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Homeowner’s voting right at a special meeting of the Members in HOA

Recently our HOA unilaterally imposed a 15-month temporary increase in assessment/due starts from Oct. 2022 to pay for roof replacement project in our condominium. We are not a planned community, we organized as a non-profit corporation. We, small group of homeowners of the Association are trying to call a special meeting of the Members. We put 4 items on the purpose of the meeting in the letter to the Board to call this special meeting of the Members. one of these 4, is to invalidated the 15 -month increased assessment, because our CC&R doesn’t authorize HOA to do that. Assumed these 4 items should be on this meeting agenda, should every member has the right to vote on each of the items on the meeting agenda at the meeting? There is no specific section about this in our CC&R or bylaw, only one section is for a special meeting of the Member to remove a Board member.

16 Responses

  1. Dennis Legere

    Irene,
    First of all if you have recorded covenants and mandatory assessments you are either a planned community or a condominium. Both require that for any meeting of the members all eligible members must be allowed to vote. Whether you have the right to vote for this special assessment is totally dependent on your CC&R’s. There will be a section that specifically identifies who is allowed to approve a special assessment. If you want to call a special meeting of the members for any reason then you need a petition to do that, signed by 25% of all the members of the community under Arizona law. Whether your small group of homeowners constitutes 25% of your community I don’t know. Even if you had the 25% what you can do at that meeting is limited by the specific rights and powers defined in the governing documents. If you Don’t have the power to reject the special assessment putting it on an agenda does nothing because the members can’t act on that issue. Special asses,ents have to be authorized in the CC&R, and either the board or the members must be identified as the approving authority. If the approval I power is with the members than the board acted outside it’s authority and the members have the power to re erase that decision. If the board refused to accept the power of the members and their decision on this issue,, then you will have to take the association to court to enforce the governing documents.

    You never mentioned what the other three items were that you were interested in, so I can’t comment on the validity of those actions.
    Dennis

  2. Irene Smith

    Thanks Dennis. Great help to understand how the HOA works! A little more details about this matter:
    Yes, we do have the CC&R and Bylaw all recorded at the Maricopa County in 1998. According to these documents, each owner owns a percentage of the interests in the undivided common elements. So we are condominium. we have a Common Expense Assessment (due) for each month, the amount is the Board decision based on the fiscal year’s budget , also per CC&R:
    …if the Board determines during the fiscal year that are, or will become inadequate to meet all Common Expenses for any reason, it may increase the Common Expense Assessment for that fiscal year…
    According to our 2021 annual financial statement, we use Cash basis accounting method. the fiscal year is from 1-1, to 12-31.
    Right now, the board imposed this 15-moth temporary Due increase starting from Oct, 2022, addition to the current monthly due, to pay for the cost of the roof replacement project (102 roofs), which is a capital improvement project. The Board refused to use a special assessment method which requires 2/3 the votes of the Members (per CC&R), and refused to listen to the concerns and legal questions brought up by the owners at the open board meetings. Therefore, we, a small group of the owners, decided to get 25% of all the members’ signatures and to call a special membership meeting.
    One of these 4 item on the meeting, is to invalidated the 15 -month increased assessment, because our CC&R doesn’t authorize HOA to do that,
    The second item is to ask the Board to revoke the Board resolution as to accept the bid from a roofing company; this company’s bid is overpriced 1.9-million dollars, and the company has done some jobs here with poor workmanship which resulted in more water leaking; these problem has not been taking care of yet. The project biding process was so strange that only two companies bid.
    The third item is asking the Board to use reserved fund to replace the roofs most in need; not every roof need replaced, $600,000 at end of this May and every mouth there is about 10,000 – 15000 add to the reserved fund, and propose a special assessment approved by 2/3 the votes, not monthly due, if the reserved fund cannot meet the cost of the roofs replacement.
    The fourth one is to replace the Management Agent.

    After read your comment, It seems at the membership meeting, we, members, don’t have the rights to vote on any of these items on the agenda. But will the Board of Directors has to answer or defend themself on each items ? not just say:” HOA Lawyer is okay with the 15-month increased Due.” then asked them where the CC&R said that, they did’t say a single word, used limited owner speak time as an excuse to close the conversation. We hopefully get the 27 signatures out of total 107 Members

    In order to reverse the Board decision, do we have any better choice or way, other than hiring a lawyer to represent our group? Does Arizona Revised Statues Title 10 10-3702, or 10-3705 Special Meeting apply to our condominium – a non-profit corporation?

    We don’t have any personal problems and political motivations toward our Board. They are volunteers to maintain our condominium. We really don’t like to file any legal action unless it has to. We are all neighbors.

