Suggestion on handling 3, out 5, Board members refusing to recognize a vote at a General Meeting

This happened this week to a property association in Texas.

We had a Annual General Meeting this week. The Board formed a committee to look at some fencing issues. The chairman of that committee in presentation, while she had the floor, called for a vote that would amend the deed restrictions. The motion was seconded and then discussed, then called for a vote. It passed. After passing, the Board President, who resigned and his Board member spot, not presidency, was replaced by a newly elected Board member, announced that "the amendment was now in effect."

Now three Board members, out of five, are refusing to recognize the vote and refusing to have the amendment filed with our County.

First two aspect of the law on this.

In the AGM announcement, made by the Board, it was indicated that "A vote will need to be taken at the AGM to change the Deed Restrictions to support these findings." So the Board announced there would be a vote before the meeting.

Also, our POA's By-laws state that a majority of a quorum can vote on any subject at a gathering of the Membership and that vote will be binding. I bring this up because the Texas Property Code calls for a 67% vote by the whole membership to amend restrictions but the Texas Property Code adds that if any of the Association's declaratory documents call for a lower percentage that lower percentage prevails over the State requirement. The vote was 34 to 14 in favor of the amendment - 38 would hit the 67% of whole membership but again the Texas Property Code defers to the declaratory documents of an Association if they call for a lower percentage which ours do.

I assume the disgruntled Board members are trying to argue one or both of those things but we do not know because they offer no explanation other than saying they will not recognize the vote. Also the Secretary is refusing to let a newly elected Board member even see the ballots, when our By-laws state that any member has a right to inspect all records and a Board officer, which the new officer is, has an "absolute right" to inspect records. We are concerned they might doctor the ballots over the next few days - although it was announced at the meeting that the vote was 34 to 14, so I do not know how they would explain such a turn around if they doctored the ballots to reverse a 2.5 to 1 margin.

Does anyone have any advise how to handle this? I think our only options are 1) get a majority to remove those Board Members, which would entail calling a special meeting, 2) living with it, or 3) legal action which would be costly and risky. Hopefully someone know of some other option.

Are you referring to Texas Property Code section 209.0041 (h) thru (i)? See https://statutes.capitol.texas.gov/Docs/PR/htm/PR.209.htm. This section states:
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"209.0041 ADOPTION OR AMENDMENT OF CERTAIN DEDICATORY INSTRUMENTS.
...
(h) Except as provided by Subsection (h-1) or (h-2), a declaration may be amended only by a vote of 67 percent of the total votes allocated to property owners entitled to vote on the amendment of the declaration, in addition to any governmental approval required by law.

(h-1) If the declaration contains a lower percentage than prescribed by Subsection (h), the percentage in the declaration controls.

(h-2) If the declaration is silent as to voting rights for an amendment, the declaration may be amended by a vote of owners owning 67 percent of the lots subject to the declaration.

(i) A bylaw may not be amended to conflict with the declaration"
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Roger, you say your HOA's "By-laws state that a majority of a quorum can vote on any subject at a gathering of the Membership and that vote will be binding."

By-laws are different from the Declaration. In the hierarchy of governing documents, my understanding is that the general legal rule is that the Declaration trumps the By-laws. Also the general legal rule is that it should be hard to amend the Declaration. A majority of a quorum is typically a pretty low number. What is your quorum requirement, anyway?

Right now, I think the board majority is correct to reject the vote as a legitimate amendment to the Declaration.

Its in the associations's By-laws and CCR.

Texas property code section 209 defines: "Declaration" means an instrument filed in the real property records of a county that includes restrictive covenants governing a residential subdivision.

Our By-laws and CCRs, both of which call for a majority quorum vote on any subject, are filed with the county.

Roger,

Since we have access to Texas statute, we need to see the actual language in your Bylaws and CCRs dealing with this.

Just checking, Roger. You do know that the deed restrictions and CC&R are the same thing?

Yes I sent a scan of the relevant two pages that cover termination and amendment within the CCRs to the person who requested it. I do not send anymore so as not to identify the association.

