Board, Annual and Special Meetings
Taken from the Montgomery County Commission on Common Ownership Communities
BOARD, ANNUAL AND SPECIAL MEETINGS
I. ANNUAL AND SPECIAL MEETINGS OF OWNERS
The democratic process is alive and well in association meetings across our nation. However, the democratic process in associations requires order and rules of procedure and behavior so that boards of directors and the owners can work together to preserve, protect and enhance the value of the property and maintain a strong sense of community.
Typically, the bylaws sets forth criteria for the annual meeting, including notice, quorum, voting, and proxy procedures. Almost uniformly, the bylaws state that the annual meeting is held to elect directors and to conduct such other business as may properly be brought before the meeting. Other business may include, by way of example and not limitation, the presentation of officer and committee reports, presentation and/or approval of the annual budget, voting on special assessments (if required) and voting on
proposed amendments to the governing documents. Unless otherwise set forth specifically in the bylaws or other governing documents or relevant laws, any business which may appropriately come before the body can be entertained and, if needed, voted upon. It also can provide a forum for discussions on various aspects of association life and for non-binding, straw votes of the owners that can be used by the board as a tool to determine constituent interests. In addition, the annual meeting presents an opportunity to strengthen relationships within the community by bringing neighbors together. At annual meetings, members have the right to speak out on any topic of association business, and may also have the right to vote on certain proposals; but any proposal to amend a bylaw or covenant must obtain the proper majority required by those documents for amendments.
Special meetings generally focus on one particular matter, and this matter should be clearly spelled out in the notice of the meeting. Care must be taken when drafting special meeting notices. Imprecise language or an unclear purpose can render the meeting invalid. For example, calling a special meeting “to discuss the removal of one or more directors” has two potentially fatal flaws. The first is the phrase “to discuss,” which limits the meeting merely to discussion of the removal. No vote on the removal can be taken. The second is the phrase “one or more directors.” As most bylaws require the association to notify any board director of his or her proposed removal, the association must provide such notice
to each before taking action. Use of the phrase “one or more directors” is imprecise, thus problematical. However, the bylaw requirement would not pose a problem if the notice proposed the removal of all directors. Most bylaws do not allow the owners to take any action at a special meeting on a matter that is not one for which it has been specifically called, even if a majority of all owners is present. Conducting business that is not indicated in the notice disadvantages those residents who did not attend based upon what
they were told would be the subjects of the meeting. As an example, if the meeting is called to take a membership vote on a specific rule proposal, then the members cannot vote on proposed amendments to the proposed rule from the floor at the meeting.
Special meetings differ in one other significant respect from annual meetings. Bylaws usually allow a group of owners to call a special meeting. To call a special meeting, a minimum number of members must sign a petition and present it to the board president or secretary. The petition must precisely state the purpose of the meeting. The president or secretary then calls the meeting for the purpose contained in the petition. The special meeting provides a setting for residents to have an open discussion about the topic of interest of concern for which the meeting was called. Ideally, the special meeting allows the community to come to a consensus and/or resolve an issue. Even if consensus is not reached, the special meeting provides board members with valuable insight into the interests of the residents. Note, that different rules might apply to special meetings called to remove a director, than are to be used for other business.
II. NOTICE OF MEETINGS
Distributing Meeting Notices
Notice of an annual or special meeting is an important procedural element of a successful meeting. How, when, and to whom notice must be given is governed by the bylaws and, for condominiums, state law. When notifying owners of a meeting, the association must follow certain rules. Notices must be issued on time and in the appropriate manner. Notices should be brief and direct.
Whom Do You Notify?
Virtually all bylaws and state statutes require the association to send a notice to each owner. This means that every owner of record must be sent notice, even if the owner is ineligible to vote at the meeting. This can also be beneficial to the collection of assessments process, as notice of a meeting is a good way to encourage all owners to clear a delinquency so that they are eligible to vote at the meeting or stand for election to the board. Note that sending notice to all owners also means that each owner or co-owner of a unit or lot whose identity is known to the association must receive notice unless the bylaws specify otherwise. Accordingly, if a unit or lot is owned by husband and wife or by some other group of individuals all of whom reside there, a single notice should be sent to all co-owners at the unit or lot address. If there are multiple non-resident owners, notice should be sent to each owner at the address of record with the association. The association has an affirmative duty to keep an accurate roster of owners and their current addresses. Prudent HOA bylaws and the Condominium Act itself require owners to keep the association apprised of their identity and address, and deny the right to vote to those who do not. The association is responsible for sending notice to all persons who are listed on its roster as owners. If owners fail to receive notice because they did not notify the association of their ownership or current address, the association is not at fault. In some situations, the association must also give notice to any lender who has a mortgage on any unit or lot in the association. Usually, the bylaws or covenants will state when this is necessary.
What Address Should You Use?
Notice should always be sent to the address of the unit or lot unless the owner has specifically designated a different address of record. If mail is returned from an alternate address of record with no forwarding address, the association should ask the renter or resident for the owner’s current address. If the unit is vacant or the resident will not divulge the address, the association has little choice but to send the notice to the last known address of record AND to the owner at the unit address. Keep records of returned mail.
Delivery of Notice
State statutes and association governing documents often define acceptable means of delivering official meeting notices. Delivery by first-class mail, postage prepaid, is almost always permissible. However, some older governing documents require associations to deliver notices by registered or certified mail. If so, the association should consider amending the documents to delete that provision. Realistically, certified mail delivery is less effective because many people routinely decline it. First-class mail, on the other hand, will be left in the owner’s mailbox and does not require the owner to be home. Moreover, the law in every jurisdiction establishes a presumption of delivery if the notice was sent
by first-class mail. Other forms of delivery are also acceptable. Governing documents often allow the association to deliver notices by hand. Some associations prefer this method
because it saves postage and seems more personal, as it gives the board members an opportunity to interact with residents. This method can pose problems, however. Postal regulations forbid the placement of anything other than official mail items bearing postage that have been delivered by the United States Postal Service in a person’s mailbox. Postal regulations also prohibit posting or affixing notices to the exterior of mailboxes or cluster boxes, although additional housing around cluster boxes may itself be used for posting notice. Associations that hand deliver notices by placing them on the door knob, stoop, or threshold should note that even an established pattern or practice of delivering
notice does not necessarily negate the effect of alleged non-delivery. Hand delivery is truly effective only if one person actually places the notice in the recipient’s hand, and even then, certification of delivery may be required. Some associations deliver notices by posting them on bulletin boards, in common hallways, on entryway doors, and in elevators. If an association has established a pattern and practice of delivering notice in this manner, that evidence would be admissible in court and most likely would be persuasive if the method of giving notice was challenged. A few associations attempt to provide meeting notice via the association newsletter. An association that uses this method should mail the newsletter and should either put the notice on the front page or put a bold-faced statement on the front page that the meeting notice is inside. As with posting, this mode of
delivery is advisable only if it is an established practice and if it is common knowledge among the owners that notice will always be made in this manner.
