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Contracts signed in private session, minutes issues

Started by ChrisD7 • 11 replies • 1488 views

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ChrisD7 (Illinois)
Posts: 5
Posted:
I am a member of a townhome association in IL. I'm currently having issues against the board and PM. I am hoping to join the board in the upcoming year to fix some issues.

During an October meeting, the board meeting satisfied a couple of items on the agenda, and then went into executive session. After the members departed the house, I stirred up a conversation with a couple of other members outside. The door to the house was shut to keep out the noise.

The next part of the agenda covered contract signing. All the public members were not invited back, so I'm guessing that this part of the meeting was still kept private. This appears to be a violation of the IL state laws concerning associations. Other than a complaint to the Secretary of State's office, are there other recourse actions?

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I have also noticed recently that the PM (who writes the meeting minutes) tends to keep the minutes very minimal, such that I believe that some decisions and contracts are not recorded as part of the minutes. Unfortunately, the association has relied on the PM to perform the treasurer's and secretary's duties. The PM does not sign checks, thankfully.

I understand that the board must approve of the minutes. What happens if the minutes are rejected? As a hypothetical, if contracts were approved in the private meeting mentioned above, but not mentioned in the minutes, I wouldn't have information to know whether or not the minutes are accurate.

Should contracts which require renewal always require a board vote or some other record of decision? Example contracts such as association insurance policies, legal retainer notices, etc. I suspect that the insurance certificate has never had a vote of renewal, but the certificate has always been renewed.

Are meeting minutes recorded at a public office?

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Does the Association own the common areas and grounds? I know that the Association maintains the common grounds. The covenants seem to mention that all unit owners have a undivided percentage of the common area. But, I don't have hard information to suggest that I have some ownership, such as seeing ownership of the common area reflected officially from a property tax perspective.
MelissaP1 (Alabama)
Posts: 13,836
Posted:
I am going to tackle a little of this.. I am sure Tim will have better response. Common property is owned by ALL the members equally. A HOA is made up of you and your neighbors. Some HOA's are set up so that you own the house and the lot the house sits on, everything else is considered "Common area" controlled by the HOA. Your most likely just going to see the tax of your specific lot if your looking for tax records. It's because the HOA is made up of a group of lots. Once the HOA is incorporated, then basically all the lots become like "stockholders". It is then subjected to corporate taxations.

The HOA board going into executive session isn't that worrisome to me. Yes, they probably are talking over details of contracts. These are things that are quite difficult to talk about in the entire group of owners. All the owners feel they want to have a say in the decision making. The HOA board needs to have a chance to hammer out the details amongst each other before presented a united front and best option to discuss with ALL the members. Not thinking they are hiding anything. Remember the HOA BOD are OWNERS themselves. They were elected from the GENERAL membership to represent the WHOLE of the HOA. Ultimately, they are the ones responsible for making decisions on the contracts and daily operations. It's sometimes good they are able to do some business behind closed doors to get their act together. However, the decision then should be discussed in the next OPEN meeting for all the members to know what the decisions are.

Typically the Secretary is responsible for taking the meeting notes. Sounds like your PM is doing some of these duties. The PM is a sub-contractor to the HOA. It is to get it's orders from the HOA BOD. If they feel comfortable with the PM taking notes then that's what you get. Some HOA's get a little too dependent on their PM's and lose sight of the separation. It's basically due to the inability to understand how they are to manage things. Which is difficult as people in a HOA are NOT professionals at HOA or management. All it takes to be a member is to own property.
Former HOA President
TimB4 (Tennessee)
Posts: 21,059
Posted:
Hi Chris. Welcome to the forum.

Lots of questions. Lets see if I can live up to Melissa's expectation with my responses.

Quote:
Posted By ChrisD7 on 12/19/2012 9:53 PM

The next part of the agenda covered contract signing. All the public members were not invited back, so I'm guessing that this part of the meeting was still kept private. This appears to be a violation of the IL state laws concerning associations. Other than a complaint to the Secretary of State's office, are there other recourse actions?