Added note on the above, since I mention a quorum earlier. The ballots in favor of the change were 34 votes. There are 56 tracts. So it was a clear majority of the total tract votes. All ballots and proxies that represented some of the ballots were signed. The Secretary has all those and I assume is why she is refusing to show them to a newly elected Board members because she knows he could take them to the County with the current filed CCR to record the amendment.

What about the CCR stating, "executed by the Tract Owners of a majority of the Tracts"?

Texas Property Code defers to the Declaration document if it calls for a lower percentage. The Declaration document, in question as quoted above, calls for a "majority" which would be 50%, so that lower percentage would prevail according to the Texas Property Code, no?

The legal definition of a majority is "The greater number. The number greater than half of any total." https://legal-dictionary.thefreedictionary.com/majority

Wow this is great. Thank you very much.

On the minutes, that might be tricky because the Secretary controls the minutes and she is one of the ones fighting it. So is refusing to show any documents to any general member and now an elected Board officer also.

Also, two points on minutes to show what we are up against. There was a special meeting about 6 months ago. The secretary is refusing to accept the minutes to it. She refused to attend the special minutes and claims she is the one one who can record minutes and she will not listen to a recording of that special meeting.

And at the AGM this week, there was a very important floor discussion where the then current President gave the Board's interruption of a rule. I wanted to make sure his/Board interpretation got recorded in the minutes but I noticed the Secretary had her head buried in some documents, not paying attention to the floor discussion. I pointed this out to the President. He then had to call her name 3 or 4 times, each time louder and stener than before, to get her to look up. He asked if she was paying attention and she admitted no. He then requested her to please pay attention while another Board member iterated what was just discussed on the floor so that she would make sure to record the discussion in the minutes. As soon as the other Board member began to iterated the discussion, she buried her head in documents again not paying attention.

First, I second Augustine's thoughts regarding meeting notes and the processes in Section 209.

Secondly, in my experience the language sent owners in the notice of the AGM is not adequate to amend your documents. When we have done this in the past, our attorney has told us the notice package must contain word for word the proposed amendment. An example might be:

The following proposed amendment to the declaration reads as follows:

Paragraph X, Section Y is amended to read Yada, Yada, Yada.

It is that language which is being voted upon, not a generic statement the documents will be amended as you stated: "A vote will need to be taken at the AGM to change the Deed Restrictions to support these findings."

I would not vote to approve the language you cited in a million years, even if I agreed to it. I would like to see the exact wording which is being proposed to be approved and filed. Redlines would be better.

Finally, are you certain there is not language in your documents which states something like: "This Declaration may be amended by NN% of the owners of property in the Association" or some such?

I was thinking this might be the objection also - again they will not say why they are objecting. I do not know if this requirement was met - I do not have the expertise but personally, I am leaning toward your point of view.

How can we determine if it is a valid argument? And again, I do not know if it is their argument.

First some background: There was an almost complete turn-over of the Board last year. Four of the five Board members were newly elected last year and the 5th one, who stayed, is extremely shy and timid - he probably would not speak up about anything, so there was basically no continuity. That scenario itself would likely lead to problems because of the inexperience. Add to it that one of the Board members likely got onto the Board to accomplish something for his property that is not allowed. He is an extremely forceful person, who yells and screams at people at Board meetings, one time literally in the ear of a lady in her 70s or 80s. He had only lived in the subdivision less than a month at the time of the AGM where he was elected, and he nominated himself to be on the Board, which is perfectly legal but in my opinion, borderline uncouth. Our subdivision is fairly small and there is usually a problem to get people on the Board when Board members get off - no to few people want to be on it. So usually anytime someone announces interest that person will get elected unopposed. Because of his commanding personality he has two other board members that seems to be in lock-step with anything he wants.

