Oregon both require that owners receive the opportunity for a hearing in front of the board of directors prior to levying a fine. Notice and the opportunity for a hearing should be built into all rules and regulations which include a financial penalty.

8) Don’t adopt needless rules or regulations. Always ask “why are we adopting this?” Rules and regulations should be adopted to address specific issues that arise in the community or to resolve ambiguities in the CC&Rs or Bylaws.

6 Ways to Take a Vote

Nearly all condominium and homeowners associations use Robert's Rules of Order ("RRO").  RRO describes multiple methods of taking votes.  Depending on the type of motion which the assembly is voting on, some methods of voting are better than others. For example, any vote which may be subject to challenge should be done by written or electronic ballot. This method provides a paper trail of the votes and can be re-counted and audited. For motions which are obviously going to be uncontested, it may make sense to take a voice vote by calling for "Ayes" and "Nays."

Here is an overview of the different methods of voting found in RRO:

1. Voice Vote

For a voice vote, the chair (after debate is over) instructs the assembly to say "Aye" or "Nay".  The chair, using their discretion, then announces the outcome.

2. Roll Call Vote

This may take much longer, but it provides a record of who voted "yes" or "no".  The chair reads through the names on the roll of the assembly, including those present by proxy, and records a yes or no vote for each member.

3. Standing Vote / Raise of Hand Vote

Similar to a voice vote, the chair asks all those in favor of the motion to stand or raise their hands. Then again for those voting no.  This is useful if the vote is close and a voice vote is too difficult to determine the outcome.  Remember though, if some members are holding multiple proxies (i.e. the owner is casting one vote for themselves and 4 votes on behalf of proxy givers) it may be complicated to get an accurate count.

4. Written Ballot

For any issue which may be contested, a written ballot is always the best course of action.  A written ballot provides physical evidence of who voted which way and the total number of votes for and against the motion.  Written ballots should be kept with association records for at least one year from the date of the meeting.

5. Electronic Ballot

By statute or bylaw provisions, many associations may use electronic ballots.  Many communities have seen a dramatic increase in voter turnout when using electronic or online ballots.  Electronic ballots work similar to written ballots in lieu of a meeting.  Here's an example of an online ballot: https://calaw.attorney/online-voting/

6. Unanimous Consent

For a series of procedural or uncontested motions, the chair may announce each item or motion and then ask the assembly to approve the motions by unanimous consent.  The chair does this simply by asking the assembly if there is anyone opposed to the motions.  If there are no objections, all motions pass without debate or discussion.

Insurance Policies Every Community Association Should Carry

The right insurance policies with the right coverage amounts are critical for every community association. State law may mandate insurance policies, and your association’s governing documents likely require certain types of coverage. Each association should review (on an annual basis) its coverage and coverage limits. Here are the policies every association should carry:

1. Property Insurance

Property insurance covers real property and insurable improvements owned or controlled by the association. Common examples include: clubhouses, restrooms, play structures, entrance monuments and fences.

The policies limits should be sufficient to cover replacement of any of the buildings or structures. If the association’s clubhouse is valued at $500,000, the property policy covering the clubhouse should be at least that much.

2. General Liability

Liability insurance covers the association and board against claims arising out of bodily injury. When an owner’s guest slips and falls on the association’s sidewalk, it’s the liability policy which is triggered and will provide coverage.

3. Directors & Officers Insurance

Some older governing documents may refer to this policy as “Errors & Omissions.” This policy will provide legal defense and coverage for claims asserted against the board or the association related to mismanagement, breach of fiduciary duty, or errors in judgment. The policy should cover the association, past and present board members, committee members, and managers of the association.

4. Fidelity Insurance

Fidelity policies cover theft of association funds. This type of coverage is especially important in self-managed associations which may not have sophisticated financial safeguards in place. Your policy limits on fidelity insurance should be least as much as the association has in all of its bank accounts.

5. Other Insurance Policies

In some cases, it may be appropriate (or required) for the association to carry earthquake or flood insurance. These policies are often expensive, but shouldn’t be overlooked if the risk is present. Lastly, if the association has employees worker’s compensation insurance is absolutely necessary.

Avoiding Personal Liability as a Board Member

Board members in community associations owe fiduciary duties to the association and the membership.  Fiduciary duties are duties above and beyond the normal obligations which a person owes to the public and to fellow citizens. This means that board members must act and make decisions which are in the best interest of the community, even at the expense of the board member’s individual interests.  Just because you’re a volunteer, this duty is not diminished.

