board members voting illegally

Started by GeorgiaL • 13 replies • 1730 views

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GeorgiaL (Illinois)
Posts: 14

Posted:

Hello everyone,
I am a Director of a Board in Illinois. Recently, we have a director who never understands what is going on and has had other board members sit by her to vote yes on certain motions. This has been witnessed by members of the Association who have verbally complained about this. Last night, the board motioned to sign a contract with a management company which half the homeowners, by petition, do not want, the petition is still circulating. We are a board of 9, 5 of which have discussed amongst themselves to vote for this contract. The problem now is we never saw the contract that the President signed which is one of the reasons 4 of us said no. One other board member was unsure of what to do especially with the issues that was stated on the floor before the vote. We argued that we should table the motion until all board members have discussed the contract. I mentioned on the floor that it is against the law to vote on an item that everyone is unfamiliar with. This has been a repeated problem in the past. It ended up that a director was whispering in her ear during this time, the secretary stated it was out of order and the board member ended up voting yes. Is this not against the law? Can another board member encourage, while on the floor, for another to vote a certain way? Should we as a board not have discussed the contract or even viewed it before signing? Do we have any recourse to these actions? Any advise is appreciated. BTW, the secretary records all the minutes to assist in taking accurate minutes. This has all been recorded.

JoeW1 (New York)
Posts: 728

Posted:

To my knowledge there is no law that states it is illegal for someone to cast an uninformed vote. If there was, at least 3/4 of our country's votes would be tossed out. Part of life is people making uninformed decisions based upon public opinion, hearsay, and alliances. You can not nor should not try to stop that pathetic process by attacking it head on. Set an example by doing what is right. Even bullies will respect you in the end.

IMHO you should vote NO to the contract based upon the fact that you have not received it to review and cast an informed vote.

If you do receive it, vote your conscience and step away from all the he said, she said drama. It'll cause wrinkles and more gray hair than you may already have.

GeorgiaL (Illinois)
Posts: 14

Posted:

JoeW,
I dont know if this makes a difference to you, but we are a "Not for Profit Corporation". There are also laws that govern this.

RobertG (Arizona)
Posts: 505

Posted:

Georgia, I am not sure what your point is about the status of the HOA (most are not for profit). Joe is completely correct, uniformed voted is not against any rules. It maybe bad decision making the board member should not be on the board, but there is nothing illegal about it.

PaulM (Pennsylvania)
Posts: 1,347

Posted:

GeorgiaL: not certain I understand your point about the director who has other board members sit by her to vote yes... Maybe she's hard of hearing...??
Don't all the Board members sit together at the front of the room during the meeting?

I don't believe it is 'against the law' to hold a vote on something that perhaps others feel they have not been adequately informed about. It is good practice for Board members to ensure they are informed on what the vote is for; further, prior to a meeting, if a vote is to be taken, it should be part of the agenda to alert those who will be asked to cast a vote.

JoeW1 (New York)
Posts: 728

Posted:

Quote:

Posted By GeorgiaL on 06/28/2007 7:30 AM
JoeW,
I dont know if this makes a difference to you, but we are a "Not for Profit Corporation". There are also laws that govern this.

Hi GeorgiaL - My HOA and COA are Not for Profit Corporations. No laws that I know of exist outside of our Associations that require informed voting. However, let's say there was a law. How could you prove that uninformed voting is taking place? Unless of course you voted yes to the contract and admitted you did not review the information. That's why I advised you to vote no with the stipulation that you did so because you did not have a chance to review the contract.

A Board member is a fiduciary and is supposed to act in the best interests of the entire Association. The residents who choose to be informed serve as the check and balance, the law so to speak.

You should be commended on your concern for doing what is right. So, keep doing that, stick it out, work towards bringing everyone together, even those who disagree with you.

Jadedone4 (Virginia)
Posts: 495

Posted:

Whenever a person is elected to a position in an HOA, they have a responsibility to those who elected them. It is called "fiduciary duty." As defined....

"A fiduciary duty is the highest standard of care imposed at either equity or law. A fiduciary is expected to be extremely loyal to the person to whom they owe the duty (the "principal"): they must not put their personal interests before the duty, and must not profit from their position as a fiduciary, unless the principal consents. The fiduciary relationship is highlighted by good faith, loyalty and trust, and the word itself originally comes from the Latin fides, meaning faith, and fiducia.

When a fiduciary duty is imposed, equity requires a stricter standard of behaviour than the comparable tortious duty of care at common law. It is said the fiduciary has a duty not to be in a situation where personal interests and fiduciary duty conflict, a duty not to be in a situation where their fiduciary duty conflicts with another fiduciary duty, and a duty not to profit from their fiduciary position without express knowledge and consent. A fiduciary cannot have a conflict of interest. It has been said that fiduciaries must conduct themselves "at a level higher than that trodden by the crowd."

