Vote on Bylaws in Early 2000s -- Amendment Needed? Never Filed

Hi,
I have discussed this subject in other postings. Apparently, there was a vote by co-owners at an annual meeting in the early 2000s to compensate board members. The vote passed and was recorded in the meeting minutes. The board never recorded this as an amendment to our bylaws. (There's a section in our documents regarding compensation.) Shouldn't this have occurred? Fast forward . . . This is a hot topic in our development. The treasurer claims that he no longer has the ballots. He disposed of them years ago. He produced a piece of paper that's states the yes and no numbers from the vote. No other information was given. I'm wondering if this whole thing is even valid since in amendment was never recorded? Couldn't we ask for the money to be reimbursed back to the association from past and present board members? The president and treasurer have served on the board since the alleged vote in the early 2000s.

From the Michigan Condominium Act:

559.153 Bylaws governing administration of condominium project; amendments; recording.
Sec. 53. The administration of a condominium project shall be governed by bylaws recorded as part of the master deed, or as provided in the master deed. An amendment to the bylaws of any condominium project shall not eliminate the mandatory provisions required by section 54. An amendment shall be inoperative until recorded.
History: 1978, Act 59, Eff. July 1, 1978;Am. 1982, Act 538, Imd. Eff. Jan. 17, 1983

See http://www.legislature.mi.gov/documents/mcl/pdf/mcl-Act-59-of-1978.pdf. You should start word searching the Condo Act any time you have a question.

Because of what the Michigan Condo Act says, I think you might have a good case to stop this compensation in its tracks going forward. But I suspect you really need an attorney. It will take a pretty savvy pro se person to fix the situation via the courts. One would probably be better off spending her or his time getting a like-minded majority on the board and getting a new amendment passed (and recorded this time).

My quick and dirty layperson's answer: When a board for years and years violates a bylaw and no one says anything, then their 'course of conduct' waives the bylaws. There is a lot of case law on this subject. The courts often do say the course of conduct (in violation of the Bylaws) trumps what the Bylaws say, at least until someone objects. Shame on the membership for not paying attention. I do not like your chances one bit of recovering any compensation from previous years. Toss in that the Michigan Nonprofit Corporation Act says that compensation of directors is allowed (when the Bylaws or their amendments duly authorize such compensation).

The meeting minutes state:

The results of the ballot on Board compensation was 120 "yes" votes and 23 "no" votes. Thus, the resolution permitting board compensation was passed. A motion to grant compensation to members of the board was tabled to the May meeting. A motion to increase the Treasurer's pay for accounting services by $100 per month was passed.

Jenn

I say in lieu of other "evidence", Official BOD Minutes carry the day.

Jenn

Our Covenants state that Annual Dues shall be equally split (as in the same) for all members. Read your docs closer and see if this exists. Payments to the BOD and equal Dues are two different issues. Do not confuse them.

You have two separate issues here that are being conflated.

One, the issue of compensating board members, which according to the minutes was approved by the membership but the amendment was never recorded (may or may not be an issue depending on the laws in your state).

Two, the issue of reducing the assessment amount in lieu of writing a check. Unless Michigan is different from other states, this is absolutely not lawful. The assessment amounts are typically spelled out in your CC&Rs, and thus form a part of each owner's contract on their home. The board has no legal right to set this aside unless they amend their CC&Rs. If the proper paperwork is not being filed with the IRS, they may also have an opinion on this.

A third item, which the board members may or may not like: By accepting compensation, they no longer qualify for the legal protections of being volunteers - basically immunity from being held legally liable for errors they make when carrying out their duties. Personally, I would not want to forego such a protection, because we're too lawsuit-happy in this country and people are especially cranky right now (because 2020).

Hi,
We have 7 board members. Monthly dues are $200. This is a condo development with 180 units.

Motion to RECIND ....

Be very careful. We were self-managed until January 2019. Then we had a MC for 6 months. Then we were self-managaed again after June 209.

Self mis-managed is more like it.

Say, Sue, it was the members, not the Board, who voted to compensate directors waaaay back then. The Board may not make a motion to rescind that membership decision.

Adding to this, it would be worth discussing with an HOA attorney. In the past, when we had to deal with something that conflicted with current law, the board did not need approval of the membership to do so, only a board resolution. The reasoning being: even if the membership were 100% in agreement with something that was illegal, they still couldn't do whatever it was.

I don't see anything illegal either. But I agree with others, the compassion should never be in the form of a reduction in assessment. So that May THAT motion & decision opposes the CC&Rs.

So, it seems to me the Board needs to vote to not compensate directors at all, or to not compensate them in the form of dues reduction.

I really think you need an HOA attorneys advice on this.

OP said the “documents” say that dues are equally divided among the members. If you don’t have contribution from a handful of board members, then the financial burden falls on all other members.

JenniferD8, if it was me I'd get down and dirty and report the association and those directors to the IRS. Even though the IRS may take a long time to investigate, and may end up taking no action, it will put the fear of god into them.

One could say the same if the board members were paid by properly issued checks (with no assessment rebate) accompanied by 1099-Misc forms after the tax year.

Arguably only motions and the vote on same goes into the Minutes. But in this case, I think your being an unpaid director is important to document. I agree this is a serious omission. I would be furious.

I continue to feel that fighting the compensation, after many years of same, would be quite difficult. You might even lose in a court of law, on account of 'waiver of Bylaws' principles involving acquiescence by the membership for many years. I think the safest path is to seek a formal amendment saying no compensation, no how.

Meanwhile, finding the right IRS web site to file a complaint about these people not paying taxes on their compensation is not difficult. I would resign from the board and, like Geno suggested, throw everything at them I could via the IRS, reporting both the corporation and the individuals. It will cost the corporation in legal fees. But I think it's better to put a stop to their unlawful failure to pay taxes than continue with the status quo.