💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in

LynnS6 (California)
Posts: 11
Posted:
3 out of 5 board members resigned. Davis-Stirling says that if there is not a quorum the board cannot conduct business except to appoint new board members. A property manager says that the two board members can still sign checks to keep things going. Is that true?
JanetB2 (Colorado)
Posts: 4,219
Posted:
Hi Lynn:

The non-profit corporation a.k.a. association still must operate for the benefit of all members equally. If there are bills due such as water, electricity, etc. then yes absolutely they must be properly paid.

What they cannot do until they appoint new members is for instance vote to spend money on items not already considered usual operating expenses.

TimB4 (Tennessee)
Posts: 21,059
Posted:
Lynn,

Both are correct.

What you need to remember is that a Director and an Officer (Pres, V.P. etc.) are two different positions. Typically they are filled by the same individuals and when this happens that individual wears two hats and does two jobs.

Directors make the decisions of the Association (who to award a contract to, appointing committee members, holding hearings on infractions, etc.).

Officers implement the decisions of the Board and do the day to day tasks that run the Association (collecting assessments, paying bills, overseeing contracts, etc.).

If the Board can not seat a quorum, then they may not conduct business (awarding contracts, etc). However, this does not prevent the Officers from doing their business of the day to day activities (collecting assessments, paying bills, etc.)

You will need to make sure that the remaining Officers are those who have the positional authority to issue checks, etc.

Tim
LynnS6 (California)
Posts: 11
Posted:
Thanks for your replies. We just found out that the two board members are conducting other board business and not just check signing and the property management company may also be aware of this. What can the homeowners do to stop this?
TimB4 (Tennessee)
Posts: 21,059
Posted:
Lynn,

It depends on what your governing documents say.

If it has wording similar to "the Association shall be ran by a board of no more than 5 and no less then three directors" then your two directors are constitute a quorum (if there were only three seats).

However, if the documents have wording similar to "The Association shall be ran by a board of 5 directors) then there is no quorum and business should not be conducted.

You didn't specify what the "other business" was. Therefore, it's difficult to offer an opinion if what they are doing is considered proper or not. It is possible that they are trying to do what they can with what they have and still meet the Associations requirements to it's membership.

Have you offered to serve on the Board? Perhaps the remaining members haven't appointed anyone because they haven't had volunteers.

With all that said, if the membership believes that the Board is acting improperly they can do the following:

1) Volunteer to serve. Point out that the membership is aware that the Board is unable to conduct business because of the lack of a quorum and offer to fill the vacant seats.

2) Recall the Board - of course, you will need volunteers willing to serve so the empty seats are filled. Mind you, a recall can take months to happen. Volunteering to serve and being appointed to an empty seat can happen almost immediately.

Tim
LynnS6 (California)
Posts: 11
Posted:
A quorum in our community is 3. These two are the reason the other 3 resigned. No one will serve with them. A recall is in the works but in the meantime, how do we get them to stop conducting board business? Their disregard for the law has always been a problem with them.
JanetB2 (Colorado)
Posts: 4,219
Posted:
Hi Lynn:

They need to fill the positions, failure to fill means they cannot conduct business. They should potentially only insure homeowner’s water or other necessary items are paid and not shut off which is not conducting business per se but just paying current bills. They cannot conduct any “business” except appoint members to replace.

Here the statute states that if they do not fill then the membership can file a petition for a special meeting to fill the vacant seats. Also, they need to watch carefully what they do as they can end up with personal liability for violation of fiduciary duty.

http://www.davis-stirling.com/MainIndex/IndexofTopics/AppointmentofDirectors/tabid/1368/Default.aspx#axzz1mlc5Lqnx

Failure to Fill Position. If the board fails or refuses to fill an empty position, the membership may elect a director at any time to fill the position.Corp. Code §7224(b). The process is initiated by filing a petition with the board for a special membership meeting to fill the vacant seat.

Less Than a Quorum. If there is more than one vacant seat such that the remaining directors are less than a quorum, the remaining directors cannot conduct any business except to appoint other directors to the board.

About the only way to potentially force them is show them the statutes and maybe someone inform them they can be sued personally for violation of their fiduciary duty. Remind them that being sued for this violation generally is not covered under the insurance. Otherwise the members can elect to fill the 3 positions, then recall the 2 afterwards, if desired. This is about the only way to "force" anything.
MelissaP1 (Alabama)
Posts: 13,836
Posted:
My last year as President we started out with 7 board members and officers. The end of the year I was left with 1 Vice President who was behind in his dues and even I had moved out of the HOA. We had a two board member signature plus accountant requirement on ALL checks written. Luckily, my VP was the other signature...Our HOA still operated but was not able to make some of the larger quorum type decisions. However, I never did have a high number of membership attendance and had been trusted enough by the community that I was able to make a few decisions here and there just to keep us afloat.

Unfortunately, our documents did NOT say the board or president had the authority to replace or to appoint board members. My hands were tied as ONLY elections served as a way for us to elect board members. The elections were still 3 or more months away. It was NOT an easy few months...

Due to some back stabbing con man he had created quite the mutiny. I was called a "dictator" and compared to "Hitler". I always kind of prefered the "Anti Christ" myself..LOL...It wasn't like I had a choice in the matter of assigning board members nor could I allow the Vice President to take over. (The VP was walking his dog which scared the cat someone was holding causing them physical harm and angered most members). The good news is that the day of elections he had managed to get a group of people interested enough to fill ALL the positions. Which was my "Bigger Fish" goal when I left. Ironically, the person who got hurt by the cat was elected President...LOL.

