Palm decision in IL; practical impact on how BOD operates

Hello folks!

It has been many years since I have posted on this forum. I am a former BOD President for a condominium association in Illinois and am currently on a committee for our BOD. Our new BOD is trying to gain a better understanding/insight of how the Palm decision (Palm vs. 2800 Lake Shore Drive Condominium Association) affects the day-to-day business of the BOD, especially with regard to communications in-between BOD meetings. What we understand is that conduct of BOD business and decisions must occur in meetings open to the HOs and that no such business may be done by a quorum of the BOD via email, closed meetings, workshops (there are exceptions outlined in the IL Condo Act - litigation, employment, collections and rule violations).

The practical implementation of the Palm decision is where the BOD is trying to gain understanding.

How are other IL condo HOAs addressing the Palm decision in their day-to-day operations in regard to communications? Any other opinions or insight from the rest of you would be welcome.

We are trying to determine where to "draw the line" when it comes to regular communications among BOD members, whether via email or in person.

Also, not being able to hold BOD workshops to discuss vendor proposals (landscaping, maintenance/repair, draft budgets, etc.) makes it more difficult to conduct business - although we understand that committees may be formed comprised of a few HOs with a BOD member to take the place of the former BOD workshops - which we are doing/will be doing.

FYI, here are a few links with additional info re the Palm decision:

https://www.connectedmanagement.com/index.php/blog/2014/04/22/understanding-palm-v-2800-lake-shore.htm

http://www.ksnlaw.com/blog/aftermath-palm-v-2800-lake-shore-drive-sky-falling/

http://www.penhart.com/wp-content/uploads/2014/05/Palm-II-Now-Law.pdf

Your insights/opinions are appreciated!
Bonnie

As with Larry of AZ, HOA boards in CA also must follow the laws that are very similar to IL. FL and VA also have "open meeting" legislation and some other states too. So you don't need to recreate the wheel. But I'd say that your HOA attorney is the best source for asking questions about new legislation. There's also an occasional IL contributor to this site who's very wise. Hope Art checks in.

Also, must the Board meet in an open meeting to discuss potential contracts, proposals etc.? In CA, we can do that in executive session, though we handle most of our smaller ones in open meetings (we have a LOT of contracts).

Keep in mind that less than a quorum of the board can email, or meet at any time. In addition, a quorum of the board can attend social events, seminars so long as they don't discuss their HOA's business.

The key, as Larry points out, is to delegate, delegate, delegate. I'll find a longer statement on a CA website that will help a lot, Bonnie, but I don't have time right now.

Meantime, what size is your HOA and what size is your Board? Do you have a property mgr.?

(Btw, I lived at 3100 N Lakeshore Dr. in '90/91. It's why I now live in an urban high rise with water views.)

The below is from Davis-Stirling.com, which is an HOA law firm that has put together the site about CA HOAs, but much of the info is generalizable to other states. Sorry for the length.

EMAIL MEETINGS

"... Boards of directors are allowed to exchange emails under the following conditions:

Emergency Exception. "Electronic transmissions may be used as a method of conducting an emergency meeting if all members of the board, individually or collectively, consent in writing to that action . . ." (Civ. Code §4910(b)(2).)

Minority of Directors. Fewer than a majority of directors may discuss or comment on an item of business so long as the email exchange does not become a "series" of emails involving a majority of the board." (Civ. Code §4910(b).)

Non-Business. A majority of directors may send and receive emails between themselves if it does not involve board business as defined above. Following are examples of allowable email exchanges:

setting dates and times for meetings,

distributing information for meetings,

requesting that items be placed on the agenda (prune trees, repair streets, create committees, paint buildings, repair roofs, etc.), and

informational emails (informing directors of educational events, reporting the status of fence repairs, distributing interim financial statements, etc).

