Ammendments
Hi Dennis, I am a homeowner in a small HOA community. (60 homes) Our new board of directors is being driven by an over zealous and self serving community manager which has resulted in a storm of potential issues. I’m an individual who takes not only an interest but a active watch dog role in our HOA.
Just a few days ago our board held a 3rd attempt 2021 annual meeting that met the quorum requirements. Secondly the association approved a 25 percent annual meeting quorum requirement to replace the outdated 51 percent original quorum requirement within our Bylaws. Those two issues I have no problem with.
Thirdly within the same meeting the 2022 annual meeting was called to order. The community manager stated that the just passed quorum reduction vote was retro-active and as a result we met the quorum requirements for the 2022 annual meeting.
That statement was challenged by myself and other homeowners. When asked how many members were represented for quorum requirements she would not answer the question directly and stated that with the just passed Bylaw amendment we had enough. My research has come up with nothing definitive except for a number of AZ articles that state that when an HOA Bylaw amendment is voted on and passed, it goes into affect after the members are noticed of the new Bylaw change.
If those statements were accurate the 2022 annual meeting more than likely was not valid. Does any legal language exist that would support the notice requirement? Thank you Dennis for any information that would shine some light on this situation.
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Robert,
Let me first congratulate your association for actually doing the right thing and continuing to try and hold the annual meeting until a quorum could be achieved. Your board also did the right thing in reducing the quorum requirement to a much more reasonable number. Let me just say that so many associations do not do the right thing and actually violate the law by calling a meeting and if the quorum is not achieved stating that the requirement for an annual meeting is satisfied and extend the term of the sitting board without a vote of the members. Both those acts are illegal under existing Arizona law. I’ll be proposing legislation that will require any association that fails to satisfy quorum to continue to re-convene the meeting until it is actually held and will be required to reduce the quorum in half until a meeting and election is held.
Now about your question. Your community manager is absolutely wrong in the statement that a bylaw change can be made retroactive. It is valid only from the date it is approved by either the board or the community. But because your meeting was finally held in December under the amended quorum requirement than the annual meeting requirement for 2022 was in fact satisfied.
You do not mention anything about the election of board members, but if elections had not taken place this year to replace or re-elect board members whose terms had expired in 2022 than a problem still exist for your community. Once you were able to hold an annual meeting then the association was obliged to also hold elections for those board members whose term expired in 2022. While this can be mitigated if the normal annual meeting is held in January or early in the year, and all the board positions whose term expired in 2022 and 2023 are put up for election at that annual meeting. In order to retain the stager between terms I would suggest that terms that expired in 2022 be shortened by one year and those positions that expire in 2023 be elected for the full term.
Dennis
Dennis,
Thank you for your very comprehensive response, it was very much appreciated.
I have been actively involved for decades with our HOA in many different capacities. Currently in our association it appears the challenge now if more with the management company than with our new board. The management company is providing often times bad Intel to the board as to it’s duties and obligation required by our governing documents. In 2021 I prevailed in a case brought before the AZ OAH. Two members of the board resigned after that decision was handed down and as a result a new inexperienced board has been in place for approximately 6 months. With that said in addition to some incorrect direction from the management company the struggles are now appearing to make themselves known.
Executive sessions now seem to be a normal addition to the regularly called board meetings. Also there are indications that board business is being discussed in person or via email outside of the open meeting requirements.
The management company uses the “personal. health or financial information about an individual member in ARS 33-1804 as legal justification to call these private sessions.
The challenge in combating this is extremely difficult if members cannot by document request be given the minutes of the executive sessions. If the management company continually sites the above ARS statute how can any association member gather any documentation that would ever justify a session before the AZ OAH. Its appears to be a very hard wall to break through. Do you have any thoughts you could share.
Thanks again,
Bob
Bob,
I fully understand your concern and totally agree with your assessment, that bad advice from community managers and HOA attorneys makes life in these communities bad for both homeowners and board members. My proposed open meeting law changes that I discussed in your original note will address all of your concerns if I can get it introduced and passed. That exception to the open meeting laws for closed session is the most abused and mis-used statute. The association board has absolutely no reason to discuss any personal health or financial issues for any community member, that is absolutely none of its business. What it is there for is to protect the review of records that may contain personal, health or financial information of the members. If for any reason the board is reviewing any document that may contain that information it needs to be done in executive session to protect the confidentiality of the information. How it is most abused is that community managers claim that notice of violation of governing documents is personal information and therefore subject to this exception. This is absolutely false, as all violations of governing documents would necessarily be visible to anyone walking on the street with a knowledge of the governing documents, and therefore is public information and not personal information. My proposal will make that clear and eliminate that abuse of that provision. My proposal will also make clear that even under existing law the board is not allowed to take any action other than in an open meeting (unless in emergency) of the board and would thereby be reflected in the minutes of that meeting. While the board can review and discuss issues or receive legal advice in closed sessions, they can only take action in an open meeting after allowing members to comment on the issue before the vote under subsection A of the statute. If you want to help with getting this issue fixed. Write or call your LD Senator and Representatives and ask that they help fix this problem by meeting with me to discuss this proposal. Let me know what LD you live in, and I’ll directly follow up with meeting request with your legislators.
