Court Petition to Change Quorum
Hello there,
We are in a difficult situation with our HOA. Long story short, the three-person Board resigned because a group of homeowners was going to remove them for holding illegal meetings and changing guidelines and rules without a meeting. We went through the process of a special election before holding an Annual Meeting (something we haven’t had since 2019), but our quorum needed is SIXTY PERCENT. We had 33% vote, and with many homes owned by people renting them out, reaching quorum seems all but impossible.
Has anyone dealt with this type of situation? I have looked into petitioning superior court to lower our quorum rate because at this point we will never have another Board and do not trust the management company to do anything in our best interests.
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Quorum for meetings of the members are typically contained in the association bylaws. Read your bylaws and determine who has the authority to change them. Some allow the community members to revise that document.
Your situation is actually more dire that you thought. Without a board your association does not exist and cannot pay bills or hire or fire any contractors. The management company does not have anyone to report to and cannot act on it own to pay any association bills including their own. Also without a board you cannot actually buy or sell any home in the community as membership in the association is required as a condition of title and if the association does not exist a home cannot clear title.
Your quorum requirements are totally inappropriate and unnecessary. But you are not the first community that I’ve run across with quorum requirements like yours. In the other community the association had not conducted an annual meeting of the members required by law for 15 year and never elected a board. The existing board simply continue from term to term and if anyone left they simply appointed one of their friends to fill the vacancy. This was intentional on the board’s part because the board had an opportunity to change that by revising the bylaws to make the quorum requirement more reasonable, by a simple vote at a meeting of the board. They simply did not want the community to hold actual elections that would impact their power and control over the community. Other than for specific circumstances does state law specify the quorum requirements, and that is at 20% for any meeting to recall a sitting board member. Surely 20% is a reasonable limit, but some are as low as 10%. Many community do a progressive reduction in quorum requirement if they are not able to satisfy quorum, for example if they fail to meet quorum they call a second meeting and the quorum requirement is cut in half, if they still cannot satisfy quorum the third meeting quorum is cut in half again until they satisfy quorum and conduct the meeting. Remember the membership is required to hold a meeting every hear and simply calling a meeting that does not satisfy quorum does not constitute satisfying that provision of law requiring that a meeting be held.
My recommendation to you is to simply appoint an interim board of volunteers to represent the association and to modify the bylaws to revise the quorum requirements. Then call for and elect a board for the association with reduced quorum requirements. You may want to stagger terms so that continuity can be maintained on the board. In reality because your association cannot exist without a board the bylaws are no longer in place and valid. The community is capable of taking action to restore the corporate entity mandated by the CC&R’s.
I had a similar community in Prescott that went thru the same problem, but in that case the entire board resigned rather than comply with a court order to provide financial records that in my opinion would have put some of the board in jail. Because the association did not exist and the community members were not willing to appoint an interim board until the financial issues were resolved the court was forced to put the association under a court appointed receivership who was empowered to run the community and charge assessments until such time that the financial issues were resolved and a new board could be elected by the community. This was a real mess for this community and cost the homeowners greatly but in the end it was a good thing for the community, everything was resolved and the community is running strong under a newly elected board very aware of the hard lessons the community had to face when a rouge board mismanages association property and funds and works for their own self interest instead of the best interest of the community as a whole.
Good luck
The management company has informed the homeowners they have the responsibility without a Board to take control, but I totally understand about the ability to hire and fire contractors. We have major issues the previous Board put in place that are going into effect and have no way of stopping it at this point, no one to approve paint schemes, etc.
Can a Board of volunteers be appointed through a regular open meeting by the homeowners? I don’t see much about that in my findings, but I know it’s also a rarity.
Like i told you the first time without a board your association does not exist, and paint schemes are the least of your worries. Call an informal meeting of the members, no quorum requirements. Inform the community of the plan to appoint an interim board to modify the bylaws to specify a reasonable quorum requirement for members meetings and then to call a formal meeting of the members to elect the new board. Once the new board is in place it can work to resolve and address and if appropriate reverse any issues put in place by the new board. You are free to decide what else the interim board can and cannot do, such as authorizing the payment of any bills. The management company has no authority without a board to pay any bills including their own. It is up to you if you want to put all bill payment on hold until such time that a board is elected. Right now the community focus has to be on finding members willing to act as the interim board to modify the bylaws and for legitimate candidates for the board that will not continue the illegal actions of the past board. If your community would like I’ll gladly speak to them at the informal meeting to explain the significance of their situation.
