Out-of-State Director(s)

Started by TammyC3 • 24 replies • 609 views

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TammyC3 (New Mexico)
Posts: 102

Posted:

I'm looking for advice from Associations that have out-of-state non-resident Officers - President, Vice President, Treasurer, and/or Secretary.

Frontier New Mexico subdivision - 144 lots - 65 owners total - 15 reside in subdivision full time.

Our Association's top priority is road maintenance/keeping roads passable. Grading the road (association owns grader, driven by volunteer), cutting the road for water runoffs, installing culverts, contracting for rock to be laid at problem areas.

Previous Out of State Owner/Directors were 'unable' to attend meetings (altitude/distance/work reasons), review projects in progress, assess road conditions, meet with contractors, etc.

Previously, the out of state President directed the (resident owner) Vice President to conduct all bidding, negotiations and oversee all the work contracted. The directive was to dump rock at damage areas. Period.

Previously, the Treasurer denied access to the full budget amounts allocated, and insisted our small annual budget also included (ungoverned) expenses ... that the Association should 'save' for ... just in case. Point: Money allocated for roads wasn't being used for the roads. Budget money needed for roads (as determined by Board) was denied. The Treasurer flatly refused to cut a check, regardless of Board decisions.

We have corrected some of this. The checking account is now IN the state of New Mexico. Two signatures are now needed for all checks, and the checks are now kept in the subdivision. Pet projects were rejected. Once the books were received, accounting practices were found to favor friends (the Developer), resulting in substantial financial losses to our Association. The over zealous Treasurer is no longer on the board.

We have an election coming up. How do we avoid these pitfalls going forward?

What is the common practice for Officers that live out of state?

If the Treasurer lives out of state, how do you handle this?

If the President lives out of state, how do you handle this?

Does/has any other Association held their association's checking account out-of-state?

Sincerest appreciation for any guidance.

TimB4 (Tennessee)
Posts: 21,059

Posted:

I wouldn't have the treasurer live out of State.

However, it sounds like the developer might still be in the picture. Is this the case?

Hopefully, you have enough individuals who reside locally to serve.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Might be worth it to check your bylaws to see what they say about attendance at board meetings. That's pretty much a director's primary duty, and living out of state probably it impossible unless the director is planning on a doozy of a commute.

Our bylaws say that three consecutive absences is considered to be a resignation. Living elsewhere is not considered a valid excuse.

Of course you have the other issue that people who live in the community know a lot more about what's going on. Not that out-of-towners can't run for the board, they can unless your governing docs say otherwise - but their lack of knowledge makes them less qualified. This is a legitimate reason not to vote for someone.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

No matter the situation w/ the pandemic, an HOA board of directors needs to attend meetings in-person. A president needs to call the meetings to order in person.

GeorgeS21 (Florida)
Posts: 3,808

Posted:

In person certainly is a goal, but unless there are Bylaws based restrictions, or statute based restrictions, I don’t know that directors or officers cannot reside out of town (not sure out of state is any different than out of town - or outside a driveable distance, etc.) ... unless they are held to account by those electing them.

It would seem that if a director was elected and lives elsewhere, the membership has spoken. And, if an officer was elected by the board and lives elsewhere the board has spoken.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Quote:

Posted By GeorgeS21 on 11/02/2020 3:58 PM
In person certainly is a goal, but unless there are Bylaws based restrictions, or statute based restrictions, I don’t know that directors or officers cannot reside out of town (not sure out of state is any different than out of town - or outside a driveable distance, etc.) ... unless they are held to account by those electing them.

It would seem that if a director was elected and lives elsewhere, the membership has spoken. And, if an officer was elected by the board and lives elsewhere the board has spoken.

Actually, this is the correct answer.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

I agree.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By KellyM3 on 11/02/2020 3:52 PM
No matter the situation w/ the pandemic, an HOA board of directors needs to attend meetings in-person. A president needs to call the meetings to order in person.

The applicable statutes I have read in various States all specify that Directors may attend electronically providing that all can hear all.

KellyM3 (North Carolina)
Posts: 2,239

Posted:

Quote:

Posted By TimB4 on 11/03/2020 2:20 AM

The applicable statutes I have read in various States all specify that Directors may attend electronically providing that all can hear all.

I'm discussing long-term, tactical property management. You can't do that using solely electronic means as a permanent method of conducting business no matter what's in statute. While legal, it is not healthy.

TammyC3 (New Mexico)
Posts: 102

Posted:

Hi Tim,

Thanks for reply.

The Developer "release of control" of the Association took place in 2007. The roads were deeded to the Association and the Association took responsibility for the care and maintenance of the roads.