I tell you this tale because you need to see it from the otherside too. What can you or the other members do to help this remaing member out? They have all the pressure on them I amsure they are frustrated by thier limits as well. A HOA is run by it's members FOR it's members...Why not organize more members to do so?

Former HOA President
BonnieG1 (Nebraska)
Posts: 1,186
Posted:
I hope we never get down to only 2 Board members. It did almost happen a while back is why I stepped up to be a Board member. But if it ever comes to that and no one steps up to fill the positions, I will personally file with the court to place our Association into recievership. Of courst that would be the course of LAST RESORT as our fees would definitely increase if we go into receivership. I mention that to very few people here for fear of cause some of our over 80s to have a heart attack.

I will only mention that if it looks like it may happen,
TimB4 (Tennessee)
Posts: 21,059
Posted:
Quote:
Posted By LynnS6 on 02/18/2012 8:35 AM
A quorum in our community is 3. These two are the reason the other 3 resigned. No one will serve with them. A recall is in the works but in the meantime, how do we get them to stop conducting board business? Their disregard for the law has always been a problem with them.

Lynn,

If no one will serve with them, then the only thing that can be done is to recall the board. This will take time, energy and money. The other option would be to contact an attorney and start the process for a court ordered election to fill the empty seats. This will have unintended consequences for the whole membership. In reality, it would be easier if you wait for the general election and/or have members publicly volunteer to fill the empty seats.

It's a shame that the membership failed to elect stronger members to serve. Had the three not resigned, a recall process would have been easier to complete. Additionally, with their resignation, they created the situation you are now in. Had they not resigned, they would have had the votes to nullify any action these two individuals wanted to make. Now the two are free to do as they wish.

Not knowing all the specifics, and no one really does unless they are directly involved, I'm torn as to who to be upset with. The three who left. The two for causing the other three to leave. Fortunately, there are still Directors serving which allows the bills to be paid and the Association to function.

Tim
LynnS6 (California)
Posts: 11
Posted:
The two that are still on the board use intimidation tactics to get their way. The first two board members who resigned did so out of frustration because they couldn't get anything good done. The third board member resigned to separate himself from the bullies. The two remainging board members got themselves on the board by slandering prior board members and telling everyone that things would be better with them in charge. But now, most of the homeowners have found out the truth and are willing to recall this board. They will be recalled, that I'm sure of. In the meantime, those two are doing what they want and are still making decisions, contacting vendors, preparing financials etc. The property manager has tried unsuccessfully to get them to stop. We can't wait for our next general election because that is over 8 months away. It's pretty bad here but when the recall happens, there are some really great people willing to serve.
TimB4 (Tennessee)
Posts: 21,059
Posted:
I wish you luck and keep us posted.
CarolR11 (Colorado)
Posts: 2,563
Posted:
Lynn, do pay attention to Janet's advice above and have H/O's petition the board to hold a membership meeting for the purpose of appointing 3 new directors. (Assuming the 2 directors are unwilling to appointing 3 who are willing to serve). Do visit davis-sterling.com for details. Scroll down the main Index to Special Membership Meetings and also, as Janet suggests, Appointment of Directors.

The entire procedure can take some time, but not 8 months. And it's much easier & cheaper than a recall. But you do need three who are willing to serve and who'll stand united against the bullies.

Our bylaws spell out the petition procedure and perhaps yours do too.

In addition, request a copy of your HOA's contract with your Mgmt. Co. (which is your right). Ours states that the PM may NOT follow any instructions from the board that are illegal. So, for example, if the two ask the PM to seek bids on XY or Z, the PM should refuse. Your PM may need support from a Mgmt. Co officer.

As Janet also points out, these two can be sued for taking actions illegally, and their D&O (Directors & Officers) insurance will not cover their behavior since they apparently know that their actions are illegal.

You and others also may want to chip in and pay for an HOA attorney and get a written opinion concerning the two directors' activities. This can be presented to "the board" and to the PM.

LynnS6 (California)
Posts: 11
Posted:
No one will serve on the board with those two because they harrass people so badly when they don't get their way. They will chip and chip and chip away at someone until they bring them to their knees. They are unlike people I've ever known before. Our only option is to recall them and that is currently in the works. I like the idea of getting a copy of the contract with our mgmt company and having a lawyer write a letter. That is something we can do now. Thanks for the advice.
TimB4 (Tennessee)
Posts: 21,059
Posted:
Lynn,

Be aware, that once the attorney writes the letter on your behalf, the Association can make the determination that you are threatening litigation. With pending litigation, they can prevent you from gaining access to records without a court order. Therefore, request any and all documents prior to having an attorney intervene on your behalf.

Tim
JanetB2 (Colorado)
Posts: 4,219
Posted:
Be sure to have 5 individuals ready and willing to serve if just going to recall or the HOA can be in trouble with nobody in place. If possible try to get three with a backbone into positions now. I am finding it hard to understand that nobody is willing to stand up and fill the positions for everyone's benefit after spending alot of money on their property.

Anybody need to borrow my cattle prod?
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Quote:
Posted By JanetB2 on 02/21/2012 12:19 PM
Be sure to have 5 individuals ready and willing to serve if just going to recall or the HOA can be in trouble with nobody in place. If possible try to get three with a backbone into positions now. I am finding it hard to understand that nobody is willing to stand up and fill the positions for everyone's benefit after spending alot of money on their property.

Anybody need to borrow my cattle prod?

With a properly placed cattle prod you can get a horse to dance the merengue.....

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

  • ✓ Ask follow-up questions
  • ✓ Share your experience
  • ✓ Get expert advice
  • ✓ Access 350,000 discussions
Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here