WERE THOSE REMOTE MEETINGS AUTHORIZED?
HOLDING PROPER CONFIRMING VOTES WILL PROTECT PAST ACTIONS; AMENDING THE DOCS WILL PREVENT FUTURE PROBLEMS
By Richard Brooks and Patrick Brady
With in-person gatherings proscribed by the pandemic for much of this year, many condominium boards have conducted essential business remotely and many associations have canceled their annual meetings, allowing owners to vote electronically to authorize improvements or to elect new board members. While the imperatives for these nontraditional operations ─ complying with local or state lockdown orders and avoiding contagion risks ─ were clear, the authority for them was often lacking.
The governing documents of most condominium associations specify that annual and special meetings of members must be held in person and that owners must vote either in person or by proxy at these gatherings. Trustee elections and other decisions approved by owners that did not comply with those requirements could be challenged.
We think challenges of this kind are unlikely, and if brought, unlikely to prevail. But unlikely doesn’t mean impossible. We’ve heard of owners in at least one community who are challenging the results of a trustee election, arguing that the vote was invalid because it did not occur within the context of a duly-constituted annual meeting. Whether they prevail or not (and we don’t think they will), the association will have no choice but to defend itself – a costly proposition.
CONFIRMING UNAUTHORIZED VOTES
Associations facing these potential legal risks should address them both prospectively, to anticipate our new electronic world or even future pandemics, and retroactively, to protect any unauthorized actions they have taken. Retroactively, associations have three options:
Cross your fingers and hope no one challenges what you have done.
Confirm the actions at an in-person meeting held as soon as it is safe to do so. Some associations held their annual meetings outdoors over the summer. Those that did not will have to wait for warmer weather or an end to the pandemic threat, whichever occurs first, before taking this protective action.
Use the proxy-voting process to confirm past decisions that may be subject to challenge. This is the strategy we recommend – more effective than crossing your fingers (for obvious reasons) and more appealing than waiting for warmer weather or an end to the pandemic. You can conduct a proxy vote immediately.
The proxy process sounds complicated but it is actually straightforward: Designate one or two board members to collect “directed proxies” from owners. The proxies authorize the trustees to cast owners’ ballots for them. The board should follow the procedures outlined in the governing documents for scheduling an annual or a special meeting, which only the designated trustees will attend. The trustees will use the proxies they have collected first to establish a quorum and then to vote as the owners have directed.
This process can serve relatively quickly to protect past votes that did not strictly comply with the governing documents. What about future meetings that have to be scheduled or future decisions that must be made before this pandemic ends? There are three options:Wait until control of the pandemic or distribution of an effective vaccine makes in-person meetings safe. With the timelines for both uncertain, this may not be a realistic option for most communities.
Cross your fingers and hope no one challenges the unauthorized procedures associations use or the decisions owners make. We don’t recommend this option, but associations that choose it should try to avoid voting on anything that might prove contentious, for example, barring smoking in the community or undertaking a major improvement that requires owner approval. If you can delay these decisions, you should.
Amend the governing documents to eliminate the requirement for in-person meetings and to allow owners to vote remotely, electronically or in other ways. This is the solution we recommend. It is a solution not just for dealing with the current pandemic but for creating an alternative to in-person meetings, which are quickly going out of vogue. The new generation of owners grew up in a digital world. They are accustomed to doing everything on-line and think in-person meetings are archaic.
FLEXIBILITY IS KEY
Many associations have already amended their documents, and based on the inquiries we’re fielding from clients, many more are actively considering it. The amendment language we recommend aims to give associations maximum flexibility to adopt procedures that meet the needs of their communities and to revise those procedures as circumstances and technologies change. The language should specify that:
The amendment trumps any contrary provisions in the governing documents. In legal parlance, the phrase would be, ‘notwithstanding other provisions’ or provisions to the contrary in the master deed, declaration, or by-laws.
The board has the authority to conduct annual or special meetings using electronic communications or any other communications options the board deems appropriate. The language should not specify allowable platforms. Technology changes rapidly and less specific wording will allow the board to take advantage of those changes.
An in-person meeting is not required to elect trustees or to approve amendments to the governing documents.
Owners who do not attend a meeting may submit their ballots electronically or via any other means the board allows.
Ballots submitted remotely will count toward establishing a quorum at an in-person meeting.
We think eliminating the requirement for in-person meetings makes sense, with one important exception: Initiatives to remove trustees should still require an in-person meeting at which targeted board members have the opportunity to hear and defend themselves against the complaints about them.
Although the amendment we propose focuses primarily on meetings of home owners, it also includes language authorizing association boards to meet and vote remotely. We don’t think this is necessary, because boards have broad authority to create their own operating procedures. But every community has gadflies who will protest almost anything. Making the board’s authority explicit pretty much takes potential challenges of this kind off the table.
NO GOING BACK
The condominium industry was moving slowly to adopt remote meeting and electronic voting technologies before the pandemic struck. The buyer of a new car won’t happily resume driving the 10-year old model it replaced. Board members, managers and owners who have experienced the benefits of remote meetings and electronic voting will want to retain those options.
Remote meetings can’t replicate the experience of in-person gatherings. It may be better to address some controversial or sensitive issues in-person. Some boards may want to offer a hybrid meeting structure that gives owners the option of participating in person or remotely. Boards that go all in with remote meetings should find other opportunities for bringing owners together in ways that help to build a sense of community.
Different communities will choose the solutions that work best for them, but remote meeting and electronic voting technologies are clearly part of the future for the condominium industry. The only question is how quickly individual associations and association managers will embrace it.