Electronic transmission, including email If delivery of notice is made by any means other than by hand or through the mail, it is better to use more than one method. A notice challenge is more likely to be defeated if the association can show that notice was, for example, both posted on a bulletin board and put in the newsletter. Condominium and homeowner associations may use electronic notices if they have adopted rules for such methods, but they may only send notices electronically to those members who have agreed to receive their notices in that fashion.
Timing of Notices
State statutes and association bylaws dictate the time frame in which associations must deliver meeting notices. Any conflict between the notice period in the bylaws and the period required by statute should be resolved in favor of the statute. Thus, if the bylaws state that notice of meetings must be given no less than 10 or more than 60 days prior to the meeting, and the statute requires that notice be a minimum of 15 days prior to the meeting, the association will be obliged to give notice to the owners no less than 15 days and no more than 60 days prior to the meeting. Most statutes and many bylaws provide only for a minimum time for notice of both annual and special meetings, although some bylaws provide a maximum time for notice of special meetings. However, the establishment of a maximum time limit can be important as well, since owners may forget the date or lose the notice if it is delivered too far in advance. As a result, the association may fail to achieve a quorum. The lack of a maximum time limit can also lead to an abuse of power by an
incumbent administration, especially in regard to special meetings that must be called pursuant to an owner petition. For example, a group of owners files a petition requesting a special meeting to remove all of the directors because they have indicated that they will allow an important contract to automatically renew. The owners do not want the contract renewed and know that notice of termination must be given to the contractor within 45 days to prevent the automatic renewal. The board, also aware of the timing, sets the date of the special meeting for the day after automatic renewal, knowing that the bylaws do not set a maximum time limit. Because of this gap in the bylaws, the board will probably succeed in its scheme, since the owners would have to file suit to move the meeting time forward. Most likely, the contract renewal date will pass and the owners’ effort to remove the directors will fail. In this instance, if there had been an outside time limit that was violated by the board, the owners might successfully challenge the contract, even after renewal.
Notice to Mortgagees
Association governing documents usually specify whether notice of an annual or special meeting must be sent to the individuals or lending institutions holding first deeds of trust on the units or lots: the mortgagees. Generally, the documents require notice to mortgagees only when they are affected by something taking place at the meeting. The most common example is a meeting that is called to vote on proposed amendments to the governing documents.
Obtaining a Quorum
The term “quorum” refers to the minimum number of owners who must be present at a meeting, in person or by proxy, before business can be validly transacted. The number of members needed to constitute a quorum is often governed by statute. The statute will always control if it conflicts with documents provisions. The best quorum provision to insert in the documents is one that allows it to be reduced by statute and provides that a group of owners cannot try to sabotage a meeting by leaving just before a vote they think they will lose, thus rendering the vote invalid because a quorum was not present at that time. We suggest the following language:
A quorum is deemed present throughout any meeting of the Association if persons entitled to cast twenty-five percent (25%) (or such lesser percentage as may be provided by law) of the total authorized votes are present in person or by proxy at the beginning of the meeting.
Governing documents often require a majority of the votes (sometimes expressed as 51 percent) for a quorum. Most practitioners now regard that number as too high. Many statutes and newer documents allow for a lesser number of votes to constitute a quorum. The quorum should be as low as possible so that the association can conduct its business. Low quorums do not discourage high attendance, but the association must be given every opportunity to have an official meeting and conduct necessary business – even if a great percentage of owners choose not to attend.
Adjournment for Lack of Quorum
Most documents contain a procedure for adjourning a meeting due to a lack of quorum. Generally, the owners who are present in person or by proxy must obtain a majority vote to adjourn and reconvene at a later date even though the meeting was not officially constituted because a quorum was not present. Often, restrictions state that the second meeting cannot take place within 48 hours of the adjournment so association members have time to convince others to attend. But it is not uncommon for fewer residents to attend the adjourned meeting than the first meeting. For this reason, the chairperson should ask everyone attending the first meeting to execute a proxy before leaving. Unexpected events may prevent owners who planned to attend the adjourned meeting from arriving. If the owner finds that she or he IS able to attend after all,any proxy given is revocable by the owner’s attendance at the adjourned meeting.
Failure to Achieve Quorum
Maryland condominiums and homeowners associations should never fail to achieve quorum because the legislature has enacted provisions that enable each to old an adjourned meeting at which the owners attending in person or by proxy automatically constitute a legal quorum despite the stated quorum provision in the governing documents.
For condominiums, Section 11-109 of the Maryland Condominium Act was revised in July of 2003 and provides that an additional (second) meeting of the council of unit owners may be called if a quorum was not present at the first meeting, so long as the following criteria are met:
Notice of the initial meeting stated that the Section 11-109 procedures would be used if a quorum was not achieved.
A majority of those owners present in person or by proxy vote to call for the additional meeting.
Notice of the additional meeting is mailed to all owners at least fifteen (15) days prior to the additional meeting. If the criteria are met, those persons who attend the additional meeting in person or by proxy, no matter how few, automatically constitute a quorum and any business that might have been conducted at the original meeting can be
conducted at the additional meeting.