Unfortunately, those who on the Board when the Board assumed control, were unaware of NM's HOA, statute and even the Association's governing document responsibilities. They argued that we were a 'small association' and not governed by the HOA. Or the docs apparently! I think that they believed that they worked for the Developer.

Every year the Developer sent the Treasurer the lots to be billed, and what to charge. Every year when the Developers private well needed maintenance or repair, the association paid for it. The Association lost roughly 3 years of revenues over a decade due to these 'practices'.

I guess it would be accurate to say the developer is *now* out of the picture.

I'm unsure how the Association can insist that the Treasurer live in-the-state.

Still searching for info on Association's, if any, that may have out-of-state Treasurers.

AugustinD
Posts: 5,144

Posted:

Quote:

Posted By TammyC3 on 11/03/2020 7:08 AM
Unfortunately, those who on the Board when the Board assumed control, were unaware of NM's HOA, statute and even the Association's governing document responsibilities.

I noticed not long ago that New Mexico is one of those states that only relatively recently even had a statute applicable exclusively to non-condominium HOAs. The NM legislature passed the (non-condominium) HOA statute into law only in 2013.

Quote:

Posted By TammyC3 on 11/03/2020 7:08 AM
Still searching for info on Association's, if any, that may have out-of-state Treasurers.

I am with others who say that (1) check signing is still quite difficult when the treasurer is out of state; yet (2) I have never seen a requirement for a treasurer to be a resident.

I am not sure paper checks are going to go away anytime for businesses like HOAs. The paper trail seems too important. Setting up ACH transfers may be possible but ACH also seem too easy to abuse.

I could see an out-of-state treasurer who does, say, budget planning and maybe monthly statements for Board meetings but otherwise coordinates with an in-state assistant treasurer to get checks signed.

TammyC3 (New Mexico)
Posts: 102

Posted:

Hi Cathy,

Bylaws are silent on board meeting attendance. And electronic meetings.

Have you ever heard of Association's Officers residing out of state?

I begin to wonder ....

BillH10 (Texas)
Posts: 1,217

Posted:

Tammy, to your question regarding officers residing out of state--

We own a property in an association in a ski area in Colorado, all but one of the Directors and Officers reside outside the state.

While I have no certain knowledge, I suspect property owners associations in ski, beach, and similar areas commonly have some directors and/or officers who reside out of state.

GeorgeS21 (Florida)
Posts: 3,808

Posted:

Tammy,

This is not really an out of state issue, right? It is simply they don't attend meetings in person because they don't live in the HOA full time?

I lived five hours away from a lake property and was on the board of directors - there were no issues - I made all meetings by phone, and would sometimes even be able to be there in person.

Again - if they are owners, and there are no rules, laws, bylaws, statutes prohibiting, I can't see the issue.

TammyC3 (New Mexico)
Posts: 102

Posted:

Thanks Augustin,

It's a hard pill to swallow re:out of state Officers. All we can do, is all we can do. We resolved to prepare the roads and repair equipment (assns grader) with every cent available. If you listen carefully, you can hear the (rented) grader and the rock truck off in the distance! Boom! Hopefully it will last two years. Problem solved.

Re: 2013 date

My confusion states effective 2012 ... (but) is this the 2013 you reference?

http://www.nmprc.state.nm.us/consumer-relations/docs/Homeowner%20Association%20Act.pdf

Does this have anything to do w/the price of rice in Japan:

47-16-1. Short title.

Chapter 47, Article 16 NMSA 1978 may be cited as the "Homeowner Association Act".

History: Laws 2013, ch. 122, § 1; 2015, ch. 104, § 1.
ANNOTATIONS

Compiler's notes. — Laws 2013, ch. 122, §§ 1 through 14 were erroneously compiled as 47-7E-1 through 47-7E-14 NMSA 1978, and have been recompiled as 47-16-1 through 47-16-14 NMSA 1978 by the compiler. Laws 2013, ch. 122, § 15 formerly appeared as a compiler's note in Chapter 47, Article 7E §§ 1 through 14.

The 2015 amendment, effective July 1, 2015, changed the statutory reference of the Homeowner Association Act; and deleted "This act" and added "Chapter 47, Article 16 NMSA 1978".

AugustinD
Posts: 5,144

Posted:

Quote:

Posted By TammyC3 on 11/06/2020 8:04 AM
It's a hard pill to swallow re:out of state Officers.

Out of state officers and directors have my loathing, too. But also my gratitude. No one else wants the job. What's a HOA to do?

Quote:

Posted By TammyC3 on 11/06/2020 8:04 AM
All we can do, is all we can do.

I figure apathy is nearly as bad a pandemic as coronavirus. I agree: It's all most condos/hoas can do to keep directors' seats filled with any individual passing CathyA3's fogged mirror test.

