meetings, business, and illegal meetings

An interesting point was brought up in another thread, and stopped me in my tracks. It concerns what might or might not be illegal meetings by boards.

Imagine if you will, a two member board (for simplicity). trust me, it's possible.

If one board member sees the other on the street, headed to the mailbox, and says "Hey, you think we should get that tree trimmed over the stop sign?", and they discuss it and decide to trim it back, did they just have an illegal meeting?

What if one says "Our old landscaper quit last month. I got a bid from Ajax for the job, same price as the old guys. Should we hire them?", did they just have an illegal meeting?

Must all HOA business be done in an open meeting, with agenda, notices, etc.? Is there a series of decisions that the board can do without such meetings? For example, can a board answer a complaint question outside a meeting structure? Can they write checks and pay bills? Can they engage in a new contract? Authorize repairs? Approve or deny a request from an owner? Where is the line drawn, between "daily business" and "open meeting"?

Our Bylaws include the following clause:

"Action Taken Without a Meeting" - The Directors have a right to take any action in the absence of a meeting which they could take at a meeting by obtaining the written approval of all the Directors. Any action so approved shall have the same effect as though taken at a meeting of the Directors.

I think this gives us the ability to take care of those little issues as they come up without having to wait for the next regular Board meeting. I can authorize the necessary repairs by first going to the other Board members and getting their written permission.

That's a standard clause found in many bylaws, including ours.

Below is the AZ statute regarding Open Meetings, that appears to affect that clause:

" 33-1804. Open meetings; exceptions

A. Notwithstanding any provision in the declaration, bylaws or other documents to the contrary, all meetings of the association and board of directors are open to all members of the association or any person designated by a member in writing as the member's representative and all members or designated representatives so desiring shall be permitted to attend and speak at an appropriate time during the deliberations and proceedings..."

What constitutes a "meeting" is somewhat of a gray area, and I've heard attorneys at siminars offer different opinions, especially when it deals with email communication among the board.

It does appear that the AZ statute 33-1804 negates the bylaw that's quoted above. However, we all know that most of the work of a board goes on during the time between meetings. The HOA is a corporation that is governed by a BOD, but the work is done by committees operating under "charters". Just as with General Motors, you have a BOD, but under them you have all of the departments that carry on the work under the authority issued to them in their "operating manual".

I believe the key to a board operating efficiently, and so as to comply with the law is to operate with committees that are given specific duties and responsibilities in a committee charter.

Below is the way we have begun to operate:

The president is always the official spokesperson for any HOA and has the authority to respond to any communications received for the board.

Let's say that someone sends a letter stating they were injured by something on the community property, and want compensation. The president would respond to that letter requesting complete details, including witness statements, doctor reports, police reports, etc. He/she would inform the person that after receiving all of the information, it would be forwarded to the HOA attorney and insurance company for resolution. He would contact the HOA insurance company to give a heads up. He would distribute the letter to the board and place the item on the agenda for the next meeting.

No meeting has been held. No decisions were made. There has only been a necessary communication with a complainant to acknowledge receipt of the complaint letter; communication with the insurance company and the attorney; and a heads up given to the board.

The president, or any other director can be designated as the contact with the MC in order to make certain decisions that must be made during the month. Just as the MC is authorized to make certain decisions, the president, and/or other directors may be authorized to make certain decisions. These authorities are documented either in the MC contract, or in charters, or in a book of resolutions, so that everything is open to inspection by members. All of those authorities were granted during regular "open" meetings. This is in compliance with the AZ open meeting law.

So the work between meetings is done by committees operating under a charter and their recommendations are brought to the meetings for board decisions.

Example: At an open meeting the board passes a resolution to have certain major gate work done. The project is assigned to the maintenance committee to get bids and make recommendations. The committee then proceeds to discuss details, draw up specifications and solicit bids themselves or work with the MC to solicit them. One member would accompany the vendors to view the work and take any change suggestions to the committee.

When the committee gets all the bids, the MC sends them out in the board pac for review. Then at the meeting the committee chairperson discusses the bids and the reason for their recommendation for their selected vendor. The board votes on the issue, or may request more information. They could vote to accept the bid provided that the vendor is open to make a certain change with a price within a designated range. That would prevent a delay for final decision to the next meeting.

When the work is in progress, a member of the committee oversees the project, and inspects it to see that it's completed satisfactorily and authorizes the MC to make payment.

During the month members of the committee would have certain inspection tasks. Perhaps one would inspect the street lights weekly. Another may inspect other items. If a street light is out, it would be reported to the person authorized to deal with the light company.

Another member may be assigned to inspect the sprinkler systems and grass/trees to make sure the landscaper is doing the job. They would have the authority to discuss the problems with the landscaper to get them corrected.

The mx committee chair would provide a monthly report to the board.

The key to this is the "charters", which is a paper that spells out the duties and responsibilities of the committee. That charter is approved by the board at a meeting and is part of the HOA records. This leaves the committee(s) free to do their work in between meetings. Then the board just makes major decisions.

The committee members should have meetings and keep minutes of those meetings in a separate binder in case any of their actions are ever challenged. That's rarely done, but is should be.