NOTE: The reduced quorum provision of Section 11-109 cannot be used to reduce the number of votes necessary to amend the declaration or bylaws or to reduce the vote specified in the documents for a certain action. For example, if the bylaws require that a majority of all owners is required to approve a special assessment, that vote must still be achieved before the special assessment may be deemed to have passed.
For homeowners associations and cooperatives, Section 5-206 of the Corporations and Associations Article, Maryland Annotated Code, makes similar provision for an additional meeting. The only difference is that notice of the additional meeting must be advertised in a newspaper of local circulation.
NOTE: Section 5-206 of the Corporations Article does not require that notice of the second meeting be mailed to homeowners. Nonetheless, we recommend that associations send notice to all owners by mail so that they are aware of the additional meeting and can participate.
IV. CONDUCTING THE MEETING
Most association documents require the board to use parliamentary procedure at annual and special meetings. Though the structure of parliamentary procedure often aids a meeting, parliamentary procedure can be overdone. Most documents that require the use of parliamentary procedure specifically refer to Robert’s Rules of Order, which is available in a variety of forms and editions. Unless the documents specify a form and edition, the association should choose a version of Robert’s that it likes and stick with it. This measure will provide meetings with a degree of continuity from year to year. Since associations rarely need the complicated rules that are contained in complete editions of
Robert’s, abbreviated editions that focus on the basics can be easier to use and understand. The purpose of parliamentary procedure is to provide structure to the meeting and to keep the meeting fair and productive.
Order of Business
Many sets of governing documents contain a specified order of business to be followed at the annual meeting (and, sometimes, at special meetings).
The annual meeting order of business called for in these documents is often similar to the one that follows:
Call to Order
Roll Call (usually obviated by the check-in process)
Verification of Quorum
Proof of Notice (of Meeting)
Reading and Approval of the Minutes of the Previous Meeting
Report of the President
Report of the Treasurer
Reports of Other Officers
Appointment of Inspectors of Election
If the order of business is set by the bylaws, most associations choose to follow it to the letter. However, there are sometimes two circumstances when following this order of business detracts from the efficiency and brevity of the meeting:
(1) when the calculation of a quorum is complicated and takes quite some time, and (2) waiting for the counting of votes and the announcement of election 31
results. The first problem is easily resolved by the president or other officers going out of order and making their reports while quorum is being tabulated. It is a simple matter to inform the owners that the reports are being made in the hope that a quorum will be had and the meeting can later be officially opened. Because the meeting cannot be officially opened until a quorum is confirmed, it is not appropriate to entertain a motion to revise the order of business, but the reports can be made on an unofficial basis and then later adopted by the body as the official reports once the meeting is opened. If the meeting cannot be opened for lack of quorum, those present will have had the benefit of receiving valuable information and no harm is done. Because calculating the results of an election can also take some time, it may be appropriate to entertain a motion to revise the order of business by moving the election up so that it is conducted before reports and other routine business. Having done so, the results can be calculated while other business is being
conducted so that the winners can be announced before the meeting concludes. The only potential problem with this change in order of business can come when the body knows that a controversial issue will be brought up under old or new business. In that event, it may be difficult to get volunteers to count votes and act as inspectors of election because they want to be present for the discussion on the hot topic. Of course, that need can also be accommodated by being flexible and only allowing the reports to be made and business other than the hot topic to be discussed during the counting of votes, reserving discussion on the hot topic until after all are again present.
The order of business for special meetings is typically:
Call to Order
Roll Call (usually obviated by the check-in process)
Verification of Quorum
Proof of Notice (of Meeting)
Business Called for in the Notice of Meeting
Organizing an Election
Conducting the election itself should be a simple matter, and there is no need to complicate it with undue procedures or embellishments. It is a good idea to conduct the election as early in the meeting as possible so the results can be tabulated as the meeting progresses. It also can be politic to do so because some meetings seem to ferment until the election occurs, especially if the election is hotly contested. If the documents set an agenda where the election occurs last, it is easy enough to entertain a motion to revise the agenda.
The Montgomery County CCOC offers a packet of forms and checklists on its website called “How to Conduct an Election” which can help those who are not familiar with the process. The forms can be modified to suit each association’s particular requirements. Sometimes there is confusion over whom the members are actually going to elect:
officers or directors? Almost all association documents allow the members to elect the directors who sit on the board. The board, not the members, will elect its officers (president, vice-president, secretary and treasurer) at its first meeting after the election of directors.
It is important that all candidates for the board of directors have an opportunity to meet the owners and tell them their qualifications and platforms. Unfortunately, most governing documents are completely silent on this issue. It then becomes incumbent upon the current board of directors to set candidate forum rules for the election. Some associations go so far as to have one or more candidate forum meetings before the annual meeting at which the candidates get a specified amount of time to make a presentation and the owners then have a question and answer period in which to further explore the candidates’ qualifications and philosophies. Many associations publish candidate resumes prior to the annual meeting. However, even if all of these methods are employed, some version of the candidate forum should also be conducted at the time of the election so that voters not attending other meetings or reviewing the written materials will have some minimal introduction to the candidates. Speaking time limits and question and answer
period time limits should be set before the meeting and announced at the beginning of the forum. Unless specified in the documents, there is no right or wrong way to conduct a
candidate forum: the important thing is to foster communication between the owners and the candidates so that the owners have an opportunity to elect those who best represent their viewpoints.
Inspectors of Election
Many documents call for the appointment of inspectors of election from the owners present at the meeting. Even if the documents do not require such inspectors, it can be prudent for the chairperson to appoint them so the election can be certified as legitimate. Three people should be appointed, and at least one of them should be from the opposition if the group is divided into factions. Naturally, no one should be an inspector who has an interest in the election results, such as candidates, candidates’ spouses, current officers, or directors. The inspectors should be neutral and fair. Inspectors can be given the task of merely observing, or they can help with the process. In some associations, the inspectors conduct the entire ballot collection and vote tabulation process. The chairperson should describe the inspectors’ function in detail at the meeting before making appointments. The inspectors should be required to certify, by signature, that the election was conducted fairly and that the results were accurate. The election results and the inspectors’ certification should be kept among the association records for at least three years.