Quote:

Posted By TammyC3 on 11/06/2020 8:04 AM
We resolved to prepare the roads and repair equipment (assns grader) with every cent available. If you listen carefully, you can hear the (rented) grader and the rock truck off in the distance! Boom! Hopefully it will last two years. Problem solved.

I think this is amazing. With issues like this, I lean on JFK's line in 1962: "I am reminded of the story of the great French Marshal Lyautey, who once asked his gardener to plant a tree. The gardener objected that the tree was slow-growing and would not reach maturity for a hundred years. The Marshal replied, 'In that case, there is no time to lose, plant it this afternoon.' "

Quote:

Posted By TammyC3 on 11/06/2020 8:04 AM
Re: 2013 date

My confusion states effective 2012 ... (but) is this the 2013 you reference?

http://www.nmprc.state.nm.us/consumer-relations/docs/Homeowner%20Association%20Act.pdf

I do not know why the NMPRC is posting a link to a mere // bill // that was before the NM House of Representatives. A bill is not the same as a statute. Many bills never make it out of committee; or either the House or the Senate. Sometimes a Governor vetoes a bill. A bill is not the same as a statute.

Consider emailing NMPRC a sugary sweet but firm note on the point. [wink]

In New Mexico, I believe the authoritative, lawyers' site for what NM statutes currently say is https://www.nmcompcomm.us/search-laws/. Granted attorneys have subscription services yada that are far more user friendly than what the average Jane and Joe have for their puny, labor-intensive pro se efforts to look up the latest statutes.

Other states have government sites with the word-for-word statutes. They are way easier to use. I get lazy and sometimes grab what Justia.com has for statutes. What I should be doing: Double checking with the official state source for the latest statutes. Because amendments do happen.

Search the NMSA at https://www.nmcompcomm.us/search-laws/ for "homeowners' association act" and the following comes up: https://nmonesource.com/nmos/en/n/s/index.do?c%22homeowners%27+association+act%22&iframe=false&ncol=35 . Click on the latter and then click on Article 16. Which I expect will feel unwieldy, to say the least. As I mentioned, other states' official sources for statutes are more user friendly.

Check the online newspapers where you are and you should see glowing reports (and some not so glowing) of the NM HOA Act being passed into law in 2013.

Quote:

Posted By TammyC3 on 11/06/2020 8:04 AM
Does this have anything to do w/the price of rice in Japan:

I figure it's an Augie amateur teaching moment regarding how to research statutes to find the latest, official version (that is, the version that has all amendments). It also forces Augie to come clean about whether Augie is quoting statutes, nationwide, from a legitimate source or not. I know kindly GenoS, KerrlyL1 and Iowa Jeff are watching my humble efforts and keeping me at least a little honest on the point.

TammyC3 (New Mexico)
Posts: 102

Posted:

Thanks George,

I heeded your suggestion re: rules, laws, bylaws, statutes prohibiting.

What do you make of this:

New Mexico HOA:

Section 12. Member Meetings - - Board Meetings - et. al.:

B. All meetings of the association and the board shall be held in the state.

~

Our Bylaws are silent on the matter.

~

GeorgeS21 (Florida)
Posts: 3,808

Posted:

While I consider the language disconnected from modern methods, it is clear.

I would think an online, or phone meeting hosted by someone in the state to meet this criteria.

Further, given C19, I believe courts would support a bit more flexibility.

GeorgeS21 (Florida)
Posts: 3,808

Posted:

So, took a look online ... this is different from the 2012 draft material you excerpted ... Augustin is probably reviewing now, as well. I may have the wrong excerpt?

From 2015 ...

“ 47-16-17. Meetings of association.

A. The association shall hold an annual meeting at least once every thirteen months.

B. Notwithstanding a provision to the contrary in the community documents, written notice of the meeting stating the time, date and location of the annual meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered electronically, hand-delivered or sent by mail not less than ten and no more than fifty days before the meeting. If sent by mail, the notice shall be deemed to be delivered when addressed to a lot owner at the address as it appears in the association's records and deposited in the United States mail, postage prepaid.

C. Unless a longer period of time is required by an association's community documents, notice of the time, date and location of board meetings and drafts of any proposed policy resolutions shall be provided to lot owners at least forty-eight hours in advance electronically, by conspicuous posting, posting on the association's website or social media or by any other reasonable means as determined by the board.

D. All lot owners shall have the right to attend and speak at all open meetings, but the board may place reasonable time restrictions on those persons speaking.

E. Any portion of a meeting may be closed only if that portion is limited to consideration of:

(1) legal advice from an attorney for the board or association;

(2) pending or contemplated litigation; or

(3) personal, health or financial information about an individual member of the association, an individual employee of the association or an individual contractor for the association.

F. The association shall maintain a written copy of the minutes of all association meetings, including summaries of all agenda items and formal actions taken.