I believe the above addresses Brians first two questions.

Brian your third question is "Meeting needed: Decide whether to raise assessments for new pavement in driveways."

This is where the maintenance committee will coordinate with the budget committee to bring a recommendation to the board. First of all, every board member should be familiar with the budget so they know how to vote during some of these discussions.

The budget committee, operating under a charter, works during the year to see that expenses are staying under budget, and should question the proper committee when something is going over budget. They can also see where something is under budget in case they need to get money from somewhere; as long as they don't exceed the overall budget amount.

The maintenance committee works on preparing the reserve study and following it, and developing and following a one and five year maintenance plan; and determining what work will need to be done in given months so they can see what money is available.

Let's say that their inspections point up that they need new pavement in driveways. They will determine when that work needs to be done. They will determine the cost. Now let's say that those driveways are asphalt and they discover that the cost of asphalt has tripled during the last year (with the increase in oil prices) and the reserve fund is not sufficient to cover it. They see that the only way to do all the replacement is to raise the dues assessments or to have a special assessment.

Since they know that a special assessment is extremely difficult to obtain, they must decide on a course of action to recommend to the board.

The options are to do a portion of the work this year with the funds available, and to defer the rest until next year. They determine that they need an additional $30,000 next year. Also, they know that the cost of asphalt is not likely to go down, so an increase in the dues assessment is needed. Now they have to determine how much. With 800 units they will need an additional $3.12 per unit next year for the driveways. (Don't worry if my math is not correct; it's just an example)

They discuss this information with the budget committee. The budget committee has already determined that they will need an additional $2.00 per unit for other items next year, so together they determine a total dues increase of $5.12 is needed for next year. They take this information to the next board meeting and make their recommendation. The board discusses and votes on the total amount of dues increase for following year. Naturally the budget committee will have determined that the increase amount is consistant with the increase allowed by the bylaws and state law prior to making the recommendation to the board.

In my next post I'll paste a copy of our maintenance committee charter. It's just a charter that I developed based on what I thought our needs were. Each board would develop their own based on their needs.

Dave, I don't think that is correct. The AZ "Open Meeting" statute that I reproduced in another post only deals with board meetings. It does not address committee meetings. Our bylaws also only address board meetings. No mention is made of committee meetings.

If committees were required to have open meetings then they would be hamstrung and not be able to function. They may as well abolish the committees and do all the work at the board level, which is extremely innefficient.

It is my understanding that if 3 of 5 members of the budget committee meet on the corner and address budget issues, it is a legal committee meeting and they should have minutes of that meeting. The committee has no authority to act on their budget findings. They only report their findings and make recommendations to the board at board meetings for action.

If 3 of 5 members of a board meet (not as a committee) and discuss general board business, then that is an illegal board meeting in violation of the AZ open (board) meeting statute.

If a board discusses board business by communicating via email, it would be considered an illegal meeting. Communicating regarding updating members on some issues in progress, or things to prepare for the meeting, or things like that, in my opinion, would be informational in nature, and not considered a meeting.

Some of this regarding email is a very gray area with attorney opinions varying.

We began to use committees because it spreads the work load out, and the charters spell out the duties so things can get done efficiently and timely.

Althought we see nothing in the bylaws or state laws that require committees to hold public meetings, everything the committees do is governed by the charters that are approved at board meetings and are always available to the members, and the committee recommendations are presented to the board to make decisions at meetings where members are present. So the membership has the opportunity to hear and input on all decisions that are made. Nothing is actually done in secrecy.

We have an email listserver for our Board to use to communicate with each other. William's statement makes me believe that I should eliminate this listserver?

Yes, that is my understanding, because you are having a meeting that the members are not aware of and have no opportunity to attend. Of course, since the discussion is regarding an individual in violation, that discussion should be held in the closed session of a regular meeting.

However, if there is a Compliance committee, that committee can have a meeting an any time to discuss the violations and take action that is authorized in the charter, or report the violations to the MC for handling.

Our compliance committee discusses the types of violations that are prevelant, and works with the MC to have them do their inspections on a random basis with frequency as necessary. The MC takes it from there and makes generalized reports at the board meeting. That is, the MC does not mention names; just the number and type of violation letters that were sent out.

Regarding talking about it on the telephone. I don't think it matters whether you're on the telephone, via email, or in person. If the members don't have notice of the meeting, and have no opportunity to hear and speak, then the meeting would be illegal as I understand it. Unless it is an emergency meeting.

If a meeting is deemed to be an emergency where time is of the essence, and a quick decision is necessary, then the president can call an emergency meeting of the board without having to notify the members; because there is insufficient time. The president only has to notify the entire board, and only a simple majority quorum is required to hold the meeting. A board would not want to abuse that emergency meeting provision by holding meetings that were not truly an emergency, or the members could be very upset.

Arizona statute 33-1804 states:

"...Notice to members, of meetings of the board of directors, is not required if emergency circumstances require action by the board before notice can be given..."

That meeting could be via telephone conference because everyone can hear everyone at the same time; or it could be in person. However, in an emergency it is usually difficult to get a board together in person, so the telephone conference call is very useful.