Taking the Vote
The next step is taking the vote. Attendees should be given ample time to mark their ballots and fold or seal them for collection. Some associations have the inspectors take the ballots from each person or from the person at the end of each row. Others require voters to deposit ballots in a ballot box, which is passed around or found at a particular location. The process should be quick and the security of the ballots should be protected, especially if it is a secret vote.
Tabulating the Vote
Several methods of vote tabulation are available to associations. These methods range from basic computation by hand, to sophisticated calculators, to computerized tabulation using barcodes. The League of Women Voters will, for a contribution, attend the meeting, count ballots and proxies, and certify results. No method is right or wrong. All that matters is that the vote is accurately counted. The association should set procedures beforehand and make sure the individuals involved understand their tasks no matter what method it uses. Advance preparation is needed to ensure accuracy and to project the people involved as effectual. It also can be important to have tally sheets prepared in a
format similar to that used for counting. More than one person should be involved in the counting, and the job should be split among each person. For example, one person could be assigned all of the proxies and ballots that are filed by owners with a certain percentage interest. Once the number of votes for each candidate is determined, that total need only
be multiplied by the percentage interest of that category. These totals are then recorded on the prepared tally sheet for that percentage interest and given to the
person who will receive all of the tally sheets for each percentage interest. It is then a simple matter of adding the subtotals from each percentage interest to determine the total vote for each candidate. Contemporary computer technology offers associations new and interesting ways to tabulate election results. Some companies will, for a fee, bar code all ballots and proxies. Associations that use this method will have election results available within minutes of the vote. Software packages are now available that allow associations and management companies to provide identical services. One need only purchase the software, load it on a PC-compatible computer, and rent or buy a bar-code reader (or
enter coded information by hand). This technology is a great time-saver and allows associations to achieve a new level of accuracy. Majority or Plurality In many elections, especially those where there are more candidates than open positions, candidates with the highest number of votes may not earn the majority of the votes. Such a result will not create problems for an association if its documents provide that the candidate with the greatest number of votes (the plurality) will win the election. If the documents are silent on this issue, and state that all issues arising at the meeting should be decided by a majority, the association may face a question about how many votes a candidate needs to be
If an association adopts a conservative interpretation that requires a candidate to earn a majority vote to be elected, it may need to hold an indeterminate number of run-off elections before all positions are filled. For example, if there are five candidates for three positions and the candidates receive 42, 27, 15, 11, and 5 percent of the vote, respectively, none of them have been elected. The association would then be required to drop the lowest candidate and try again. This might happen several times before three candidates are elected by majority vote. It is better to view the election as the main issue. As long as the election is decided by a majority vote, candidates should be elected based upon those
receiving the greatest number of votes even if that is a plurality. It is difficult to conceive that association developers or their attorneys ever intended to saddle associations with the cumbersome process that a true majority vote requirement would entail. An association with documentary language that requires a majority vote should ask its attorney for a formal opinion letter regarding the actual vote necessary for each successful candidate.
Associations should never favor a particular candidate when preparing election materials with association funds. Chapter 10B of the Montgomery County Code requires all associations to list candidates alphabetically and to show no preference. Though this rule seems simple, many may wonder if the indication that a candidate is an incumbent is a statement of preference. From a practical standpoint, being an incumbent may be an asset or a liability, depending upon how the current administration is regarded by the voter. The best bet is to not indicate incumbency. Most owners are going to know who is an incumbent. It should be left to the candidates whether or not to emphasize their incumbency in the candidate forum or in prepared written materials.
Voting by Ballot
All votes except those on minor or procedural issues should be recorded on a written ballot. A written ballot allows for continuity, as the vote of those owners filing directed proxies will be in writing. The ballot also safeguards the integrity of the vote, as a permanent record is available if the vote is challenged. Keep ballots for at least one year or, preferably, for three years. A written ballot also can have a positive psychological effect. People seem to feel like they are doing something positive and official when casting ballots, as opposed to merely raising their hands. Filling out a ballot also makes people feel like the association is being efficiently run or managed. Moreover, putting their vote in writing usually makes people reflect or deliberate on their choice a little longer.
Many associations have either a tradition or a requirement to hold all votes in confidence. Implementing a procedural system that ensures the secrecy of a vote is not difficult, but it requires planning. A secret vote must be done by written instrument: it is impossible to keep one’s position private if the vote is taken by a show of hands or by ayes and nays. The simplest system for those who will be voting in person or by proxy is to distribute ballots at the registration table. It is easy to check voters in, verify their status, and give them
a blank ballot that is marked with the percentage interest of their vote. Then the voters merely place the ballot in the ballot box after voting. The ballot only contains the percentage interest voted and the vote itself, not the name and address of the owner. If the secret vote includes mail-in votes, either directed proxies or absentee ballots, the best system involves dual envelopes. The ballot or proxy stating the percentage interest is mailed to the owner along with two envelopes. One envelope is used as the outer envelope and the other as the inner envelope. Owners cast their vote on the form and place it in the inner envelope, which is blank. That envelope is placed in the outer envelope, which contains the owners name and the unit or lot number. The package is mailed or put into a ballot box located on the property. The outer envelope is used for registration purposes, then opened, emptied, and discarded. The inner envelope is placed in the ballot box for counting at the same time that the ballots of those at the meeting in person are counted (unless, as will be discussed below, mail-in votes are counted before the meeting to expedite the tabulation process). As long as the outer and inner envelopes are separated as described and no identifiers are on the ballot or proxy, secrecy will be maintained.
Ballot Form and Content
The ballot form need not be any more complicated than the proxy form. It only needs to set forth clearly what or whom the owners are voting for or against.
The ballots, proxies and tabulation sheets used during the election are the official election records of the association. These records should be maintained by the association for the longest term granted in the election. So, for example, if one or more directors were elected for a three-year term, the records should be kept for three years. If the entire board is elected each year for a one-year term, records need only be kept for that year. Some association attorneys take a different position, however, and recommend that the board adopt a rule stating that the ballots will be destroyed after a fixed time (30 or 90 days) so that all challenges to the election must be made before that date. Boards should consult their own attorneys on this matter. Because the board of directors conducts virtually all of the business of the association, the integrity of an election is extremely important. Any director seated in error is not properly elected, and any decisions of a board containing one or more such directors are subject to challenge. For this reason, all elections should be conducted in strict accordance with the governing documents and Maryland law and records vouchsafing the results should be kept in order to answer any challenge.