    Thanks so much for your help.

    1. Dennis Legere

      Irene,
      Based on your details I stand by my original comment that the board had no authority to use the supplemental assessment method to fund this project. Because the expense goes beyond the fiscal year. The board can approve an annual budget for the year including planned payments to the reserve fund. They can also approve a supplemental assessment to deal with shortfalls in that annual budget for the remainder of that fiscal year. The funding that they require for this roofing project can be achieved by a special assessment payable over 15 months or by withdrawal from the reserve funds, but as you stated that supplemental assessment must be approved by the members not the board. I’m sure they took this approach based on bad advice from their attorney and their community manager. While you could challenge this decision in court and will absolutely win that case suing the association is always the last resort for the homeowners because they always pay, win or lose the only people that win in any litigation are the attorneys which get paid whether they were right or wrong in their advice and they are never held accountable for bad advice, because of privilege. There is also another provision in Arizona law relative to an increase in the annual assessment of greater than 20% of the previous year’s assessment which also requires homeowner approval. You may want to look at the assessment from the previous year and the increase in this current year including the proposed supplemental assessment I believe that you may trigger that limit which would be another basis for challenging this assessment. What I would recommend is that you hold the special meeting of the members to discuss these issues and inform the community of their option and the illegality of the actions of the board. If you like, I’ll travel to your community and if allowed to speak to your members inform everyone of how they can get this situation fixed.
      You best approach, is to rally the association unit owners against this illegal special assessment and the bidding process that failed to address the poor performance of this particular vendor. Provide the board an ultimatum that they reverse the illegal special assessment and propose to the members for their approval a proposal for a special assessment and a vendor that they chose that will perform the job appropriately. If they refuse, then have a petition ready to recall the entire board and get it signed and presented to the board at that meeting. Once you get the 25% of the members to sign that petition the association then has 30 days to hold that recall special meeting. Get candidates together that will run for the vacated seats once they are vacated, that will cancel the illegal assessment and the selected vendor.
      Yes, the board members are volunteers’ and your neighbors, that were given bad advice, but despite that advice clearly any reasonable person would see that a 15 month assessment starting in the third quarter of a fiscal year can never be considered a supplemental assessment for that specific fiscal year. It is a special assessment to be paid over 15 months, that per the governing documents requires homeowner approval and input and responsible and fiduciary consideration of the bidding process to get the best value for the community.
      Give the board an opportunity to fix this issue and do it right but if they refuse use your power to recall the entire board and replace them with members that will do their job for the community.
      Dennis
      Dennis

  3. Irene Smith

    Dennis,
    Thanks for the advice, truly appreciate! Sorry, I haven’t return your message, because We were busy with collecting the signatures for calling the special members meeting. On this Monday, We got more than 27 required number of signatures. However, HOA gave us trouble to accept the envelope which contains letter and all the signature pages,. Yesterday, I scanned all the pages into a PDF attachment and emailed it to the manager and President. with a Read Receipt request. My email tracking tool has received the READ receipt already. now I am waiting for HOA’s response. The special members meeting we are calling will be on Oct 1st. After re-read your advice, we are thinking of open a google meeting with whoever we have contact info now, more than 27, this Saturday morning, to discuss the next step. We really like to have you speak at this google meeting, if you are available, and sorry for this short notice. Thanks so much. Looking forward to hearing from you again.
    Irene

      1. Irene Smith

        Thanks so much for your time, We were so happy to have you to join our google meeting this morning, especially answering the questions from our owners, explained process of recall, pro and con, and our homeowners rights. I will keep you informed. A great organization!

  4. Irene Smith

    Hi Dennis, we went through all the bumpy road, finally every have received a special member meeting notice, the meeting will be in Oct.6 5pm. However, I have 3 questions,
    1. On the meeting notice, the property manager purposely added a sentence: No vote of the membership shall take place at this special meeting. Can a member make a motion at the meeting: demanding the board to invalidate the illegal 15-month increase assessment. ? This is a special member meeting, not a board meeting. A member should have the right to do so. After the discussion, can we ask members to vote?
    2. We have one board member she opposes to the board decisions as to this assessment and roofing contractor. She and her husband are very supportive for what we are doing. Unfortunately, on Oct.6 5pm she will be on a long preplanned trip, on a airplane, unable to attend meeting. However, she would like to make a consent in writing and ask her husband to represent her as a board member for the meeting. Is this can be done?
    3. in our Bylaws, under the section Vacancies, it says: All vacancies on the Board of Directors shall be filled by a vote of a majority of remaining directors though less than a quorum or by a sole remaining directors.
    If we have 2 remaining directors, they can appoint the new directors without going through the election, is it right? We are preparing to recall 4 directors out of 6 total.