Under the scope of fiduciary duties, the law imposes two duties: the duty of loyalty and the duty of care.  The duty of loyalty requires board members to avoid self-dealing during the course of decision making.  The duty of care means that a board member must consider the best interests of the association when acting as a board member. 

Fortunately, courts have adopted the “business judgment rule”.  This rule states that the court will not second guess a decision of the board or hold a board member personally liable. The rule will apply so long as the board members fulfilled their duty of care and duty of loyalty.  Thus, if an owner sues the board over a decision the court will apply the business judgment rule and insulate individual board members from personal liability. 

A Washington State Court of Appeals Case applied the business judgment rule after an owner sued the board and association for alleged maintenance issues.  The board undertook an investigation and even hired different experts to determine the cause of a water leak into the owner’s unit.  Nevertheless, the owner sued the board.  The Court refused to hold the board members liable:

Because they are given this wide latitude, the law will not hold directors liable for honest errors, for mistakes of judgment, when they act without corrupt motive and in good faith, that is, for mistakes which may properly be classified under the head of honest mistakes. And that is true even though the errors may be so gross that they may demonstrate the unfitness of the directors to manage the corporate affairs. This rule is commonly referred to as the "business judgment rule."

Keep in mind that the business judgment rules requires that board members:

1. Are informed about association business and affairs;

2. Attend and participate in meetings;

3. Are knowledgable about the governing documents of the association; and

4. Seek outside help (accountants, lawyers, or other experts) when necessary.

With any major decision each board member should ask if they have done everything necessary in order for the business judgment rule to apply.

Community Association Record Retention

Condominium and homeowner association accumulate large amounts of records over the years.  Community associations should consider adopting a record retention resolution which indicates the types of records and the amount of time those records will be kept.  Here is a list of common association records, along with recommendations for how long you should keep the records.

Permanent Records.

1.  As-built architectural, structural, engineering, mechanical, electrical, and plumbing plans.

2.  Original specifications indicating thereon all material changes.

3.  Plans for underground site service, site grading, drainage and landscaping together with cable television drawings.

4.  All other plans and information relevant to future repair or maintenance of the property.

5.  A list of the general contractor and the electrical, heating and plumbing subcontractors responsible for construction or installation of common property.

6.  Ownership meeting minutes.

7.  Board meeting minutes

8.  Corporate action taken by members or directors without a meeting.

9.  Records of all actions taken by committees of the board of directors in place of the board on behalf of the association.

10.  Resolutions adopted by the board relating to characteristics, qualifications, rights, limitations and obligations of members.

Records to Keep for 3 Years

1.  All written communications made to members in prior three years.

Records to Keep for 1 year

1.  Proxies and Ballots (one year from date of meeting).

Records to Keep Current Copies Of:

1.  Articles of Incorporation and amendments currently in effect.

2.  Bylaws and amendments currently in effect.

3.  List of names and business or home addresses of the current directors and officers.

4.  Most recent annual report delivered to the Secretary of State.

Recommended Non-Statutory Retention Periods.

1.  Contracts - 10 years from date of completion of contract.

2.  Insurance Policies - 10 years.

3.  Insurance Claims- 10 years.

4. Legal files-pleadings, judgments, other documentation - 10 years.

5. Tapes of board and association meetings - 1 year

Enforcing Parking Restrictions on Public Streets

Many association CC&Rs prohibit owners from parking on the streets within the community. But what if those streets are public streets? Can the association still regulate parking? The short answer is “yes.” When owners purchase property in a community association, they do so subject to the restrictions in the governing documents. In a sense, it’s a contractual relationship between the owner and the association. The owner is agreeing to do (or not do) certain things on their property or within the community. With that in mind, ownership of the streets (whether public or private) doesn’t matter. The owner agreed, via the CC&Rs, not to park in a certain place.

Keep in mind that state law may control an association’s authority to tow a vehicle from public streets. Nevertheless, in most communities the association may still levy fines against an owner for parking violations occurring on public streets.

Several court cases address this issue. Let’s take a look at a few of them.

1. Verna v. Links at Valleybrook, 852 A.2d 202 (NJ Super 2004)

The owner in the association owned a small business. Occasionally, he would park his work vehicle on the street in front of his townhome. The association’s CC&Rs contained the following language:

No trailers or commercial vehicles shall be permitted to remain on any Lot or street in The Links without the written consent of the Board....