An email meeting is not a recognized legal meeting because everyone cannot hear the speaker at the same time. A criteria of a meeting is that all members must be able to hear the speaker at the same time. A chat type room where instant messages are available to everyone in the room at the same time would serve that purpose. But email doesn't do that.

Minutes would be kept of the emergency meeting and approved at the next regular board meeting.

The board needs to be able to satisfy any member who questions it, that calling the meeting an emergency meeting was necessary.

Ronald, our committees are mostly made up of our board members also. A couple of the committees have non-members in them, and we're trying to add more non-members.

What matters is that there are individuals assigned to the committees and there is a charter spelled out. Then the committees can do their work without it being a board meeting, even though the committee may be made up of all board members.

For example, the maintenance committee (which may consist of only 3 board members) can have it's own maintenance committee meeting without it being considered a board meeting, as long as only maintenance issues is discussed, and no general board business is discussed. The maintenance committee still has to take recommendations to the board for approval.

BrianB,

It's my opinion that a Board should structure different levels of meetings: Executive Workshop Meetings, and Open Meetings. A Board should publish at least once a year the time, place, and date of each meeting. Open meetings should have an agenda to the extent known and be published adequately. Executive Meetings may or may not be open to the general public, just depends on how much work the Board can take on, because most Open Meetings require minutes be taken.

It is unreasonable to expect that all matters that arise in an HOA have to wait for resolution until the next regularly scheduled Open Meeting. Stuff happens. So the Board gets around this by disclosing what occurred (what decisions were taken) and ratifies the action at soon as it can.

Reviewing bids of any kind should happen ideally in a Workshop Meeting, but can happen in an Open Meeting if necessary. But it needs to be officially recognized at an Open Meeting that the bid was and or needs to be approved. Sometimes, depending on when the Open Meetings fall, it may be necessary to engage the contractor's services immediately.

Deciding whether to raise assessments for new pavement in driveways best happen in an Open Meeting. However, the discussion of it prior to the Open Meeting can happen in a Workshop Meeting and notifying the community of the topic in an adequately published and posted agenda would be wise, in my state (NJ) it's a requirement if known in advance prior to 48 hours before the Open Meeting.

IMO, anything can be done outside of an official meeting as long as a quorum of the Board finds it necessary to do so to perform their fiduciary responsibility as outlined in the governing documents to protect and serve the eligible mortgage holders they serve. Especially if the Board is transparent in their activities.

Best of success!!
GeraldT1
NNJ

When does a board conduct closed meetings and what type of issues are discussed? Are residents required to be informed of these meeting? Are minutes taken during these meetings?

If our board meetings are schedule once a month, are those to be closed or open? I assume they are to be open just as our town concil meetings are open. Plus I beleive our CCR states these meetings are to open to all residents, so when are meetings held that are closed?

Also, what is the responsibility of board members confiedentialy? What can a board member talk about to others in the community and what can't they talk about?

I am new to all this, as are the new elected members and I really want to get a handle before I start our first meeting this year.

Thanks

Down below is a copy of the Arizona statute governing what may be discussed in closed meetings. It is a good guide to use in any state.

All regular board meetings are open to the membership and should be provided with at least 48 hours of the meetings.

A closed session is normally held immediately prior to an open meeting, or immediately after. They are closed to all but board members, however, the board may elect to have certain non-board members attend provided they are instructed that everything is confidential. I don't recommend allowing anyone but board members.

Minutes should be kept, but only the title of what was discussed is printed. No names and no details of the discussion.

All discussions in closed session are confidential, and board members are not allowed to discuss then outside of that meeting.

33-1804. Open meetings; exceptions

A. Notwithstanding any provision in the declaration, bylaws or other documents to the contrary, all meetings of the association and board of directors are open to all members of the association or any person designated by a member in writing as the member's representative and all members or designated representatives so desiring shall be permitted to attend and speak at an appropriate time during the deliberations and proceedings. 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 before the board takes formal action on an item under discussion in addition to any other opportunities to speak. The board shall provide for a reasonable number of persons to speak on each side of an issue. Any portion of a meeting may be closed only if that closed portion of the meeting is limited to consideration of one or more of the following:

1. Legal advice from an attorney for the board or the association. On final resolution of any matter for which the board received legal advice or that concerned pending or contemplated litigation, the board may disclose information about that matter in an open meeting except for matters that are required to remain confidential by the terms of a settlement agreement or judgment.

2. Pending or contemplated litigation.

3. Personal, health or financial information about an individual member of the association, an individual employee of the association or an individual employee of a contractor for the association, including records of the association directly related to the personal, health or financial information about an individual member of the association, an individual employee of the association or an individual employee of a contractor for the association.

4. Matters relating to the job performance of, compensation of, health records of or specific complaints against an individual employee of the association or an individual employee of a contractor of the association who works under the direction of the association.

Our bylaws and covenants say that all meeting must be formal and we follow that to the letter. Right now we're having a problem of 3 people trying to take over the HOA (maybe to get access to the money?). We saw our attorney and are trying to follow his advice. But it's difficult when most homeowners are apathetic.

Gael...i would suggest a new thread and spell out your issues as the one you posted on is 5 years old...