With that scenario painted, the new Board has done a lot of changes, some good, some bad, over the last year but likely more stuff done, including legal expense, which we still do not know why the counsel was thought, and some mickey-mouse additional monthly expenses that had never been done before. Those can be overlooked but they began to grant variances on building/improvement that was changing the style of the subdivision. They did those variances without going through the proper process. So a group of concerned tract owners got together enough people on a petition to call for a Special Meeting. Enough people attended and/or gave proxies to have a quorum. Four of the five Board members refused to attend, giving excuses that might or might not have been legitimate (e.g. claimed to be out of town but we knew they were home) while behind the scenes saying we would never get a quorum and they were not going to attend to add to one. Our group followed the law, mailing an announcement, with the single agenda item clearly given with exact wording of what was going to be voted, to every tract owner within the prescribed time period by the Texas Property Code on calling Special Meetings. So the Board did not announce it. They now refuse to acknowledge it nor accept its minutes (to which everyone in attendance agreed were correct) nor listen to a recording of it to take their own minutes.

On the announcement for the recent AGM, for which the Board did give notice, I cannot answer how they did it. I do know some on the Board have said that they have completely studied the Texas Property Code and they are often citing it but they seem to do so in their favor but ignore it if it pointed out to them when it is against them - for example, they refuse to give proper notice of their Board meetings citing they are concerned members might attend unannounced and even though they acknowledge the Texas Property Code Open Meeting requirements allows that, they say they do not want to deal with people showing up. They also tend to put much of their Board meeting discussion into executive session even though per their minutes summaries of the executive sessions, much of it is normal business.

I am neither on the Board nor a committee. I agree with the CCR, its is double edge sword and I think it should be hard to change.

The idea of a Special Meeting last year started with the agenda of removing the main troublemaker off the Board - it is firmly thought that act would solve everything and our subdivision would revert to the tranquil place it had been for decades.After talking with other tract owners early while getting a petition, it was quickly demonstrated that there was no appetite for doing that, so the agenda was changed to requiring the Board to follow the By-laws and CCRs.

I think removing the bad apple is warranted and should be done, but I am more of a research person versus someone who can successfully do grass-root persuasion that would need. The ones more attuned to do that and who know more of tract owners still think it would be a no go.

Since this discussion went past the initial post, I want to bring up what most concerns me.

Our POA is small and owns no common property, and has no paid services provided to tract owners, so its budget is pretty small and our assessments are modest compared to the values of the properties - although I would argue that they are too high because ongoing expenses are under 1/2 of the total assessments every year, so the surplus just grows and grows, tempting misuse.

What concerns me is the current Board's attitude toward the funds. Either the By-laws or CCR, I forgot which at this time and have neither handy, only allow the Board to make $3000 in expenditures without Membership approval. Some on the Board have seriously argued at Board meetings that they can spend well over $3000 if that want to do so without membership approval by just paying it in under $3000 allotments. For example, they argued they could spend $60K just allotting $2000 for the expenditure every day for 30 days into another pool of money to pay the $60K. Without common property and with no ability to do eminent domain, I see no way they could spend so much money but supposedly they are pushing for "beautification" program that could run into those amounts.

Respectfully, at this point do you realize that such a requirement is superfluous? Your HOA's governing documents, state statute and case law all require the board to follow the By-laws and CCRs. I suspect the minutes for this special meeting have virtually no value, except to document that a group of amateurs was running the meeting.

RogerJ1 if you think people will have no appetite for removing board members, and nor will they step up themselves to run for the board, then the alternative is to start pursuing legal action with the courts, starting with demand letters. On the other hand, if you and your like-minded friends are not willing to serve on the board, then I personally do not think it's the least bit fair to start threatening lawsuits, all so you can tell this all-volunteer board what to do when you are not willing to do it yourselves. I hope I am misunderstanding you. If not, maybe this is the start of a huge educational process.

Nationwide any competent HOA attorney will tell you that by far the easiest way to remedy HOA problems is to run for the board with a like-minded group of people to win majority control.

Roger

A motion/vote requiring the Board to follow the By-laws and CCRs is, in my opinion, is a waste of time and effort.

If they are not following the Bylaw and CCRs, either recall them or take their a$$ to court. Anything else is a waste.