Clearly if anyone in your community is thinking about paint schemes at this point in time then your community is in more trouble than you realize. Which is probably how you got into this situation in the first place. Don’t think for a minute that the management company will help you out of this situation. I never found one capable of independent thought. Or even a basic understanding of how these communities should operate.
Dennis
A couple more points. The concept of an interim board will not be found anywhere but it is brought about by the irresponsible provision of the bylaws that require a quorum of 60% of the community to hold a formal meeting of the members. Your past boards had the opportunity to change that but failed to do so. I’m assuming that you know what your community documents actually require for quorum and I based all of my responses on what you first claimed. I cannot imagine that you ever actually held a members meeting that satisfied the 60% quorum requirement so if that is true your community has violated state law every year in your existence. I’d also don’t understand how the past boards were elected if meetings were never held. You initially reported that your board resigned based of claims of violating open meeting laws, clearly the previous boards had no understanding or appreciation of the laws that govern them. You pay a management company to help you comply with the law but like usual that guidance simply does not come because they don’t know either.
While the interim board concept is found no-where in law or any other guidance it is a legitimate way out of your situation and pathway to a duly elected board which would probably be the first one from your community.
You can chose to do nothing and the community will go bankrupt because it cannot pay it’s debtors. All the debtors will sue the association to collect on their debt and all the legal fees will be added to that debt. All the existing homeowners will be financially liable for that debt and you will be prevented from selling your homes to get away from this mess.
Hopefully now you understand that paint schemes at this point in time are not major issues concerning your community. Your only focus must be on getting the bylaws changed so that a legitimate meeting of the members can be held at the earliest opportunity to elect a board to represent the association and manage your community legally.
Dennis
The point about never having quorum and everything has been illegal since the beginning of time is something I brought up to the management company and got no response which is very telling. My guess is they initially had quorum when it was transferred from declarant control, then just nominated people to take each other’s seats and anyone who has wanted on has stayed on the Board. We’ve been through apparently 3-4 management companies over 15 years, and supposedly there’s been no transfer of minutes between companies which is super.
I realize the paint scheme isn’t a large issue; it’s one of many I could have listed. My question is: how do we get the management company to recognize the interim Board without a quorum in this special meeting? They’re just going to say “you don’t have quorum, you tried, you have an Annual Meeting coming up, etc.”
I am also a member of this community since it’s inception 2003, we have had only 1 other property management company that left Jan. 2019 due to the illegal activities of the board that just resigned. Yes making quorum was difficult, over the years it seemed we always had to have a 2nd meeting. I was told by a separate management company that we can hold an open meeting and ask our current property management company & the HOA lawyer “who is responsible” for our HOA in the absence of a Board. They most likely will say no one, at which time we can request to nominate the volunteers we have for the Board. We then need to request that either the management company or the HOA lawyer appoint the nominated members. The management company I spoke with said this is legal and they have done this in the past. Have you ever ran across this & is it doable?
While you can ask either the management company or the association attorney any question you want, if they provide you any answer that is not that the members of the association are the only people authorized to act in lieu of a board they are wrong and simply providing a self-serving response.
Never, never give the management company or the attorney the authority to make any decision for the association under any circumstances. There will be a certain conflict of interest and they will never act in the best interest of the community because those people are not part of the community and could not possible have any idea what is best for the community as a whole. This would include the authority to appoint an interim board that authority lies in the members alone and should absolutely stay there.
You can ask the management company to set up and coordinate an informal meeting of the members for the purpose of nominating and appointing an interim board. This would include the notice of meeting and request for nomination. At that meeting (no quorum requirements) the situation will be explained to the members present and nominations will be announced, any new nominations would be accepted from the floor and then the members present would simply appoint the interim board by voice vote from the floor. The interim boards only action would be to revise the quorum requirement of the bylaws. That could be done at a separately noticed interim board meeting, open to the community and in full compliance with the open meeting laws for the state. Once the quorum requirements are changed a formal special meeting of the members will be called to elect the new board. Voting must be by both in-person voting at the meeting and absentee ballots provided to every member of the community. The notice requirements for that meeting are specified in ARS 33-1804. Since you had a three member board in the past i would recommend that you should elect two members to a two year term and one member to a one year term then after each term will be two year and elections will be held every year. This can be done by the two highest vote getters getting the initial two year term and the next highest vote getter getting the one year term. This should be specified in the bylaw revision.
There is absolutely nothing wrong with this approach and it is absolutely appropriate for your situation even thought it is uncommon. Yes i have run into a similar situation that i explained earlier.
Dennis
Thank you Dennis! I appreciate your assistance…