The owner claimed that because the streets were public, the association had no authority to regulate parking on those streets. The court rejected the owner's position, stating that the regulation of parking through the CC&Rs is “a matter of contract” which may impose greater limits on an owner’s use of property than governmental restrictions.

2. Maryland Estates Homeowners’ Association v. Puckett, 936 SW2d 218 (Mo. App. E.D. 1996)

In this case an owner within the community conceded that the CC&Rs prohibited him from parking his vehicle in the driveway on his lot. However, he argued, the association could not prevent him from parking on the public street adjacent to his lot. The court held that the CC&Rs are “a contract to which each homeowner becomes a party when acquiring property in the subdivision.” The court ruled in favor of the association and granted an injunction prohibiting the owner from parking on the public streets within the community.

3. Sui v. Price (Cal. App. 2011)

While not directly dealing with parking on public streets, this California case answered the question of whether an association may tow a vehicle which is in violation of the CC&Rs. The owner in this case stored a disabled vehicle on his lot. The CC&Rs prohibited the parking or storing of disabled vehicles anywhere in the community. Further, the association had the authority to enforce rules “by appropriate means.” The owner argued that towing his vehicle was outside the scope of the association’s authority. The court responded by stating “One wonders — how else would the prohibition on parking disabled vehicles be enforced against a recalcitrant homeowner?” Ultimately, the association prevailed in the lawsuit.

5 Ways to Invite Lawsuits Against Board Members and Associations

1.  Violating Open Meeting Requirements Board meetings in Oregon (by statute) must be open to the membership. The same is true for Washington condominiums or any community association with open meetings requirements in the governing documents. The purpose of open meeting requirements is to allow the membership to witness the deliberation, discussion, and decision making of the board of directors.

There are exceptions to the open meetings requirements--namely, emergency meetings and executive session. But unless an exception applies, any time a majority of the board convenes and discusses association business, it's likely a "meeting". And if it's a meeting, it requires notice and observation by the membership.

Violating open meeting requirements casts a shadow on board transparency, causes suspicion among the owners, and increasingly, may cause a lawsuit against the association or board of directors.

2.  Failing to Renew Incorporation

Most associations are incorporated as nonprofit corporations. In some cases, it's legally required that the association be incorporated. Incorporation may provide a shield against liability for board members and owners.

In a 2010 Alabama case, a homeowners association attempted to enforce its architectural restrictions against an owner who constructed improvements without approval. The Alabama Court of Appeals held that the association could only enforce the governing documents if the association was incorporated.

Georgia dealt with a similar case in 2007, when an association filed suit against an owner for delinquent assessments. The owner claimed that because the association had become administratively dissolved when it filed the suit, the association was prohibited from collecting assessments. During the course of the lawsuit the association filed the appropriate renewal paperwork and was reinstated with the secretary of state. As a result, the court allowed the association to pursue collections.

For Oregon associations, visit www.filinginoregon.com to check on the association's incorporation status.

Washington associations can search here: https://www.sos.wa.gov/corps/search_advanced.aspx

3. Failing to Enforce Governing Documents

Board members have an obligation to enforce the provisions of the association's CC&Rs and Bylaws. If a board fails to enforce provisions of the governing documents for an extended period of time, many courts will find that the association has "waived" its right to enforce the same or other provisions.

In an Ohio case, an owner built an addition on his property. The association sued the owner, arguing that the additional building violated the CC&Rs. The court said that because the association had allowed other owners to build unapproved additions, the association couldn't require the defendant in this case to remove the building.

Similarly, some governing documents require the association to make architectural decisions within a certain number of days. The association may waive its right to enforce those covenants if it misses the deadline to respond. In a different Ohio case, the association's documents required the board to respond to architectural applications within 30 days. When the owner didn't receive a response, he proceeded with construction. When the association told the owner he could not proceed, the owner sued and prevailed because the association didn't make a decision within the 30 day window.

4. Violating the Fair Housing Act

There are literally hundreds of court cases involving lawsuits against associations for violations of the Federal Fair Housing Act. Here are some examples:

Auburn Woods I Homeowners Association v. Fair Employment and Housing Comm., 121 Cal App 4th 1578 (2004). A married couple suffered from depression and other disorders. The association's governing documents prohibited all animals. The couple bought a small companion dog to accommodate their mental condition and a lawsuit ensued. The association was found liable of discrimination.