Voting by Proxy
A proxy is the written authorization that allows one person to appoint another to vote on his or her behalf. The term “proxy” refers to the written instrument, while “proxy holder” refers to the person who is designated to vote for another at an annual or special meeting. The “proxy giver” is the person who authorizes another to vote on his or her behalf. The use of proxies in community associations is usually determined by Maryland law, the association’s governing documents, or both.
The most common type of proxy used in community associations is the general proxy. A general proxy allows the holder to vote as s/he wishes at a meeting. Blanket general proxies allow the holder to vote on any matter that comes before the owners during the life of the proxy. If the proxy giver executes a general proxy, the proxy holder is authorized to vote as if he or she were the proxy giver.
Directed proxies bind the proxy holder to specific terms, allowing the proxy giver to control the vote. The directed proxy is, in effect, an absentee ballot, which means that the proxy holder is little more than a courier who is entrusted with recording a vote. Chapter 10B of the Montgomery County Code requires all associations to use directed proxies for the election of directors. If the proxy ballot is not directed, the Code states it may be used only to help establish a quorum and for other business of the meeting, but not for the election of directors.
Other Proxy Limitations
The right to vote by proxy relates to the right of an individual to vote. Statutes do not guarantee anyone the right to be a proxy holder. Accordingly, limitations placed on the proxy holder cannot abridge any right. However, Chapter 10B of the Montgomery County Code states that a board must have a good reason to reject any proxy ballot. Limiting the number of proxies that any single individual may hold can thwart the assertive person who otherwise would show up at the meeting with the election in the bag. Such a limitation should include board members and management. Unfortunately, these individuals often are allowed an unlimited number of proxy votes because policy drafters assume they will vote in a neutral manner. It is quite common for proxy holders to be limited to other owners. It makes sense that the proxy, especially if it is a general proxy, can be voted only
by someone who has the same interest in the property as the proxy giver. By the same token, outsiders would normally have little interest in the association’s affairs and little knowledge upon which to base intelligent decisions. This limitation, then, also increases the integrity of an election or vote. Some associations allow tenants and mortgagees to vote by proxy. Each of these parties should be concerned, for example, to see that the association is managed well and to vote accordingly. The interest of tenants and mortgagees is recognized by law in some jurisdictions. For example, in Maryland, time limits placed on proxies may be waived when the holder is a tenant or a mortgagee (the lender holding the mortgage on the unit or lot). The association secretary may be the repository for proxies that are cast by the proxy giver or that are used only to establish quorum. The secretary is normally responsible for controlling the association s books and records, receiving mail and service of process, and certifying votes or elections. The owners should be able
to rely upon the integrity of the secretary and of the office to carry out this task.
Proxy Form and Content
Some governing documents contain specific requirements for proxy form and content. Most, however, are silent, as are the Condominium Act and the Homeowners Association Act. A proxy need not be a sophisticated legal instrument full of incomprehensible language. The purpose of a proxy is to assign a vote from one person to another. It is sufficient, then, if the instrument identifies the proxy giver (and his or her unit or lot, if required), the proxy holder, the meeting or vote for which the assignment is intended (including the
date, time, and place, if necessary), the date of the proxy, and the signature of the proxy giver. If the proxy is to be used to vote in an election, it should also list the names of all known candidates in alphabetical order. If a witness or notarization is required, those blanks must be provided. If the proxy is directed, the information and blanks necessary for the proxy givers to direct their vote must be provided. It may be necessary to provide written instructions for proper execution of the proxy. These instructions can be included either on the proxy form or on a separate sheet. The Commission has ruled that under the “open records” sections of the HOA and Condominium Acts, members can inspect ballots after an election. Therefore, we recommend that in order to preserve voter secrecy, the proxy form be in two sections: one part will contain the identifying information of the proxy giver, and the other part will state how the proxy is to be voted. The election judge will separate the two parts at the election, and cast the ballot part with the other
ballots. Both parts, however, should be kept (separately) as part of the records of the election. Alternatively, the association can use the dual envelope method described in the section above on “Secret Ballots.”
VII. BOARD MEETINGS
Notice of Board Meetings
Meetings of the board of directors are official meetings of the association and must be treated accordingly. In fact, more official business of the association occurs at board meetings than at owner meetings. This is so because most of the powers and duties of the association are specifically delegated to the board in the governing documents. Typically, the only powers reserved to the owners are the powers to elect and remove directors, amend the governing documents and, sometimes, approve special assessments. Otherwise, the board is tasked with maintaining the property, hiring and firing personnel and contractors, keeping the books and records, developing and enforcing rules, preparing the budget and setting the annual assessment, formulating policies and procedures, and complying with local, state and federal laws, ordinances and regulations. Except for emergencies, all of these things are done by the board at its meetings.
The nature and timing of the notice to board members is usually controlled by the documents or Maryland law. Many older documents require that notice be delivered via U.S. Mail three to five days before the meeting. Others are more flexible, allowing the board members to determine for themselves how and when they should receive notice. Many boards set the date for the next meeting before adjourning the current one, thereby giving all present notice at that time. Many others set regular monthly meetings for the same place, day and time (third Tuesday, 7:00 P.M., at the clubhouse) so that it is only necessary to give notice of regular board meetings once a year. Whatever method is employed (including email, facsimile and telephone), the form of the notice must be permitted under the documents and each director must receive notice in a timely manner. If no method or time is set by the documents or statute, the board should set its own policy so that there can be no dispute concerning whether notice was properly made. Maryland now has what is generally known as a “sunshine” law, a law that requires board meetings to be open to all members of the association unless the subject matter of the meeting falls within certain categories for which closed or “executive session” meetings can be held (see below). A meeting cannot be deemed open to the owners unless they have notice, but the statute and many documents are silent as to how and when notice of board meetings must be given to them. If so, owners should receive the same notice as directors.
