Newbie question - Bylaws & developer control

The majority of our 7 directors have not held board positions before. We were elected 6 months ago and are still grappling with what authorized powers we possess, how/why previously authorized powers were diminished and what remedies should/could be made.

We are a small association. 144 lots. 11 resident landowners own a total of 30 lots/votes. The developer still holds 30 lots (paying 1/5 of the normal assessment fee) that have never sold, an additional 18 lots that have been repossessed, and a single lot in their personal name. Currently their 49 lots = 49 votes. (keep in mind that in 2007 the developer was at 108 lots sold to release control). The treasurer allowed developer repossessed properties to return to the 'unsold' rate of 1/5 the amt of the 'normal' fee. In 2018 this practice put our association BELOW the 'viable income' level achieved in 2007 when the declarant released control! It appears the assessment arrears on repos were also forgiven. For years!! One could forgive ignorance, but our treasurer did not allow financial institutions the same luxuries. (yes, yes we know!! .. we're working on it!!)

Directors are elected by membership at the annual meeting in accordance with statute and bylaws. Officers 'ran for office' and were also elected by membership at the annual meeting, in violation of (any and all) bylaws & statute. As a result of membership electing officers, the out of state developer was able to use their votes to elect the out of (same) state president (& friend) & out of (same) state treasurer (& friend) for years and years. Because statute defined and bylaws supported directors electing officers, this was corrected at the first (ever?) BoD meeting after the annual meeting. The long time president is now a member at large. The treasurer still has full control of the associations account. (We're working on this too).

We have now established that the 'current' bylaw amendments are undated and unsigned. The former president confirms that she was unaware they needed signatures. We are unable to find a signed set that is dated after 2009, and the only signed set found (beyond originals), carries only one signature. All bylaws we have received (and had never seen before) were sent electronically and are not housed in NM for our review (per statute). The treasurer was the registered agent & principal office housing our records. Statute requires the registered agent to live IN the state. This was also recently corrected and the secretary is no longer the registered agent, but records have not been forthcoming.

Current unsigned bylaws provide that the membership can amend the bylaws by a 2/3 majority vote. Original bylaws provide the BoD can amend. I sincerely hope you are seeing our problems. Developer control is still "A THING"! The majority of directors suspect improperly stored unsigned undated bylaws are for the fireplace. But we're new on the block and we want to be sure we take all the proper steps while being supported by statute and governing documents.

Association formed in 2000. Declarant 'formally' released control in 2007 @ 108 lots sold. Since 2007 the developer has sold less than 5 lots. Our original bylaws consist of 5 pages.

New Mexico Article 8 Nonprofit Corporations - 53-8-12. Bylaws.
A. The initial bylaws of a corporation shall be adopted by its board of directors. The
power to alter, amend or repeal the bylaws or adopt new bylaws shall be vested in the board
of directors unless otherwise provided in the articles of incorporation or the bylaws. The
bylaws may contain any provisions for the regulation and management of the affairs of a
corporation not inconsistent with law or the articles of incorporation.
B. The initial bylaws and any subsequent bylaws whether by amendment, repeal or new
adoption shall be executed by two authorized officers of the corporation. The bylaws in effect
for the corporation shall be maintained at the corporation's principal office in New Mexico
and shall be subject to inspection and copying by the public. If the most recently adopted
bylaws are so maintained, they shall not be void, notwithstanding any requirements of prior
law. The corporation may charge a reasonable fee for copying its bylaws, not to exceed one
dollar ($1.00) per page

At this stage our questions are:

Are 'current' bylaws void? If so how far back do we go?
We've established that we must add that directors should live in state. Can we require that directors live IN the subdivision?
If the BoD is able to amend without membership vote, what practices can we consider in limiting developer 'perks' and can/should the developers 'votes' be harnessed in any fashion?

It's a start! Thanks!

I agree with RoyalP. You've got so many moving parts and things coming out of the woodwork that you need a knowledgeable person to guide your association. The adage about swamps and alligators springs to mind. I've discovered while serving on my association's board that logic, reason and good faith efforts will get you only so far - the legalities can trip you up. You're basically trying to start with a clean slate, so you want the slate to really be clean.

Your advise is valuable and appreciated.

Funds are a huge issue. Should our bylaws designate 'attorney' funds/reserve? Our association was foundering and our roads (#1 priority in bylaws) have suffered greatly as a result. The additional/correct revenue, now being received was instantly computed in many minds as "additional loads of rock". Maybe the directors can meet 1/2 way: Some rock AND an attorney "review" of 'current/amended bylaws' to affirm them as valid or void and the point from which we should start fresh? Would a contact attorney also guide us through rewriting bylaws, or would that require a versed 'HOA law' attorney?