Jacobs v. Concord Village Condominium X Association, Inc., 2004 U.S. Dist. LEXIS 4876 (S.D. Fla., 2004). The court found that the defendant condominium association had violated the Fair Housing Act by refusing to allow a physically handicapped resident to install a ramp so that the plaintiff could freely store, access and charge her motorized tricycle in a storage closet in the condominium building.

Sabal Palm Condominiums of Pine Island Ridge Association, Inc. v. Fischer, No. 12-60691-Civ-SCOLA (S.D. Fla. March 19, 2014). A Florida district court ruled that a condominium association violated the Fair Housing Act by its unreasonable delay in granting a request by a physically disabled resident to keep a service dog.

Hollis v. Chestnut Bend Homeowners Association, No. 13-6434 (6th Cir. July 29, 2014). A Tennessee homeowners association may have violated the Act when it denied owners from constructing an exterior sun room which was designed to accommodate two children with Downs Syndrome.

Board of Directors of Cameron Grove Condominium, II v. State of Maryland Commission on Human Relations, No. 47 (Md. Mar. 28, 2013). A Maryland appeals court ordered a condominium board to pay damages to unit owners who were denied reasonable accommodation of their disabilities. Bhogaita v. Altamonte Heights Condominium Association, Inc., No. 6:11-cv-1637-Orl-31DAB (M.D. Fla. Dec. 17, 2012). A Florida court found that a condominium association's intrusive search for more information regarding a unit owner's medical condition constituted a denial of his requested accommodation under the Fair Housing Act.

5. Filing Incorrect Liens / Collecting Inconsistent Assessments

May lawsuits involve associations levying assessments which are inconsistent with the governing documents. In a 2004 Texas case, an association's governing documents capped assessments at $50 per month. Nevertheless, the board unilaterally raised assessments to $75 per month. An owner sued the association and the court ordered the association to reimburse the owner for the overpaid assessments, plus pay the owner's attorney fees.

In another case, the owner of a commercial condominium unit in Georgia filed a lawsuit when the association levied assessments against the commercial unit to pay for expenses related exclusively to the residential units. The court's review of the governing documents concluded that the association was prohibited from assessing the commercial unit owners for residential unit expenses.

Make sure you read the assessment provisions of your governing documents carefully, and that all assessments are properly apportioned among the owners!

Free Board Member Consultations During April

During the month of April Community Association Law Group is providing free, customized board consultation sessions. During the 1 hour session we'll: 1. Review your governing documents and identify any outdated, unclear, or ambiguous provisions;

2. Review your association's compliance with state law;

3. Discuss collection of delinquent assessments in your association; and

4. Answer any legal questions relating to your association and board.

Book now by clicking here.

Robert's Rules for Small Boards

Robert’s Rules of Order is the most effective tool to ensure efficient, civil, and effective meetings. However, sometimes the formality of Robert’s Rules isn’t necessary. For small board meetings it may not make sense to follow (the sometimes tedious) formal parliamentary procedure. Under Robert’s Rules a “small” board is 12 individuals or less. Robert’s Rules recognizes that small boards may want to operate in a more relaxed and informal setting. Small boards may opt to use the “Informal Procedure for Small Boards” described in Robert’s Rules, 10th Ed., p. 469-71. Here are the key differences between the formal and informal procedures:

1. Board members do not have to stand or be recognized by the chair in order to speak or make motions.

2. Motions need not be seconded.

3. A board member may speak any number of times on a question, and motions to close or limit debate are generally not permitted.

4. A motion does not have to be pending in order to discuss a subject informally.

5. Votes can be taken initially by a show of hands.

6. If a proposal is perfectly clear to everyone it may be voted on even though no formal motion has been made.

7. In putting questions to a vote, the chairman need not stand.

8. The chairman can participate in debate just as any other board member.

So, for small and informal board meetings it may make sense to use the informal procedures. If a majority of the board agrees to “opt-in” to the small board procedures, reflect that in the minutes and proceed under the informal procedures.

Different Meanings of Majority

Condominium and homeowners association governing documents require certain association issues to be voted on. Depending on the specific issue, there may be a different voting threshold, or number of votes required for approval. Let's start with some basics. Robert's Rules of Order defines a "majority vote" as more than half of the votes cast, excluding blanks and abstentions. [RONR, 10th ed., 387)

A "super" majority is anything greater than half. However, avoid using the term "super majority," because that term may have different meanings. An amendment to your governing documents may require 75% approval by the owners. An increase in assessments may require 2/3rds of the owners to approve. Both are technically "super majorities", yet very different numbers.

