Director affected by document amendment

Richard,

There's bound to be differences of opinion on this, but my opinion is that document changes should not be made retroactive. Typically, laws are not made retroactive, nor should HOA document changes be. Typically, contract changes do not affect or undo what has happened in the past, but only affects what happens in the future.

Imagine if your state legislature passed a law making it illegal to do such-and-such. Would you then go and arrest everyone who broke that law before the law was past? How about if the government raised your taxes retroactive for the past two years?

A recent true example is that our state changed the requirements for a person to be Judge of Probate. The new requirement was that to be a Judge of Probate one had to have a law degree and have been admitted to the bar. Those who were previously elected to be Judges of Probate who did not meet the new requirement served out their terms, but were prohibited from running for re-election.

What I expect should happen is that the person would serve out the term but would be prohibited from running for another term on the board.

I suspect the rule of no membership requirement was left over when the developer left. It is often overlooked and then just becomes a false belief over time. To me it never makes sense for a director or board member/officer to NOT be a member. That opens the door for a renter or someone walking down the street to know the private business of a HOA they aren't a member of. I don't open up my check book to strangers so why would a HOA?

As for your situation it could use a vote of some sort to agree to serve out the term or terminate. The HOA is run by it's members for it's members. If the members agree then they can go with that decision. Sometimes it has to be what works for you.

Richard,

What is the exact wording of the change as this may impact my response.

Tim

Richard,

Based on what you posted, I would say that from this point on future nominees for Directors are required to be members. However, in the case of the individual who was already elected, they should be allowed to serve out the remainder of their term. This is even supported in NC § 55A‑8‑05 which states that "Despite the expiration of a director's term, the director continues to serve until the director's successor is elected, designated, or appointed and qualifies, or until there is a decrease in the number of directors."

Therefore, even if the Association believes that the person should step down, per NC law, they would stay in office until a replacement is made, they would still serve in that position.

Since the North Carolina Nonprofit Corporation Act, the North Carolina Planned Community Act and the North Carolina Condominium Act (as you didn't specify if you are a COA or HOA) defer to the governing documents on how they are to be amended, I am of the expectation that the amendment was properly adopted in accordance with those documents and that there are no conflicts between them and the Declaration of Covenants concerning who may serve as a Director.

You should be aware of the unintended consequence your Board has created by adopting such a rule is:

1) Created a requirement of the Association to verify who is actually on the deed and who is not as typically ownership identifies who a member is. This will require the Association to maintain copies of the deeds as well (which may typically be copied for a fee at the local courthouse).

2) Creation of confusion when a property is held by an estate, bank or other company. Can they appoint someone to be considered the member or is everyone at the company considered a member and eligible to run?

3) Minimized the pool of potential volunteers. Many times only one person is listed on the deed. Your requirement now prevents a spouse, significant other, adult child living at home, etc. from serving unless their name is on the deed.

4) Creation of possible legal issues if the Association, or the Duly elected director they are trying to get rid of, decides that the issue should be settled in court. Of course this will also incur legal fees that the membership will need to pay for (as the D&O insurance typically doesn't cover legal actions between directors).

My advice,

Let the person finish out their term as that individual, just like the other individuals, were elected by the membership. This also removes/minimizes any legal costs for the Association.

Hope this helps,

Tim

I agree with the majority here, she is well within her right to finish the term out. As a side note I can understand why folks would push for directors to be members, however, I don't share that opinion. It is hard enough to find volunteers among members as it is. One thing to consider, you will sometimes have husband/wife combos where one person is on the deed and the other isn't. We have several of those in our neighborhood. The person not on the deed is technically not a member and wouldn't be allowed to be a board member in some neighborhoods.

Thanks for all the input. I will add to Tim that the second word of my original post does say Condo. I will also add that I am very aware of the NC laws governing Condo associations. My query was simply to obtain facts/opinions about a board member serving out a term after an amendment had changed the status of that member.
I agree with most of the post that she should probably be allowed to complete the term. I do agree that I see absolutely no reason why anyone would want too.
This is a first time after 9 years that a non-member has served and mostly the owners would like her gone.

Sorry about missing that.