In reading the referenced statute, and considering what approach we 'might' take, I stumble at this part of the statute:
" ...... shall be executed by two authorized officers of the corporation."

The word "authorized" puzzles me. It could say "two officers", but the word 'authorized' prefaces.
Could 'authorized' be interpreted as 'current'? Or is 'authorization' something that is designated (in bylaws) to particular officers?

Forgive me while I tiptoe through the mine field! Blindfolded.

Thanks for taking the time Cathy. Sincere appreciation!

'grain of salt' is in hand!

1) The transition wasn't clean. We only clearly understood the turnover after we entered every owners property record (from co. assessor) into a spreadsheet and created a visual that people (like me) & future directors could understand. Sale dates, repo dates, resell dates, 'stated' point of turnover, purchase of grader, "actual' point of turnover, etc. We just wanted to understand the low revenues and how long it had been going on.
The spreadsheet highlighted things we weren't really looking for and this bizarre game of Chase a Mole in a Rabbit Hole was born.
State statute, the HOA Act & (the unchanged parts of) our documents are the most effective bats we can use in this bizarre game. 1/5th rate on repos? Whack! Out of state registered agent? Whack. Unsigned, undated bylaws? Whack, whack! We're getting the hang of it!

2) My thought too, but I haven't found a thing that requires 'amended' bylaws to be recorded at a county or state level. (they really should be). I'm confident that a majority of our BoD will agree on the point about: the 'most recent bylaws that were properly enacted'. Thought: If only 3 directors are 'required' in that set of bylaws, does that mean that 4 of us can go home? Whooo hooo!

D&O insurance: To 'insure' those particular officers/directors now really boils my peanuts! "Hi, we know these guys aren't transparent and it appears that we've lost thousands under their guidance, could you insure them?" I know that wouldn't be the convo, but it really stinks. (they're the ones with the nice houses).

Our annual meeting is in about 6 months. I was improperly voted into a 2 year officer/director position in Sept last year. When the procedure was corrected, I was voted into an officer/director position that ends in 6 months. We still haven't figured out how this year's elections should be conducted, 7 directors or 3? (yet another rabbit hole). Should a majority of us survive that election, then we can feel justified in bringing D&O insurance to the table again. I think all we can do right now is put the landowners in the best possible position of control, using (hopefully) bylaws amended to reflect current needs. If the elections are guided by the developer, and things return to 'the way they did it for years', I'm fairly sure that is when they will regret not having D & O insurance!

If anyone should ask, and I don't think they will, I'm off to Robert's house to read his Rules!

Thanks again!

Another thought about money: if it really comes down to a choice between fixing the roads (can get you sued) or getting legal advice, I suggest that a group of you pool your money and buy an hour or two of competent legal advice. Be sure to find an attorney who is well versed in HOA law.

Figuring out what your CC&Rs and bylaws actually say can be difficult for the layman, especially if the layman is just getting started. (Witness a recent discussion here about whether "shall" means "must" or "may".) Getting a grip on your governing documents will allow you to answer a lot of your groups' questions and will give you a solid foundation for making necessary changes. It also will make it easier to handle the challenges you're sure to get from folks who don't like or understand what you're doing. Being able to cite legal opinions and "chapter and verse" from your governing docs will stop much pointless and ill-informed argument.

I've got to rein in my 'personal' feelings, move beyond my annoyance and heed what is best for all. Big thanks Cathy! Keep the whip handy. You'll need it again, I'm sure!

Sue,

The amended bylaws are not signed. Maybe if they were, there would be a date!

The (former) president sent them electronically. At our last meeting, we asked "Where is the signed copy?" The president answered: "Only the originals needed to be signed." Directors provided state statute that states "two authorized signatures" on original AND amended bylaws. The bylaws are not signed.

If approved at a meeting 5 years ago, how do we know that something wasn't changed since then? We've already experienced 'cut and paste' replies to inquiries that give what they want you to see and hide what they don't want you to see.

Keep in mind that all officers were improperly elected. Even IF they had signed them, were they 'authorized' to?

First - modification of most Bylaws I have seen require votes by either BoD or membership (requirements are in the Bylaws) ... they cannot be modified by notes at meetings.

Second - the meeting where the Bylaws were changed, Board or Membership, will have minutes noting the passage of the new Bylaws - if there are no minutes of either a board of membership meeting when this occurred, perhaps it didn’t occur.

Third - when my last neighborhood modified our Bylaws, we recorded the Bylaws. This solves the “where did they come from” problem.