Because giving monthly notice to all owners can be time consuming and costly, many associations have opted for one annual notice of pre-set monthly board meetings. If board meetings are not pre-set, then owners will have to be given notice each month. This can be done by mailing notice to each owner in a timely fashion or by newsletter or by posting on a bulletin board or other location, or by hand delivery. Email delivery is not appropriate unless the board can verify an email address for each owner. The same is true for posting on a web site. Until such time as the vagaries of electronic communication are a thing of the past, the bestand most challenge-proof method of delivery is via the mail.
A majority of all the directors is usually the number that must be present in order for there to be a quorum and the meeting officially called to order. If less than a majority is there, no official business can be conducted (meaning that no binding decisions of the board can there be made). Unlike the quorum provision cited above for annual meetings, the departure of enough directors to diminish quorum DOES effectively adjourn the meeting, as no further business can then be conducted. Board members can participate in meetings even though they are not physically present, so long as they are present in some other fashion, such as by speaker phone, that allows them to hear everything being said and allows everyone present to hear everything the absent member has to say. We recommend that if associations allow such a procedure, they adopt written rules on it so that all
members are aware of them and have equal opportunity to take advantage of them. The minutes of the meeting should make clear how the absent member participated.
All decisions of the board must be by majority vote, but the term “majority vote” is usually based upon the number of directors actually present so long as a quorum is present. Thus, if there are three directors on a five-person board present at the meeting, official decisions of the entire board of directors can be made by two of those directors present. As noted above, the proviso in Robert’s Rules of Order stating that the president or chairperson should only vote to break a tie is not applicable to community associations. Each director is elected to represent the owners and to vote on issues as he or she sees fit. This is part of every director’s fiduciary obligation to the owners and the association. If the president or chairperson is also a director, then he or she must vote – as a director – on every matter that comes before the board. His or her election by other directors to serve
as president or chairperson does not supersede the obligation to the owners. Similarly, if the president or chairperson wished to make a motion, he or she should do so as a director. To be procedurally correct under Robert’s, he or she should first step down as presiding officer long enough to make the motion, then resume the gavel and preside over discussion and vote. Association documents often allow the board to elect as officers people who are not members of the board. For example the board may want a professional manager or accountant to act as its treasurer. Officers who are not also directors cannot vote. Only directors can vote.
Unless there is a VERY specific authorization in the documents or in applicable statutory law, board members may NOT vote by proxy. The reason for this is that each director is elected in his or her personal capacity to serve as director and vote on behalf of all other constituent owners. By accepting this obligation, the director is effectively already voting for that constituency as their proxy holder. That proxy could not be further assigned without the consent of every member of the constituency. Accordingly, directors who cannot attend a meeting suffer the same fate as our Senators and Representatives in Congress who cannot attend a session: their votes are not counted.
Few documents or statutes specifically provide for a written ballot of directors at a meeting of the board of directors. As a practical matter, it is much faster for a verbal vote to be taken and recorded in the minutes of the meeting, so most boards conduct business in that fashion. However, there are times and circumstances where a secret written ballot of directors might be appropriate. For example, the election or removal of officers might best be handled that way so that there is no acrimony among directors concerning those issues. A board wishing to take some votes by written ballot may wish to establish procedures and rules regarding the process and when it will be used.
Some rules of order state that the president or chairperson sets the agenda. Obviously, the person setting the agenda controls the meeting, although a preliminary motion at the meeting should be the approval of the agenda, in which case others may have input at that time. In many associations, it is the manager who sets the agenda, as he or she is the person most familiar with the business of the board which must be conducted at the meeting. Some boards allow any director to add items to the agenda at the beginning of the meeting. Because many extraneous matters arise at association board meetings, it is important to have an agenda – and one that is as specific as possible – so that all necessary business is conducted without those other matters interfering. Some boards make very effective use of a timed agenda, understanding that all necessary business should be fitted into a two-hour meeting time, as the attention of members is less focused after two hours. Although board members must follow the agenda, and although the agenda may be
set by the president or manager, they are not excluded from being able to raise the issues they think important. This can be done during the time set aside in the agenda for “new business.” At that time the concerned director can state the issue and ask that it be placed on the agenda for the next meeting for discussion and if possible a vote.
Member Comments and Open Forums
The Condominium and Homeowners Association Acts state that members of associations have the right to speak at open board meetings on any issue that is listed on the agenda. However, the board can set reasonable limitations on this right, such as limiting each speaker to a few minutes. Although the sunshine (or “open meetings”) laws in effect in Maryland specifically require that all owners be notified of all board meetings, the presence of owners at a meeting can often be disruptive – even to the extent that necessary
business is not conducted. Although the sunshine laws do not give the owners the right to be heard at the meeting, prudent boards find it politic to provide a time period during which owners can make general comments. It is best if this “open forum” occurs at the beginning of the meeting both so that owners can raise issues they would like the board to consider and because many owners will not be disruptive once they have been heard or their issue has been dealt with by the board. The open forum should have a finite time limit. If there are a great number of owners who wish to address the board, it is advisable to set speaking time limits, and not to allow anyone to speak twice until everyone has had an opportunity to speak once. At the conclusion of the open forum, the board should make it clear that the remainder of the meeting is the business meeting of the board and that owners will no longer be recognized or allowed to speak. It can sometimes have a great psychological impact on the owners if a couple of directors move around the board table so that their backs are to the audience. Doing so says that the board is meeting to discuss business, that the members are focused on each other (not the owners) and that the role of the audience has changed and is now merely one of observers, not participants. An important note: the “open meetings” statutes applicable to community associations are NOT identical to the Maryland Open Meetings Act, which is much more detailed and which applies only to government agencies.
The Condominium Act (Section 11-109.1), the HOA Act (Section 11B-111), and the Cooperative Housing Act (Section 5-6B-19) set specific criteria under which a meeting of the board of directors may be held in closed or “executive” session.
These criteria are:
Discussion of matters pertaining to employees and personnel.
Protection of the privacy or reputation of individuals in matters not related to the association’s business.