I completely agree. I found no value and in the outcome of the Special Meeting - purely redundant just saying, "you have to do what you have to do" in my opinion.

On getting on the Board. I am a resident but not a tract owner. So I would not qualify to be on the Board. One active person did get onto the Board last week and that person had been on the Board in other years. Also, I think everyone in what I call "our group" had been on the Board at one time or another and one was on the Board as recent as the year before last and had been in years previous to that too.

Does not being a tract owner mean you are a renter?

No I live with and care for my mother, who is the tract owner. Also ironically, she wrote most of the earlier documents in question.

Also the post and conclusion above make logical sense.

If people are voting on something without a meeting, an example being a mail ballot, they needed to know the exact wording on what they are voting. Hence the method titled #1 - and note, even it states the substance of the amendment as opposed to a verbatim amendment.

But if as the method titled #2, which is another method that could be used, there is gathering then the amendment could be discussed and changed during the motion at the gathering. In fact this makes logical sense. If there was a meeting to make an amendment, which again our AGM announcement stated was on the agenda, and the exact wording were given before the meeting, what happens if during the meeting someone noticed a material typo that completely resulted in the wrong intent - for example a "can" versus "cannot" when it was intended to be the other. If only pre-meeting exact language can be voted, then the meeting, for that subject, would be a waste. The typo would have to be corrected then resubmitted and a second meeting called to vote one the corrected language. That would be impractical. Instead I would think that during the floor discussion, at a gathering, the typo could be corrected then a vote on the corrected wording done. And if you had to live be exact language before the meeting that would not be possible making the whole process impractical in my opinion.

Law is often very logical in what it is doing, and with the Texas Property Code, that I cited above this post, offering many choices of methods to change restrictions, that intent of flexibility to fit the method would make sense, no? Why else all the method choices?

Anything in the statute or your governing documents that uses the word "notice" with regard to meetings translates in case law yada to mean that the agenda needs to be pretty precise. The point is to give people enough information to decide whether they want to attend or participate by proxy. "Notice" is a legal term of art. If you have doubts about this, ask an attorney or maybe google. It's a part of "sunshine statutes" that seek to ensure operations of a governing body are reasonably transparent. Nationwide improper notice can and has invalidated major decisions.

He can try to record whatever, but without proof that the one director speaks for the HOA, it is not going to be a lawfully recorded amendment. In fact if this one director does what you propose, then he would be committing an act of ultra vires and so a violation of the law. Also "executing" typically means that duly elected/appointed officials of the HOA sign a statement saying they swear xyz. The ballots themselves are not turned over to the County Clerk for recording. There's a lot of legal vocabulary for something like this. It's going to take awhile to get a handle on it all.

Thanks, I was just writing/thinking out loud which is probably not prudent. I think the most straightforward solution is drum up enough support to remove one Board member. The other two are just marching to his orders and normalcy would return if that happened.

What do your Bylaws say about what is required for resigning from the President's job? Resigning from being a Director? (In some HOAs, the President does not have to be a director.)

Are you saying he resigned as President and director, and he had only recently been elected to both?If your Bylaws say the Board elects the President, and the guy was not elected President by the Board, then yes, this is an act of ultra vires. Yes. Banks are pretty strict about adding check signers to an account. Typically they require a copy of Minutes that indicate the person was properly appointed to xyz position , along with a number of other documents. I suspect you may need to gather more facts here. Also keep in mind that not having anyone to sign checks can freeze HOA operations.

Here's an example of the format a HOA would use to record an amendment in Texas: http://www.shuleram.com/resources/Legends-Park-HOA,-Proposed-Amended-and-Restated-Bylaws.pdf . The law firm that prepared this works in several states and exclusively with HOAs and condominiums.

On the past President he resigned from the Board or stepped-down, I am not sure the exact language. Whatever it was he is completely off the Board. He announced it to the Board for the meeting and I think one other Board member was thinking about it. The Board announced a month or more ago that there would be at least one Board vacancy, his, any maybe two, that would need to be filled by an election of new Board member at the AGM, which took place.

I'll go check on what the By-laws and/or CCR states.