To give benefit of the doubt, if the door was closed, it is possible that the Board was unaware that some members remained for the rest of the meeting.

Regardless of the reason. If the Board fails to comply with the governing documents it's the responsibility of the members to hold them accountable.

As you know there are civil laws and criminal laws. Criminal laws are enforced by the State. Civil laws are usually enforced by the individuals involved and they do this through the court system. Since contracts, hoa/coa laws and corporate laws are considered civil laws, there is typically limited governmental authorities to "oversee" or enforce those laws.

Sure the State corporation commission may fine for not filing the annual report on time. The IRS will certainly go after the Association for failing to file taxes. The District Attorney will prosecute if criminal laws are broken (example embezzlement). However if the Association doesn't comply with the Bylaws or a civil law, it's up to the membership to hold the Board accountable. The easiest way would be to recall the board or not reelect them to the Board. The more expensive option is to go through the court system.

Quote:
Posted By ChrisD7 on 12/19/2012 9:53 PM

I understand that the board must approve of the minutes. What happens if the minutes are rejected?

Draft minutes of the meeting are written and submitted for approval at the next meeting. The Board may make motions to correct the minutes. If the motion fails to pass then the correction is not made. Once all motions to correct the minutes have been made, the Board votes to approve them. If the vote fails to approve the minutes (which I've never heard of), then the corrected draft minutes would remain with the annotation that the minutes were corrected by, but not approved.

Quote:
Posted By ChrisD7 on 12/19/2012 9:53 PM

As a hypothetical, if contracts were approved in the private meeting mentioned above, but not mentioned in the minutes, I wouldn't have information to know whether or not the minutes are accurate.

The minutes are a record of the decisions of the Board.
If the minutes are not accurate, then the Board has no way to "prove" things happened when an issue is challenged.

In the case of contracts (since that was your hypothetical), even if the minutes do not show board approval, if the President signed the contract, it is likely binding on the Association.

Quote:
Posted By ChrisD7 on 12/19/2012 9:53 PM

Should contracts which require renewal always require a board vote or some other record of decision?

Should they be voted on by the Board? - Yes
must they be voted on by the Board? - This will depend on the wording of the existing contract, language in your governing documents and the authority the Board allows the Officers and/or management company to have.

Quote:
Posted By ChrisD7 on 12/19/2012 9:53 PM

Are meeting minutes recorded at a public office?

No.

It is up to each corporation to maintain their own records.

Quote:
Posted By ChrisD7 on 12/19/2012 9:53 PM

Does the Association own the common areas and grounds? I know that the Association maintains the common grounds. The covenants seem to mention that all unit owners have a undivided percentage of the common area. But, I don't have hard information to suggest that I have some ownership, such as seeing ownership of the common area reflected officially from a property tax perspective.

The Association typically does not own any of the common area.
The common area is owned by the membership, as described in the CC&Rs. Since the CC&Rs are actually attached to your deed, this would be the hard information you are looking for.

NOTE: Even though the Association does not own the common area or amenities, the governing documents typically give them full authority over the common areas. This authority typically includes the right to sell or purchase more. Hence, the reality of the issue is that you own a percentage of the common area but have zero control over it except through your vote as to who serves on the board.

Taxes vary from State to State but it's typical for common areas to be exempt from property taxes or paid by the Association.

Hope this helps,

Tim

MelissaP1 (Alabama)
Posts: 13,836
Posted:
Yes Tim! You lived up to my expectations!
Former HOA President
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Welcome Chris

While an association is made up of all members, the members do not get a say/vote on everything the BOD does. It is not like OK all here at this meeting, let us chat and vote.

Once a BOD meeting has been called to order, only BOD Members can speak unless the BOD ask someone not on the BOD to speak. It is not a frre for all question and answer situation. A smart and open BOD will have a Q&A session prior to the BOD Meeting.

BOD's are allowed to have Executive Sessions (no one not invited allowed to attend) to discuss specific things. What thye can discuss varies by state law. Some very limited so not limited at all.

Minutes usually only reflect motions, votes, etc. There are not meant to be a record of everything said by everyone.

