Deceptive Voting Practices???

Need your opinions on this, especially if you're one of the HOA Professionals.

We're about to have our annual meeting (on Saturday, Jan 13th) and in contrast to previous procedures for setting annual dues, this year the Board sent out the following proxy ballot...

"I (resident) do hereby grant my proxy to the HOA Board of Directors....

1) To approve the proposed annual budget and association fees as presented in the meeting materials. (Please check the appropriate blank)
Authority Granted __________ Authority Withheld __________"

Here's the way I read this...

The proxy that was sent out by the Board is not a proxy that allows residents to vote for, or against, raising our dues. It is a request for the residents to grant the Board the right to vote in favor of raising the dues for them (as well as vote on "other matters"). The resident that checks "authority withheld" thinks that they're voting against raising the dues. In reality, when the time comes, the Board legally can only cast proxy votes in favor of raising the dues. The votes of those that don't want the dues raised will not counted in the totals as the proxy does not give the Board the authority to cast votes against raising dues.

My example. Say you have 50 households represented at the annual meeting and when they vote on going to higher dues there's a 50/50 split. At the moment the election results are 25 residents voting in favor of higher dues and 25 residents voting against higher dues. Now enter the proxy's! Let's say the Board also receives exactly 50 proxies back and there's also a 50/50 split there with regards to granting or denying the Board the authority to approve the higher dues. Now on the surface you would think that this would represent a tied vote involving 100 households! Each side now holding 50 votes (25 in person and 25 via proxy). But the reality of it is that the higher dues pass because the Board is only authorized (via proxy) to cast proxy votes that favor raising the dues! The final tally is 50 votes for (25 in person and 25 via proxy) and 25 votes against. The 25 proxy votes against raising cannot be cast and can't be counted in the totals for calculating the percentages as the Board does not have the authority to cast disapproving ballots!

It's a very slick trick in my opinion, one that goes beyond just being deceptive, it's unethical! And of course the Board didn't provide any clarification beyond what you saw written.

Your opinions please. I have to launch an information campaign fast if I'm right about this. I have an attorney friend that agrees with me but he's not into HOAs or non-profits.

Answers to your questions below --

"Below are questions that you, as a non-board member I assume, must ask yourself when faced with a dues increase:"

-- I am on the Board right now (7 members if you want to count the 2 that are serving illegally --

"Remember, that the board members are also community members and they have to pay the same dues that you do, so is it likely that they would increase the dues unnecessarily?"

-- Voluntary association at the moment. Board members pay the same as other residents except they can use the recreation facility ($300 value) for free if they want, few do. Board members must join association but other residents still have the option not to join even if mandatory dues pass. --

"Do the bylaws require the members to approve or disapprove the budget, of can the board do that?"

-- Bylaws state that fees must be approved by membership but in the past the Board would just say, everyone has to pay this much each year. If residents thought that was excessive then they just didn't join HOA. --

"If the bylaws require the members to approve the budget, then this proxy may not be legal because it does not allow the members to vote against the resolution."

-- Bylaws state that fees must be approved by membership but the Board doesn't follow the rules now! Proposed covenants state that the budget and the annual Homeowner Fees shall become effective unless disapproved at the annual meeting by a vote of a majority of the members voting in person or by proxy at such meeting. Doesn't specify how the proxy is to be used, i.e., straight ballot or granting authority. --

"Was the budget included so the members can see the budget?"

-- It was included but I'm on the Board and I can barely understand it --

"Have you studied the budget to see where the money is needed?"

-- We operated on $67K last year counting $ going to reserve. They calculate that between our pool income and getting at least 250 (of 263) households to pay their dues that we would reach that same amount. Right now we only pay $130/yr and only ~220 residents pay now! Rise it to $215 and even fewer will pay and there's nothing that can be done about it! 1) We're a voluntary organization trying to go mandatory. 2) Even if we go mandatory it will only effect new residents as current residents are grandfathered against having liens filed against them. 3) Using HOA money to fund our swimming pool is a very volatile subject so even if covenants pass even fewer will pay because it does include funding the pool so the budget they're proposing is very unrealistic. --

"Is the dues increase within the bylaws and state law restriction?"

-- Bylaws don't mention limits on increases and Tennessee doesn't have HOA laws unless they're somewhere in the non-profit statutes which I haven't had time to research. --

"How much is the increase?"

-- Going from $130/yr to $215/yr. I consider the $215 a bait and switch tactic. Right now to use the pool you pay HOA fees plus $300/family. $215 is assumed to cover both but the wasn't spelled out in the meeting documents. --

"When was the last increase, and how much?"

-- Last year it was increased from $120/yr to $130/yr. The basis was that "people expect things to go up in a neighborhood like ours!" --

"Is the increase necessary, and is the amount reasonable?"