    By the way, I sent you an email last week, let me know if you have received it.

    Thanks.

    Irene

    1. Dennis Legere

      Irene,
      The community manager did this because they have nothing to vote on right now that they can put on any absentee ballot. If you have a quorum of the members present at the meeting, you can vote on anything the members want to vote on or say to the board. This is your meeting not the boards, do not let the board say what you can or cannot do. The board may not be bound by your actions, but at least you will be heard and be on record for opposing this illegal assessment. This is a special assessment and must be authorized as specified in the CC&R’s. Because they simply claim to call it not a special assessment has absolutely no relevance at all it expands beyond the fiscal year so it cannot be part of the annual or supplemental assessments.
      Voting by proxy is not allowed in Arizona for HOA’s under the law no matter what the CC&R’s say.
      The law for recalls specifically requires that if a majority of the board is removed by recall that a special election be held to fill the newly created vacancies. This supersedes any provision in the governing documents to the contrary.
      Dennis

  5. Irene Smith

    Hi Dennis,

    Our meeting was an eye-open event and out of order meeting, but at lease homeowners was able to asked a lot of questions, some very critical.

    The Board brought a general counsel , an attorney, of the HOA to preside the meeting. We asked if she can preside impartial as a meeting chair. She claimed that she works for HOA which consists both the board and homeowner members, therefore, she should be impartial. However, it was a lie, as soon as we asked questions for the board, she automatically jumped in to answer for the board, with baseless statement, defending the board’s wrongful actions, I should have asked her to leave the meeting chair seat. Anyway, more homeowners jumped in for more questions, so I just let it go. At least, all the homeowner attended meeting learned how this attorney acted, with inconsistent statement, no one thinks her words is trustable, and Board made these decisions without any sufficient supportive information. No wonder we got into this terrible situation.

    Anyway, we are in the process of collecting signatures to recall some board members; we have new board member candidates, a plan or actions for new board to do. Any specific suggestions?

    Now I have little confused from what I have read in A.R.S Section 33-1243(H)(6):

    6. On removal of a majority of the members of the board of directors at a special meeting of the membership called pursuant to this subsection, or if the condominium documents do not provide a method for filling board vacancies, the association shall hold an election for the replacement of the removed directors at a separate meeting of the members of the association that is held not later than thirty days after the meeting at which the members of the board of directors were removed.

    in this paragraph,” …Or if the condominium documents do not provide a methods for filling board vacancies,…”
    But our Bylaws says, ” All vacancies on the Board of Directors shall be filled by a vote of a majority of remaining directors though less than a quorum or by a sole remaining directors.” it does provide a method for filling board vacancies.

    in order to take care of our roofing situation quickly, can our Bylaws method be applied, so we can fill the vacancies fast for the unexpired terms of removing board of directors?

    Thanks,

    Irene

    1. Dennis Legere

      Irene,
      First of all, any attorney that states that they represent the interest of the board, and the homeowners are absolutely lying. As a corporation the attorney’s client is the corporation and the corporation along. They do not represent the interest of the board and they absolutely do not represent the interest of the members. You can never trust anything out of an HOA attorney’s mouth to be true, it will be their version or whatever is best for the corporation they represent, there is absolutely no relationship to whatever is the truth.
      The process for filling the vacancies for recalled board members are dictated by statute and supersede anything in the governing documents. This is for a reason. A board is only authorized to act on anything if a quorum of the board is present. If a majority of the board is recalled a quorum is no longer available and the remaining board members have no authority to do anything, especially to fill vacancies for the majority of the board. Boards are allowed to fill vacancies for less than a majority of the board because a quorum is available to act. The election by the members is the only way to legitimately fill vacancies in a majority of board positions. I’ve seen many bylaws that are written in a manner that is very similar to yours’s, but that does not make them right. Let the homeowners decide who they want on tthe baord and not the remaining board members. You will be far better off in the long run.
      Dennis

      1. Irene Smith

        Thanks for the advice. I have a question about the recall process.
        1. Do we need majority of the votes of 107 units, which is 54? or the majority of the vote of total votes from in-person and absentee ballot submitted at the meeting?

        2. Usually, the absentee ballot for election is sending to the either the property manager (done in 2022) or to the person (secretery?) of the HOA law firm (done in 2021). Should we concern this in the recall process?