Consultation with legal counsel.
Consultation with staff personnel, consultants, attorneys, or other persons in connection with pending or potential litigation.
Investigative proceedings concerning possible or actual criminal misconduct.
Compliance with a specific constitutional, statutory or judicially imposed requirement protecting particular proceedings or matters from public disclosure.
Discussions of individual member’s assessment accounts.
Consideration of the terms or conditions of a business transaction in the negotiation stage if the disclosure could adversely affect the economic interests of the association.
If a board closes a meeting, the minutes must show the reason that the meeting was closed and how the board members voted on the motion to close it. Although the board can close its meetings, it cannot conceal the decisions it makes at any such meeting; and at its next open meeting it should report all decisions it made at the closed meeting.
The key to a well-run meeting is a chairperson who acts with quiet authority and has good people skills. The chairperson must always be in charge and in control of the meeting, but he or she should not be overbearing, confrontational, dictatorial, inflexible or always requiring center stage. Indeed, the chairperson must frequently walk a tightrope, intervening enough to keep the meeting on track but allowing others to participate as appropriate so that the business of the board gets done. It is crucial to the conduct of any meeting that the chairperson remain above the fray and that he or she be composed, organized, soft-spoken, equitable, and obviously in charge without being overbearing. This is a tall order to fill, especially if the chairperson comes under personal attack. If the person who would normally chair the meeting is incapable of this demeanor, or if he or she
feels some things might occur that will cause a loss of composure, that person should put aside custom or ego and allow someone else to chair the meeting.Once the chairperson becomes visibly angry, tearful, flustered, or frustrated, the meeting can degenerate. Similarly, a chairperson who is overbearing, confrontational, dictatorial, inflexible and egotistic will usually cause resentment such that all goodwill is lost. Though the chairperson is in charge of the meeting, he or she should not ride roughshod over the members. The chair can diffuse anger and deflect personal attacks by the judicious use of advisors – such as management or legal counsel – or of experts – such as architects, engineers, and accountants. The success of the meeting may depend upon the presence of the right advisors or experts depending upon the issues that are likely to arise. The chairperson should also make good use of committee chairs, officers, and directors who can answer questions or explain issues or actions. The meeting need not and should not be a one-man or
one-woman show. At the same time, the chairperson cannot allow others to take over the meeting. He or she should see that specific assignments are carried out by those mentioned above, but that control of the meeting returns to the chairperson after each report or discussion. In fact, one sign of a good chairperson is that all heads
automatically turn to him or her at the end of a report by another.
Note: the chairperson should not allow discussion of an issue to continue interminably. When discussion becomes tentative, repetitive or meandering, the chairperson should ask “Are we ready for the question?” This language is better than “Is there any more discussion?” because that language can foster the continuation of what the chairperson has already perceived as fruitless dialog.
Minutes of the Meeting
The minutes of the board meeting (and of the annual meeting) are the “official” record of what occurred at that meeting because they have been subsequently reviewed by the board (or the owners) and their content approved. This means that, prior to such approval, the minutes are not “official” and thus are not yet records of the association and should not be distributed. This can sometimes cause a delay in making the minutes available to the owners. For example, the minutes from the January meeting are reviewed by the board at the February meeting, but extensive changes are required because the recording secretary failed to include the discussions and decisions made during an entire section of the meeting. In that situation, the minutes are sent back to be rewritten pursuant to the board’s direction at the February meeting, but are then not available for review and approval until the March meeting. This means that the “official” minutes of the January meeting are not available to the owners until March – which is a problem for a board that wishes to keep communication lines open with the owners. One method of resolving the communication problem (an issue crucial in all associations), while still protecting the integrity of the association’s official records, is for the board to agree upon a synopsis of the meeting at its conclusion. This synopsis might be nothing more than a short list of issues discussed and actions taken. Once approved, the synopsis can be published to the owners so that they are aware of how hard the board is working on their behalf. The synopsis can also be a vehicle for important announcements. For example, the synopsis might indicate that the board approved a contract to re-stripe the parking lots, and give the owners notice that all cars must be off the lots by 8:00 am on a certain day. Once the minutes become official, any notes of the meeting from which the minutes were derived as well as any tape recording of the meeting that may have been used to create notes or the minutes should be destroyed. This is so because notes and audiotapes may contain extraneous or even incorrect information that was later changed in the minute approval process. Also, an audiotape will not reflect gestures or facial expressions that might change the
meaning of the words recorded and thus give a listener who was not at the meeting a false impression of the actual events at the meeting. For the same
reason, boards might adopt a policy preventing owners from taping meetings of the board or annual and special meetings of the owners. Whether to allow voice or video recordings of a board meeting is becoming a more frequent issue in associations because of the growing popularity of laptops, video cameras, and other devices. The board may occasionally with to review its policies on the topic so that they reflect the input and desires of the community.
Content of Minutes
Minutes should contain all information necessary to make them an accurate record of the meeting, but should be as brief and to the point as possible. For example, it is sufficient to say “The board discussed several bids for landscaping services and selected ABC Landscaping as the contractor for the coming year by unanimous vote.” There is no need to provide specific detail of the discussion, even if it took an hour of the board meeting to accomplish. There is also no need to recite the vote of each director if the vote was unanimous. However, when a decision is made with dissenting votes by some directors, it is important to record the fact of the dissenting votes and, upon the request of those directors, the basis or reasons for their dissent. Similarly, management may wish the minutes to reflect a recommendation made by it that was not followed by the board.
Some decisions may be challenged by members later on the grounds that the board acted arbitrarily or without a good reason. Although we have said above that the
minutes need not contain the details of discussions leading up to votes, it may be helpful for the minutes to note the reasons given for the decision, or to refer to the
memoranda or reports used by the board in its discussions. By doing so, the board is in a better position to justify its decisions when challenged months or even years
Policies and Procedures Manual
Although the minutes of board meetings are the official record of those meetings, they are a cumbersome vehicle for locating the important policy resolutions of the board or specific procedural processes adopted by the board. This is so because the minutes contain a lot of other important, but routine, information. Any board member or manager who has tried to wade through years of board meeting minutes to find out if the board had a specific policy concerning, say, fining, knows what a difficult job it is. The policies and procedures adopted a decade ago by the board at that time remain the policies and procedures of the association until modified or repealed by a future board. The “board” is a single, continuous legal entity just like the association. The directors who comprise the board change from time to time, but each set of directors has a legal responsibility either to follow the policies and procedures of the board or to change them. It is difficult to follow these policies and procedures unless you know what they are. It is for this reason that all
associations should make it a practice to put all policies and procedures in writing and to keep them separate from the minutes.