GeorgiaL (Illinois)
Posts: 14

Posted:

Thanks for all the responses, I presume the only recourse we have is to sue for breach of duty. Correct me if Im wrong.

PaulM (Pennsylvania)
Posts: 1,347

Posted:

GeorgiaL: Why would you want to go to that extreme? What and how would you prove anything at court?

TracyT (Maryland)
Posts: 228

Posted:

Hi Georgia,

"Should we as a board not have discussed the contract or even viewed it before signing?"

Yes, you and the entire board should have reviewed and discussed this contract as well as any and all others. You should not vote on it until you have done so.

As for other board members voting, not at the meeting, that could be a problem if you state has "open meeting" laws. Otherwise as indicated above it must be recorded at the next meeting. However, if other board members are meeting outside of the board meetings then what is the point of having a meeting? Were the board members who voted for the contract aware that a petition was going around?

Do you have Covenants and/or By-laws for your association? They should spell out this conduct. I haven't read "Roberts Rules" (?) but he apparently has a lot say about the conduct of board meetings. Also, you should check your state law(s) on the conduct/operations of a non-profit organization.

Good luck.
Tracy

GeorgiaL (Illinois)
Posts: 14

Posted:

The reason is this management company has not served this association well. Many of us feel, cant prove, that the President of our board has control over the property manager/company and has been making decisions, and violating our bylaws (both have), for example, drawing 70,000 to pay a contractor breaching their contract without board approval or 2nd signature required per bylaws. Among other things. The vendors they have hired and we are now contracted with are not performing per contract and they do not enforce our contracts regardless of our repeated requests to do so. Another snafu, we had an elevator upgrade, but the PM didnt follow through and contact an electrician to review what needed to be done thus creating a nightmare costing the assoc over $100,000 more than budgeted. The members are not aware of this because of how it was applied on the GL accounting report. Last the contractor mentioned above was also recommended by PM yet they are not qualified (12 story, 260 unit bldg) to do this job. They have repeatedly walked off the job (191 on site, 88 days pulled off site) because they keep demanding more money. Our contract was written poorly and no protection for the assoc, yet they keep paying them. Need more?

TracyT (Maryland)
Posts: 228

Posted:

What a mess. However, it may or not be entirely the fault of the President / MC. Many contractors will under bid a job to win the work then hit you with change after change to get the price they really want.

If you're not able to prove any of your suspicions get those petitioners to attend the next meeting and get them to start asking questions to the board/president. If they won't answer then start another petition to have them removed from office. Remember you will need new officers to volunteer for the vacant position(s). Bare in mind the board may not have all the answers. If they show a good faith effort to seek answers and reply you might be in good shape. Otherwise boot 'em out!

Tracy

JoeW1 (New York)
Posts: 728

Posted:

Quote:

Posted By GeorgiaL on 06/28/2007 1:45 PM
Thanks for all the responses, I presume the only recourse we have is to sue for breach of duty. Correct me if Im wrong.

GeorgiaL - You have many options other than lawsuit, lawsuit being the worst option of all. Everyone looses, especially in an Association where it's neighbor against neighbor. Fiduciary duty is a very serious thing however, you can not legislate a person's choice to whisper in someone's ear, divide the community into camps, etc. All you can do is gather your supporters and develop change. You will probably find that most choose to sit on the sidelines and gripe.

JM2 (Oregon)
Posts: 439

Posted:

Hi Georgia:

A couple of observations...
1) In most states, the law allows the Board to go into "executive session" to negotiate contracts and discuss them. This may have been a wise and prudent thing for your board to do, on this contract as well as any contract.
2) In approaching votes on contracts, it would be much wiser for the Board chair to make sure that all board members have had the opportunity to read through a contract and discuss it prior to the motion going to a vote. If the opportunity to read the contract was not given to all board members, then all should have refrained from bringing this to a vote. That said, it is incumbent on board members to come prepared by reading the materials given, prior to the meeting, clarifying any questions, etc.
3. Normally, the Board acts through the president in dealing with the manager, rather than the manager having 9 (in your case) bosses. However, most, if not all, contracts should be discussed and voted upon.
4) If your community is truly against this management company, approving the contract could easily lead to a revolt (= board recall, whether selective or the whole board).
5) If the manager does not improve performance, there is probably a clause that allows the association to give notice of deficiency and a timeline for improvement, as well as to break the contract (typically a 30, 60, or 90 day time period). That may need to be used.

Best of luck in this. If you truly feel that board members are not fulfilling their fiduciary duty, you may need to sow the seeds of a recall in the people who are currently running the petition around.

J. Patrick Moore, CMCA

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