        The HOA had tried everything they could do to destroy our last membership meeting; refused to accept our petition, delayed the membership meeting date, sent a meeting notice with “No VOTE OF THE MEMBERSHIP SHALL BE TAKE PLACE AT THIS SPECIAL MEETING.”, distorted our group presentation pdf file, set a meeting plan to limited members discuss time for 15 min. only for pro and cons (even we emailed them and asked them to run the meeting per AZ Condominium ACT for a members meeting, not a board meeting. They ignored. However it didn’t happened, the meeting was last 2 1/2 hour), also HOA purposely block more members to join the meeting after an hour the meeting started.

        I believe that these reactions from the Board were all from the attorney and the manager. The Board were totally out of their mind.

        Irene

        1. Dennis Legere

          Irene,
          For the special meeting of the members called for the purpose of recalling one or more directors the quorum for the meeting is 20% of the members in the community which will be 23 members in your case in person or by absentee ballot. A simple majority of the votes received for each individual board member decides the issue. Every ballot must have an opportunity to for or against the recall of each individual director.
          Like I stated in the prior guidance The board can control what happens in a board meeting, but they cannot control what happens in a membership meeting as long as a quorum is present. I don’t know what your typical quorum requirement is but if you had that present at a membership meeting that membership can take any action they are authorized to take. The problem comes when you need the absentee ballots to satisfy quorum. If anything is to de decided at the meeting it must be identified in advance so that those wishing to send in absentee ballots have an opportunity to vote on the issue. If a quorum is present at the meeting motions from the floor can be made and voted on and are valid even though those not-present never had an opportunity to vote on that issue.
          I believe that the root of all evil in these communities stems from bad advice from both HOA attorneys and incompetent community manager.
          Dennis

          Dennis

  6. Irene Smith

    Dennis,

    We are still collecting the signatures for the petition to recall, and almost get to the required numbers. However, now some homeowners are afraid of the frictions in the community, if the recall is going to take place. In my opinion, the attorney and manager created this situation, the board forced us to recall them. Some homeowner suggested we could send a letter to the some board members and ask them to resign; I don’t see this is possible, according to the Board’s recent action:

    Last Thursday we had a monthly open board meeting, the Board wanted to approve the 10-6 members meeting minutes which was written by the property manager with a lot of fabricated and falsified statements in it. The Board tried to approve it without asking any homeowner to speak. We had to tell them it is AZ open meeting law; to let homeowner speak before the Board takes any action. After we told them we disagree what the minutes has stated, they muted the person who was describing what actually was happened at the member meeting. Very rude!
    Now The manager just send out a special 2023 budget approval open board meeting notice for this coming Tuesday, which has a agenda, following the “new business – 2023 budge”, there is a sentence says ” There will be no Call to the public.” The board obviously is not willing to discuss anything with the homeowner. However, at the bottom of the Notice, the menager copied the A.R.S section 33-12-48, it clearly said ” …The board may place reasonable time restrictions on those persons speaking during the meeting but shall permit a member or member’s designated representative to speak once after the board has discussed a specific agenda item but before the board takes formal action on that item in addition to any other opportunities to speak….” this meeting notice seems to contradict itself. The board must have something in the budget they knew the homeowners would disagree.

    I would like to have your suggestions as to how to have a successful recall in these situation. Thanks.

    Irene

    1. Dennis Legere

      Irene,
      Recalls are always a controversial issue within any community, but not as turbulent as allowing any board to simply ignore the law and stomp on all your rights and get away with it. First of all, you are absolutely correct relative to the open meeting laws. But most importantly the board has absolutely no right to approve the minutes of a members meeting. They can approve the minutes of a board meeting but only the members can approve the minutes of a members meeting. This is not rocket science, and simply shows the level of incompetence in the community manager. The key any recall is organization and communication between homeowners. This is exactly what HB-2158 was all about your ability as homeowners to communicate and organize the other members for issue like this. Depending on the size of your community and the energy level of the core team, you need a core team of about 1 to 2% of the homeowners in your community to get together and how they will spread out and get the signatures from the required percentage of homeowners need to call the special meeting for the purpose of recalling one or more board members. We had a community of 1200 residents in queen creek recall the entire board with a core team of about 20 people.
      Dennis
      Dennis

  7. Irene Smith

    How can we audit the recall votes? Every May we have election for the new board, but the manager never announce the total number of the votes, or the number of the votes for a person who ran for the board. All the absentee ballots were mail to the office of the management company (secretary), or once were mailed to the attorney’s office(receptionist). How can we make sure the votes were not altered by the manager or the attorney? We really cannot trust these people for this recall. Any suggestion?

    Thanks

  8. Irene Smith

    Sorry for sending twice with same questions. Thanks for the suggestion on the previous concern. As you mentioned that member meeting minutes can only be approved by the members, not the board! Didn’t think of that. Thanks so much. I will also circulate the HB-2158 to every homeowners I know. even to the board members.

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