Statement of Board Member Ethics and Conduct
It will increase member respect for, and trust in, their Board of Directors if they know that the Board is committed to acting fairly and in the association’s best interests. Likewise, it helps commit the Board to recognizing the principles of proper governance. We therefore recommend that every time a board is elected, its members sign a code of conduct, and we suggest the board use one of these forms.
[DRAFT] CODE OF CONDUCT
FOR BOARD MEMBERS
The____________________________ Board of Directors has approved the following code of conduct for its members in order to ensure that they maintain a high standard of ethical conduct in the performance of the business, and to ensure that the residents maintain confidence in and respect for the entire Board. The following principles and guidelines constitute the code of conduct:
No individual shall use his/her position as a Board member for private gain, for example:
No Board member shall solicit or accept, directly or indirectly, any gifts, gratuity, favor, entertainment, loan, or any other thing of monetary value from a person or firm who is seeking to obtain contractual or other business or financial relations with [name of association].
No Board member shall accept a gift or favor made with intent of influencing decision or action on any official matter.
No Board member shall receive any compensation from the Association or any third party for acting as such.
No Board member shall engage in any writing, publishing, or speech making that defames any other member of the _________________Board or resident of the community.
No Board member will willingly misrepresent facts to the residents of the community for the sole purpose of advancing a personal cause or influencing the community to place pressure on the Board to advance a Board member’s personal cause.
No Board member nor his/her agent or employee or family member shall enter into a personal service contract with the _________________ without previous disclosure of such interest to the Board.
No Board member will seek to have a contract implemented that has not been duly approved by the Board.
No Board member will interfere with a contractor implementing a contract in progress. All communications with contractors will go through _______ site staff or management or be in accordance with policy.
No Board member will interfere with the system of management established by the Board and the management company.
No Board member will interfere with the duties of any staff member of the ___.
No Board member will harass, threaten, or attempt through any means to control or instill fear in a member of the staff.
No Board member will utilize homeowners’ keys in any manner other than as outlined in the Key Policy passed by the Board of Directors on January ____ , 20___.
Any Board member who violates this code of conduct agrees that the Board of Directors may seek injunctive relief against him/her and agrees to pay the attorney fees incurred by the Board in that enforcement effort. The Board member also agrees that the Board shall be relieved of posting bond as a condition to its injunctive remedy.
No provision of this Agreement can be rescinded, altered, and/or amended without unanimous vote of the members of the Board of Directors.
President _____________ Date
Vice President_________ Date
Board Member ________ Date
[DRAFT] CODE OF ETHICS AND RULES OF CONDUCT FOR VOLUNTEER BOARD MEMBERS, OFFICERS, AND COMMITTEE MEMBERS
WHEREAS, the Board of Directors of [name of association] has the power and the responsibility to make decisions for the entire community, and
WHEREAS, the Board of Directors is responsible to appoint officers and committee members, and
WHEREAS, the volunteer leaders of the Association are responsible to set a standard and a tone for behavior that is conducive to the best interests of the entire community,
NOW, THEREFORE, BE IT RESOLVED THAT the Board of Directors of _______ hereby adopts the following rules of conduct, standards of behavior, ethical rules,
and enforcement procedures that are applicable to all volunteers serving the community:
1. The Board of Directors will use its best efforts at all times to make decisions that are consistent with high principles, and to protect and enhance the safety and property value of the residents.
2. No gifts of any type worth $5.00 or more will be accepted from any resident, contractor, or supplier.
3. No contributions will be made to any political parties or political candidates by the Association.
4. Confidentiality of other Board members’ personal lives, all residents’ personal lives as well as employees’ personal lives, will be protected by the Board officers and committee members.
5. No interference between the Board of Directors or other volunteers and the employees will be undertaken, so long as a contract exists with a management company which prohibits such interference.
6. No promise of anything not approved by the Board as a whole can be made to any subcontractor, supplier, or contractor during negotiations.
7. No drugs, alcohol, or substance abuse will be tolerated.
8. Any Board member convicted of a felony will voluntarily resign from his/her position.
9. Board members will immediately remove any volunteer from such positions as officers or committee positions if said person has been convicted of a felony.
10. Any Board member under investigation for a felony will request a leave of absence from the Board of Directors during the investigation and trial period.
11. Language at Board meetings will be kept professional. Personal attacks against owners, residents, officers, and directors are prohibited and are not consistent with the best interests of the community.
12. It is understood that differences of opinion will exist. They should be expressed in a clear and business-like fashion.
13. Proper parliamentary procedure should be followed to have such dissenting positions stated clearly within the official records of the Association.
14. A volunteer may not knowingly misrepresent any facts to anyone involved in anything with the community which would benefit himself/herself in any way.
15. No volunteer serving the community may use his/her position to enhance his/her financial status through the use of certain contractors or suppliers. Any potential conflict of interest must be exposed to the other volunteers, especially to the Board of Directors.
16. The Board of Directors will stand and face the community at their first Board Meeting following their Annual Meeting and will raise their hands and agree to abide by this Code of Ethics and will sign the Code of Ethics.
17. This resolution of Rules of Conduct will be framed and kept posted in the Association’s office. Each new volunteer will be given a certificate and will be asked to initial that they have received the certificate and have read it and agree to abide by it.
18. Violations of the Code of Ethics will be brought to the Hearing Board.
19. The attorney, management agent, and accountant, if any, for the association can serve as Advisory Hearing Board members if requested by the Hearing Board.
The resolution is adopted this __________day of , 20 at an open Board meeting where a quorum of the Board was present and will become effective immediately.