-- Necessary only if the neighborhood goes mandatory as we'll have to cover the pool expenses from HOA fees. The amount is very reasonable considering that it's unrealistically low due to the number of residents that will drop out of the association before having their money spent on the pool. --

i would say "illegal proxy", as I believe a proxy must have a spot for the voter to say who will get their proxy, and this one does not.

I also agree, "board" is not a legal proxy holder, as the "board" does not own a home, is not an owner, and not entitled to vote.

and I agree with you, that if you sign the proxy in question as "agree", then the board has a valid proxy for quorum purposes. If you sign "withheld" then you throw your proxy away, as it gives no one the power to vote against, and that proxy will NOT count for quorum purposes.

These directed proxies marked authority withheld are not invalid, rather they are equivalent to abstaining. Withheld is different than voting no.

I had an interesting thought....

Can the membership at the meeting vote to include ALL proxies that were submitted in the total ballot count? That's not the same as having the Board cast proxies as disapproved, which they don't have the authority to do. It is however a recognition that a valid proxy was returned.

Say the Board receives 100 proxies (and only 50 grant them proxy on an issue) and there are 100 votes cast in person. This motion would serve to recognize all 200 residents that took the time to be involved in the process, instead of the 100 present and the 50 that granted them authority on a particular vote. Beyond making sure everyone gets represented, let the votes, for or against, fall where they may.

I personally can live with whatever outcome there is on the budget. I just don't want the Board to manipulate the voting on the issue by confusing the residents in order to protect their own interests.

Beyond that I need to win the proxy war to have several items brought up before the membership and voted on. (My proxy gives them the option to vote yes/no on each proposal and have their vote cast as such.) These are items the Board wants to retain control of such as closing our only pool during the evenings so the swim team can practice. (We don't even have residents on their "Board") Keeping the percentage requirement at 75% for residents to call special meetings. Letting them change the Bylaws without neighborhood approval. These are things that residents have come to me with during the past year and want changed but the Board blocks them from coming to a vote before the general membership.

Hi. My opinion. I am not a lawyer. I am a CAM in Florida. Part of your answer about proxies should be in your state law. IN Florida, there is certain information that has to be on the proxy.

First, for an example of a proxy form, the Florida Dept of Business and Prof Regulation has an example of a limited proxy form suitable for voting for our state. You can call them and ask how to get to their web site. Your state may well have either standard forms or examples of forms on their web sites.

In Florida this is what the law reads for homeowner association proxies.

"To be valid, a proxy must be dated, must state the date, time, and place of the meeting for which it was given, and must be signed by the authorized person who executed the proxy. A proxy is effective only for the specific meeting for which it was originally given, as the meeting may lawfully be adjourned and reconvened from time to time, and automatically expires 90 days after the date of the meeting for which it was originally given. A proxy is revocable at any time at the pleasure of the person who executes it. If the proxy form expressly so provides, any proxy holder may appoint, in writing, a substitute to act in his or her place."

It should be pointed out that Robert's Rules discourages proxies and absentee ballots. He considers it unfair for those who aren't present to hear any discussion on an issue, and then expect a proxy holder to vote the way the owner would want to vote on that issue. However, that may have no bearing on your situation.

That said, proxies are typically meant to do a few things: 1. Establish a quorum, 2. give the proxy holder either full power to vote on anything that gets voted on, or limited power to vote on just the issues listed, 3. give a time period in which it is valid, and 4. give the owner a choice as to who will vote for them, or not vote, but just establish a quorum.

That said, I wouldn't write a proxy like the example you gave, to authorize or withhold a vote on an issue. Also, the proxy is meant to be counted as if the owner were there. It should be written to be counted for the quorum.

You mentioned about the membership voting on whether to include all proxies in the total ballot count. If the proxy is intended to establish a quorum and for a vote, then the owner intended to be included in the vote. What's the point in sending in a proxy to let someone else represent you if the membership then has to decide if the owner is allowed to cast their vote?

As for percentage to call special meetings or change the bylaws, our state law tells us what the percentage requirements are for calling meetings. Sometimes the law leaves it up to the bylaws for the percentage. Changing the bylaws can come from state law or the bylaws themselves.

ArthurG

Well Randal you got a partial victory. Let's hope the new Board members are more knowledgeable and open.

For anyone experiencing a problem with how votes and proxies are counted I suggest you make a motion to have a teller's committee. Their job is to open and count the votes and certify the count including any votes (including proxies) which were not counted. These results should be announced during the meeting after the election. Any member should have the right to dispute the count and make a motion for a recount prior to making the election results official. The ballots should be available for anyone to inspect upon request. I would do it immediately at the meeting.