AugustinD
Posts: 5,144

Posted:

I did not do a word for word check, but the section on meetings that GeorgeS21 quoted above appears to match what is in nmcompcomm.us. I attach the entire NM HOA Act (NMSA 47-16-1 through NMSA 47-16-18) that is current as of today, printed out from nmcompcomm. By my reading it indicates that the section on meetings that GeorgeS21 quoted was added in 2019.

The NM HOA statute was enacted in 2013. From the attachment, I believe the statute was amended once in 2015 (adding a section on flag display) and a second time in 2019 (adding numerous sections concerning records inspection, conflicts of interest, meetings, removal of directors, proxies, audits, dispute resolution and applicability and maybe more)

Like GeorgeS21 posted, the section Tammi quoted appears to be from an early draft. So far I do not think it was ever a part of New Mexico law. Good catch, GeorgeS21. Tammi, I hope this does not take you all back to square one when it comes to conforming to the NM HOA Act. I would be grateful NM's HOA statute is not nearly as long and complicated as Florida's equivalent statute. I think.

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TammyC3 (New Mexico)
Posts: 102

Posted:

Augustin,

"No one else wants the job." < that threw me a curve.
New thread coming soon: Zero Members Volunteer for Directorships. Good grief! I can't wait!!

Great JFK quote. Such an era of change and progress! And pillbox hats.

As recommended, I searched online newspapers for reports. (I think) It put some things in perspective.
While searching for links for previous reply to you, I found HOA 12-B .. and read it in a different light ...

Let's see if I'm up to speed {{gears grinding}}:

Prior to 2013, the Bylaws of non profit associations were required to stay within the parameters allowed by New Mexico's Non Profit Corporations Article 8, 53-8-22: "... board meetings may be held either within or without New Mexico". ??

In 2013, NM HOA Section 12 - B.: "All Meetings of the Association and the board shall be held in the state."

I wonder what this 'reining in' was based on. Could other 'rural road maintenance organizations' have been facing issues similar to ours? Oh to be a fly on the wall!

~ Given the above:

Would a board member president that is sitting in their out-of-state residence, calling a meeting to order over the phone, meet the HOA's compliance requirement of an 'in state' board meeting?

GeorgeS21 (Florida)
Posts: 3,808

Posted:

Is there an in-state board meeting requirement?

AugustinD
Posts: 5,144

Posted:

Quote:

Posted By TammyC3 on 11/08/2020 9:04 AM
Prior to 2013, the Bylaws of non profit associations were required to stay within the parameters allowed by New Mexico's Non Profit Corporations Article 8, 53-8-22: "... board meetings may be held either within or without New Mexico". ??

-- Prior to July 1, 2013, the main statute by far that applied to incorporated, non-condo, NM HOAs was the NM Nonprofit Corporation Act.

-- The section of the NM Nonprofit Corporation Act you quoted, regarding Board meetings being held either in state or out of state, is current NM law. I think this is an excellent catch by you, because you identified Thee Applicable Law for where your Board meetings are to be held.

-- The section of the NM HOA Act George quoted applies only to annual HOA membership meetings. (I may have got membership meetings and board meetings a bit muddled in my prior posts to this thread.)

Quote:

Posted By TammyC3 on 11/08/2020 9:04 AM
In 2013, NM HOA Section 12 - B.: "All Meetings of the Association and the board shall be held in the state."

No, this is incorrect. By my reading, this was never the law. It was in an early draft of the proposed law, being discussed and edited in NM House and NM Senate legislative committees. This early draft is floating around the net.

Early drafts of proposed legislation are all over the net. One has to take care to find an authoritative source for actual statutes. Whatever you have been using is not an authoritative source of anything but an early draft of the proposed law.

New Mexico statutes contain no requirement whatsoever for your HOA's board meetings to be held inside the state's borders.

Starting July 1, 2013, the main statutes that applied to incorporated, non-condo NM HOAs were the NM HOA Act and the NM Nonprofit Corporation Act. If the two statutes conflict anywhere, the NM HOA Act prevails (per the rules of statutory interpretation).

Quote:

Posted By TammyC3 on 11/08/2020 9:04 AM
Would a board member president that is sitting in their out-of-state residence, calling a meeting to order over the phone, meet the HOA's compliance requirement of an 'in state' board meeting?

This is not applicable, since there is no in state board meeting requirement.

Other observations:

-- I hope you keep reading this forum so you see how often that, nationwide, boards battle to have a full complement of directors. You all in NM are not alone.

-- Re the pillbox hats, ha.

AugustinD
Posts: 5,144

Posted:

Quote:

Posted By GeorgeS21 on 11/08/2020 9:13 AM
Is there an in-state board meeting requirement?

No.

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