Delegated Authority. Administrative and oversight tasks can still be handled via emails if delegated to a person or persons such as the president and/or manager or a committee. Once delegated, the president and manager can make decisions and retain the right of email consultation with directors. Delegated business is specifically exempted:
except those actions that the board has validly delegated to any other person or persons, managing agent, officer of the association, or committee of the board comprising less than a majority of the directors. (Civ. Code §4155)

If the president has the authority to make decisions, he/she can ask for input from other directors before doing so without violating the Open Meeting Act. If a board is worried about delegating too much authority to the president, they can form an Executive Committee with two or more directors, but less than the entire board, to handle issues between board meetings.

"...SUMMARY: To address issues between regularly scheduled board meetings, directors may do the following:

Delegate authority to the president and/or manager,

Call a special meeting with 4-days notice,

Call an emergency meeting attended in person or via teleconference,

Address emergency issues via email or circulate a unanimous written consent, or

Call an executive session meeting for executive session issues.

RECOMMENDATION: Association should set up dedicated email accounts for board members.

Maybe I'm missing something but I would just open the "working sessions" to the homeowners and get on with life.

Well said Art.

After reviewing the following presentation:

http://www.penhart.com/wp-content/uploads/2014/05/Palm-II-Now-Law.pdf

I've changed perspective. It seems that under Palm II, the board cannot differentiate between the roles of directors and officers. Nor can a board delegate decisions to a committee. Nor can a quorum of the board sit on a committee.

The only things that can be discussed in exec session are (1) pending or imminent litigation, (2) hiring of firing employees, and (3) violations and delinquencies.

I think I would have two concerns -

1. Salaries of employees. Not sure that I would want it to get back to an employee which directors voted down a salary increase.

2. Vendor selection and vendor performance discussions. Not sure that I would want those discussions getting back to bidding contractors. Not sure I want homeowners to know every time there is dissatisfaction with performance or thoughts about changing vendors when the contract is up.

Of course, PA is not an open-meeting state, so not an issue for me. But I'm wondering if this is an issue for you Art.

I'm also interested in knowing the facts that required the return of reserves to the condo owners.

In Illinois, a Board can discuss certain matters in executive session but must return to open session before voting. What happens in practice is that the discussion in executive session reveals to the Board members the outcome of the vote, so there is no need for a contested vote in open session, and the Board as a whole can vote up or down unless someone wants to go on the record against the majority, which hasn't happened in my experience.

There are some curious inconsistencies between the law for condos and the law for other community associations in Illinois, and one of them is that only for non-condo associations, the list of items that may be discussed in executive session includes "third party contracts." Generally we haven't had much sensitivity to the issue of discussing service providers other than the property manager in open meetings. It's awkward at best to have a frank discussion about whether we want to renew the property manager's contract with a representative sitting there in the meeting, though certain performance issues do receive an airing.

Not sure what produced the question about return of reserves -- perhaps something I wrote was misunderstood? I mentioned a reserve study only as a possible example of something that might typically have been discussed in a closed working session before the Palm II decision.

My questions were based on the overview that I cited.

It says that hiring and firing can be done in exec session, but not salary discussions.

Understand that Palm II only applies to condos.

Re the question about refunding reserves - according to the presentation, the COA had to refund excess reserves to homeowners - but apparently that ruling only applied to that case. I was wondering if you knew what those unique circumstances were.

GlennC, your suggestion could certainly be done and I will pass it on to our Board. Should they decide to do that, they would need to obtain a meeting room and provide the required notice to the homeowners.

ArtT5, NpS, JohnC – thank you for the commentary.

Here is my take on all of this: the Board has some options on how to conduct “working sessions” -- open up such sessions to the homeowners; delegate specific tasks to committees formed to complete a task who can then report out to the Board on their results at an open Board meeting. The Board could also form a 2-member committee comprised of Board members (since are not a quorum) who then would report back to the Board at an open Board meeting.

NpS - Re your question about the Reserve Funds
See pg. 2 of this article:

http://kmlegal.com/wp-content/uploads/2015/01/GRC-article-in-DCBA-Breif-Sept-2015.pdf

Evidently the Board was required to return the surplus from the HOA’s income at the end of the year to the HOs as a credit, per their governing documents, which wasn’t done – the surplus was placed into the Reserve account.

Thx Bonnie and Art. Messy stuff for sure.