If you want to be privy to everything, get on the BOD.

Hope this helps.

ChrisD7 (Illinois)
Posts: 5
Posted:
Thanks for the replies, that really did help.

Just to clarify a couple of things from my first post.

I am aware of executive sessions, and their purpose. Generally there are times when you don't want the public members to know of legal matters, other homeowners in foreclosure, etc. There are legal opinions on the web that clarify this.

However, it is the contract signing that occurs afterwards that I thought was illegal. I would suspect that all contracts would need a motion to be approved. Since the meeting was then closed, no motions should have been made to sign or approve of contracts. The next meeting hasn't occurred, so the minutes of the previous meeting have not been approved. At this time, I don't know if any motions were made during the closed session. If no motions were proposed or approved during the closed session, then the only record of approval would be a signature at the bottom of the contract.

I do realize that the meeting minutes usually contain a record of the decisions made. I find some of the background information regarding the motion to be helpful too. A couple of years ago, the minutes were substantially more descriptive, and you could follow along with what happened in the meeting. Now it is bare bones.
TimB4 (Tennessee)
Posts: 21,059
Posted:
Quote:
Posted By ChrisD7 on 12/20/2012 9:54 AM

Since the meeting was then closed . . .

I know that you are basing this on the fact that you were not in attendance.

However, it could simply be that you were not informed of the group coming out of executive session.

Based on your posting, all we know is that you were asked to leave while the group went into executive session and the door was closed behind you. Not having been there, I can only go by what you posted. This leaves the following questions:

Did you tell them you would wait and wanted to be in attendance?
Did someone come get you and tell you the meeting was continuing?
Did you try to enter and told you could not because they were in executive session?
How did you learn about the meeting continuing from executive session?

Is it possible that the meeting exited executive session and, innocently, after some issues were discussed, they realized that other members may still be around to be part of the meeting?

ChrisD7 (Illinois)
Posts: 5
Posted:
Quote:
Posted By TimB4 on 12/20/2012 11:24 AM

Did you tell them you would wait and wanted to be in attendance?


No, as I did not believe that the meeting would continue to be public after the executive session. However, the board never mentioned that the meeting would continue to be public after the executive session. The meeting was closed to membership commentary (a first for this association), and given the distasteful looks I was getting in the meeting, I wasn't quite ready to pipe up that I wanted to see the budget discussion and contract motions.

Quote:
Posted By TimB4 on 12/20/2012 11:24 AM

Did someone come get you and tell you the meeting was continuing?


No. I was outside for about 20-30 minutes or so, continuing a conversation. At no time did any board members allow the public to enter. It is possible that executive session may have lasted longer than 20 minutes, and the door could have been opened again, but I doubt that had occurred. All members who exited disbanded after the discussion.

Quote:
Posted By TimB4 on 12/20/2012 11:24 AM

Did you try to enter and told you could not because they were in executive session?


I did not try to reenter the house after the door was closed.

Quote:
Posted By TimB4 on 12/20/2012 11:24 AM

How did you learn about the meeting continuing from executive session?


Well, the only way I can determine is that the agenda for that night contained an item after the executive session which would discuss the 2013 budget and contracts. Usually this is the meeting which a contract would be signed for landscaping, possible snow removal, management, etc. Unfortunately, I wasn't as well versed in the law regarding public meetings at the time, and I didn't pay much attention that the board could continue business after the executive session. A letter was just circulated recently which contains the approved 2013 budget, which would prove to me that a budget discussion had taken place and a motion was made to approve it.

Quote:
Posted By TimB4 on 12/20/2012 11:24 AM

Is it possible that the meeting exited executive session and, innocently, after some issues were discussed, they realized that other members may still be around to be part of the meeting?


This may have been possible, but again, no indication was given that the meeting would ever exit executive session, and AFAIK, no effort was used to open the door and re-invite public members.

LawrenceC1 (Georgia)
Posts: 480
Posted:
Quote:
Posted By ChrisD7 on 12/20/2012 9:54 AM
A couple of years ago, the minutes were substantially more descriptive, and you could follow along with what happened in the meeting. Now it is bare bones.