Dennis
Dennis, thanks again for the information. I am not familiar with how to address these issues with LD representatives however I will look into it for sure.
In my opinion one of the biggest issues in our governing documents and common in most is the ability to remove a board member or all board members with or without cause. With cause makes perfect sense based on standard fundamentals of enforcement through out most of society. Without cause is ridiculous and doesn’t make any sense in the real world.
My first submission on this forum alludes to the current BOD who are doing little to nothing without a few members strongly confronting them in regular board meetings in regards to performing their duty and obligations to our relatively small association. Add into that mix a management company that is also misleading the board with their own version on how to run an HOA.
This all came as a result of the previous 3 BOD’s who were performing the duties of a responsible HOA board correctly being removed without cause. A few association members who dislike HOA in general solicited and misrepresented information in order to gain a majority vote to remove the entire board. In short Dennis, there is no defense for “without cause”. So now we combat complacency with a board of directors all because “without cause” exist in the ARS as well as our governing docs. The question one would have to ask themselves, why would good intentioned individuals want to serve on an association board when they can easily be removed without cause. If the law and governing documents provided “with cause” now board members would have an opportunity to defend and stand up for themselves. When a board member (s)
is removed it should be for a reason that can be defined by our governing docs or ARS statutes. As our association just proved good people willing to serve on a board and perform that duty in accordance with our governing docs and state statues are in no way protected from frivolous actions from association members who simply don’t want to be governed. There is something very wrong with that concept.
Robert,
Thank you for your thoughtful question. The fact is the only true power the homeowners have is the power to elect and recall board members. While I don’t disagree with your concern about “cause”, the fact is the board as individuals or as a whole has far greater power to address any concern raised by homeowners than any individual or group of homeowners will ever have. The board serves at the pleasure of the community. While I also agree that it is difficult to quiet disgruntled homeowners with an agenda, it is also hard to remove a dictatorial board with an agenda as well. If homeowners would be limited to the recall of board members only for cause, then we get into the question of what constitutes cause and how is that defended. There have been many boards egged on by the community managers and attorney to file or threaten defamation lawsuits against homeowners for claiming wrongdoing by the board. This practice is far too widespread to mandate that “with cause ” as the only mechanism to recall board members. The board uses the association funds to pay for these claims and actions. but homeowners are left to only the use of their personal resources to defend themselves. In statute we try and establish a common ground that addresses the needs of either side in a dispute. The key to solving these issued is total transparency by the board in their actions and to call on the common sense and fair play of the community. Call an informational meeting of the members and allow both sides to present their positions and arguments. Then trust that the community will do the right thing. It is far easier for the board to do this than the members. Use it. I never want good board members to ever be recalled based on personal vendettas or retribution from disgruntled homeowners but surely this happens on occasions. It can absolutely be prevented by focus on the truth and the decision-making process for the board. You will never make everyone in your community happy with all decision the board makes, but that is not your job. Your job is to act in the best interest of the community as a whole. not just the corporation but the community. If you do that then disgruntled homeowners will be silenced and the threat of recall will be eliminated.
I’ll never promote the removal of “without cause” from statute for many reasons but I’ll always support the ability of boards to defend themselves with the truth, against homeowner abuse as I do with protecting homeowners from board abuse.
These communities do not need to be adversarial and the key to that is transparency and understanding of the duties of the board to their community and the responsibilities of the members to their community. My top priority bill this coming session will focus on that exact clarification.
Dennis
Dennis,
Thanks again for your response. I agree with your approach regarding total transparency, however in my opinion in the real world for comparison, that is just the starting point to effect change. I am not a board member however as previously noted we are now dealing with a very complacent BOD who have convinced a majority of the members that they will do little to enforce our governing docs. This struggle in our small association has been going on consistently for many many years.
Thankfully we do have the AZ Office of Administrative Hearings to hear and address serious issues when the BOD is negligent or simply will not perform their duty and obligation. Luckily, as you know “”with cause” is critical to those cases as it should be. I do respect your opinion even though we don’t agree totally regarding this issue.
Bob