You must look carefully at the language in your governing documents to understand how many votes are necessary. Here's a hypothetical:

There are 200 lots in the association. At the annual meeting 100 owners are in attendance in person or by proxy. 97 owners cast votes related to the approval of a special assessment, 3 owners abstain.

Depending on the language in your governing documents, the required votes could be very different. Here are some common voting requirements along with the votes necessary under our hypothetical:

1) "A majority of owners present in person or proxy at a meeting" = 51 2) "A majority of votes cast by owners present in person or proxy at a meeting" = 49 (remember, only 97 votes were "cast") 3) "A majority of all lot owners" = 101

Very small differences in the language results in very different outcomes. So, pay close attention to the language used in your governing documents, and make sure you know with certainty the voting thresholds before you take a vote!

March 12 Vancouver Board Training Recap

More than 30 board members and managers attended the education seminar in Vancouver, WA, on March 12, 2015.  Community Association Law Group attorney Kevin Harker presented "EFFECTIVE BOARDS: EFFICIENT MEETINGS, UNDERSTANDING GOVERNING DOCUMENTS, AND OWNER COMMUNICATION."  A copy of the slide show can be downloaded here: EFFECTIVE BOARDS. For information about future seminars, visit www.calaw.attorney/events

Effective Collections Policies

At some point every condominium or homeowners association experiences delinquencies. Assessments are critical for the association to pay insurance, maintain common property, or hire professional management. When an owner is delinquent, the association has two options. It can foreclose on the association’s lien against the lot or unit, or file a personal lawsuit against the owner.

Every association should have a collections policy which outlines the steps that will be taken when an owner is delinquent. It’s critical that the policy is followed each time an owner is delinquent, and that the same steps are used with each owner.

The policy should include the following:

1. Citations to the authority to levy and collect assessments (usually the governing documents and state statutes)

2. The amount of the late fee and when the late fee will be charged.

3. Interest rate.

4. A statement that the association may file a foreclosure action.

5. When the first demand letter will be sent.

6. When the file will be turned over to an attorney or collection agency.

7. When a lien will be filed against the property.

8. If a judgment is obtained, how the association will collect on the judgment (garnishment, writ of execution against personal property)

Click here for a sample collections policy: CALAW COLLECTIONS RESOLUTION

For more information about Community Association Law Group's collections program, click here.

The Difference Between Board Members and Officers

There is often confusion about the difference between directors and officers in condominium and homeowner associations.  Much of the confusion stems from the business world, where typically the board members of a corporation are different individuals than the officers.  For example, IBM has 13 individuals on its board of directors, and nearly 20 officers--all different individuals. In community associations, however, the individual board members are usually the same individuals who serve as officers.  There are distinctions between the roles.

First, board members are almost always elected by a vote of the association's owners.  And (usually) may only be removed or recalled by a vote of the owners.  Officers, on the other hand, are typically elected or appointed by the board members, without a vote and without the input of the ownership.  Most governing documents provide that officers can be removed by a majority vote of the board members--without a vote of the ownership.

You may have heard that the chair of the association only votes in the event of a tie.  This is true--especially in the corporate world.  However, at an association board meeting, the board members are voting in their capacity as board members, not in their capacity as officers.  Assuming the chair of the association is also a board member, the chair has a duty to vote!

Lastly, many governing documents outline specific duties of board members and officers.  Review those provisions carefully and look for differences between the roles.

[As always, your association's governing documents may have provisions which are different than the general information provided above.  Consult legal counsel if questions arise.]

Avoiding Fraud in Condominium and Homeowners Associations

Last week an Indiana newspaper published an article titled "Homeowners association supervisor faces 21 counts of forgery." (Click here to read article) The article states:

A McCordsville woman is charged with 20 counts of forgery and one count of theft of at least $100,000 in Marion County.

Marcy M. Smitley, 39, the owner of MCS Management Group Inc., was hired to supervise the Winslow Crossing apartment and condo complex on the southeast side of Indianapolis.

Court documents state Smitley repeatedly wrote and cashed checks without the permission or knowledge of Winslow Crossing Homeowners Association, pocketing more than $120,000 during the course of four years.

Fraud and embezzlement can occur in any condominium or homeowners association.  Here are some steps to help minimize your risk:

1. Purchase fidelity insurance to protect your association from theft of funds.  Your fidelity policy limits should match the amount of funds in your accounts.