Chris,

Minutes are supposed to be "bare bones." See for instance How to Take Minutes.

The board can choose to explain its decisions in a newsletter or email notice, but that kind of detail should not be in the minutes.

Also, contract deliberations is a category of activity that is usually allowed in an executive session. After all, you don't want everyone to know your negotiating strategy. Once a contract is signed, it becomes part of the corporate records that ought to be available for any member to examine.

ChrisD7 (Illinois)
Posts: 5
Posted:
According to this legal opinion, executive sessions should be used for the following:

"Portions of a board meeting can be conducted in executive session (1) to discuss litigation when an action against or on behalf of the association has been filed and is pending in a court or administrative tribunal, or when the board finds that such an action is probable or imminent, (2) to consider information regarding appointment, employment or dismissal of an employee, or (3) to discuss violations of rules and regulations of the association or a unit owner’s unpaid share of common expenses."

Although a contractual strategy may apply (such as attempting to annex a piece of land), a contractual strategy does not apply when you sign the dotted line for a snow removal contract. In such a situation, a motion would be needed to approve the contract and have it signed. That should also be the case for approval of a budget.

The link you provided also contains elements (k) and (l) which mention that actions for old and new business should be recorded. At this point, I'm not sure that the minutes are providing some of these actions, but only show the motions. No contracts are mentioned in the minutes (I guess I'll see this more in detail in an upcoming meeting). In theory: a meeting could be held, after discussions the business is deferred, thus there aren't any motions, so the minutes only reflect that a meeting occurred and nothing else.

I guess the crux of the matter is that some contracts (such as insurance) are automatically renewed without a record of a vote or motion. However, other contracts such as snow removal and lawn maintenance usually require a decision to approve the contract, and I would expect that to be reflected in the minutes. If that is missing from the minutes, then you have an official record which did not mention the contract, yet a signature was placed on the contract.
JonD1
Posts: 2,350
Posted:
I am not sure how other properties handle this but ours does not vote on and record every contract when it is up for renewal. And if we did it would be a mere formality not someone trying to sneak something by the rest of the owners.

Some according to the conmtracts automatically renew. Other it is understood will be renewed without the "formal" vote being taken.

Master insurance policy renewal NO
Landscaping NO
Garbage removal NO
Snow removal NO
Utilities NO
Management NO
among others

Souinds to me like the OP wishes things to be handled according to their agenda and what suits them. My question which would be more important to me would be what kind of job is the Board and MC doing? What state is the property in. And I would work to handle that rather than address the concerns of one owner.

The minutes are handled by the Secreatry or whomever that job is assigned to. Again, their content and format should not consider what one owner wishes to see. Afterall, the Board just might have better and more important things to do. The minutes should reflect Board actions not record meetings.

As an owner who is NOT a member of the Board it is not unusual for the Board members to act without being required to explain to your satisfaction what happened, how and why. Or provide the paperwork to detail such. In our case we have more than enough to do already for nothing.

LauraR5 (Tennessee)
Posts: 220
Posted:
Before I got on my HOA board, I had no idea how much goes on behind the scenes. When you elect your BOD at the annual meeting, you are trusting them to take care of a lot of stuff for you. If you don't trust them, that's something you need to take up at election time by running against them.

On our Board, we have a secretary but the property manager also takes minutes. They are not exceptionally detailed, but the capture what was discussed.

As long as your board is doing a good job and you don't feel like they're hiding anything, don't worry about what is being done that you're not seeing. It is probably pretty mundane stuff. At our last meeting we spent tons of time discussing what to be done about birds getting in dryer vents and then we authorized our maintenance man to put screens on them. It would cost extra if he painted them to match the siding on the unit. Seriously, that's the most exciting thing we dealt with. We're not hiding anything; we're just dealing with the stuff we've been entrusted to deal with.

If anyone asked me about anything specific, I would tell them. I have an open-door policy with my neighbors. While we didn't tell our neighbors about our conversation with the handy man, we did tell them whom to call if they needed one of those shields on their dryer vent.

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