2. Require two signers for all checks.

3. Have an independent CPA perform an annual financial review or audit.

4. Require monthly bank account reconciliation.

5. Keep blank checks in a secure location.

6. Consider background checks for any employee or contractor who may have access to association funds.

Solar Panels in Homeowners Associations

Solar panels are becoming increasingly popular, even in the cloudy Northwest. Oregon and Washington both have statutory provisions which apply to homeowners associations. In most cases, these statutes will override prohibitions in the CC&Rs related to solar panels. The best approach is to work with owners and develop reasonable guidelines for the installation of solar panels. Washington - RCW 64.38.055

Washington’s statute governing homeowner associations and solar panels states:

The governing documents may not prohibit the installation of a solar energy panel by an owner or resident on the owner's or resident's property as long as the solar energy panel:

(a) Meets applicable health and safety standards and requirements imposed by state and local permitting authorities;

(b) If used to heat water, is certified by the solar rating certification corporation or another nationally recognized certification agency.

However, there are some restrictions that an association may place on the installation of solar panels. For example, the governing documents of the association may prohibit visibility of a roof-mounted panel above the roof line or require the materials and installation hardware to be color coordinated.

Oregon - ORS 105.880

Oregon’s law governing solar panels is not as broad as Washington’s. ORS 105.880 reads:

Conveyance prohibiting use of solar energy systems void. No person conveying or contracting to convey fee title to real property shall include in an instrument for such purpose a provision prohibiting the use of solar energy systems by any person on that property.

Any provision executed in violation of subsection (1) of this section after October 3, 1979, is void and unenforceable. For the purposes of this section, “solar energy system” means any device, structure, mechanism or series of mechanisms which uses solar radiation as a source for heating, cooling or electrical energy. [1979 c.671 §5]

Forest Heights Homeowners Association in Oregon has adopted and published a great set of guidelines for solar installations within the association. Click here to view.

Open Meetings and Executive Session

Open Meetings Requirement Washington and Oregon require homeowner association board meetings to be open to the membership. (ORS 94.640 / RCW 64.38.035)

First, it is important to understand what constitutes a “board meeting.” Oregon law defines a board meeting as “a convening of a quorum of members of the board of directors at which association business is discussed, except a convening of a quorum of members of the board of directors for the purpose of participating in litigation, mediation or arbitration proceedings”

If a quorum of the board is discussing association business, whether in person or by electronic means, the board communication is considered a “meeting" which must comply with the open meetings requirements as set forth by statute.

In general, all meetings of the board must be open to owners and properly noticed, except for emergency meetings. There is no specific definition of an “emergency,” but it would likely include addressing items such as threats to the immediate health, life or safety of residents or preventing significant or irreparable damage to the common property of the Association.

Board members often ask if it’s okay to communicate with other board members via email. Oregon law addresses this issue: “the meeting and notice requirements in this section may not be circumvented by chance or social meetings or by any other means”.

In other words, alternate forms of communication, such as email, cannot and should not be used for the purpose of circumventing the open meetings requirements. It is crucial to understand the risk that any decisions that the Board makes at, or as a result of, improper meetings could potentially be invalidated.

Executive Session

Oregon and Washington provide an exception to the open meetings requirement. Boards may meet in executive session, outside the presence of the owners, to discuss certain topics.

In Washington, those topics include:

1. Consideration of personnel matters; 2. Consultation with legal counsel or to consider communications with legal counsel, and discuss likely or pending litigation, 3. Matters involving possible violations of the governing documents of the association; and 4. Matters involving the possible liability of an owner to the association.

In Oregon, executive session topics include:

1. Consultation with legal counsel; 2. Personnel matters, including salary negotiations and employee discipline; 3. Negotiation of contracts with third parties; and 4. Collection of unpaid assessments.

Here’s how executive session works: During a normal, open board meeting, any board member may make a motion to convene in executive session. The minutes of the meeting should reflect the motion to convene in executive session. The board members then discuss the relevant issues in executive session.  Once the discussion is complete, the board reconvenes to the open meeting. If any motions or decisions need to be made, they are done so once the board has returned to the open meeting. There are no motions, and no voting, during the executive session.

Remember, the purpose of the open meetings laws is to ensure that owners are able to observe the deliberations, debates and decision making of the board of directors. Open meetings and transparency are critical to a well-run association.