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OK for board to impose standard eligibility requirements for director candidates even though the bylaws don't include them

Started by ChrisE823 replies • 499 views

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ChrisE8
Posts: 454
Posted:
Is this appropriate?

The bylaws of the HOA contain very few requirements about board eligibility:

1. There is an annual meeting and which board elections occur.
2. The president appoints two inspectors of election who are not directors.
3. When a board member ceases to be an owner of a home in the HOA (unless s/he is married to an owner), s/he ceases to be a board member.
4. A majority of the board must be residents in the HOA.
5. The original developer can continue to fill 3 seats on the board (which is a minority of 7 directors), even though the HOA is no longer under developer control.

That's it.

The board announced that:

A. All directors and director candidates are requested to sign a conflict of interest statement (which is standard and has been approved by the board; it prohibits a director from having an interest in any transaction with the HOA, or an interest in any company that does business with the HOA). At the annual meeting, the board will announce which directors and which director candidates have not signed the conflict of interest statement.
B. All directors and director candidates are requested to be current on their HOA dues and other charges. The board did not say if any delinquent candidates will be announced or not; I do not think that they will be.
C. Any director who is not an owner of record of a home in the HOA will not be eligible to serve as a director (other than the 3 developer directors), based on item 3 above.

Do you think that these actions are appropriate?

One board candidate, who is a relative of the CEO of the developer, and who lives in the HOA but whose home is owned by the developer's company, objects. The developer's company is late on dues on her home (and other homes in the HOA that the company owns). The candidate apparently is a partial owner of the developer's company and so the candidate states that the candidate is an owner, through an interest in the developer company.

To me the board's actions seem reasonable, but items A and B are not in the bylaws; they were just approved by the board. I think that the board has a very strong basis for item C, although the bylaws could be clearer about what counts as an owner.

If the board candidate gets on the board, then the developer's company will control the board (and both the CEO of the developer's company and his relative will both be on the board).

Thanks.

JohnC46 (South Carolina)
Posts: 14,265
Posted:
Chris

I say A is a rule A BOD could implement. Personally, I think it is useless as cheaters cheat.

B & C could get tricky as they might override Bylaws in some associations. That said, I personally like B & C.
ChrisE8
Posts: 454
Posted:
Thanks!

To clarify:

A and B are just requests by the board. Nobody will be banned from serving if the person won't sign the conflict of interest statement or is late on dues, but if people find out that a person didn't sign the conflict of interest statement, surely it would make it hard to win.

C seems to be OK in accordance with the bylaws, although the bylaws don't clearly say "you have to be the record owner of a home in order to be a director". But taking that position is reasonable.

Thanks again.
AugustinD
Posts: 5,144
Posted:
Quote:
Posted By ChrisE8 on 12/06/2020 9:21 AM
The bylaws of the HOA contain very few requirements about board eligibility:

1. There is an annual meeting and which board elections occur.
2. The president appoints two inspectors of election who are not directors.
3. When a board member ceases to be an owner of a home in the HOA (unless s/he is married to an owner), s/he ceases to be a board member.
4. A majority of the board must be residents in the HOA.
5. The original developer can continue to fill 3 seats on the board (which is a minority of 7 directors), even though the HOA is no longer under developer control.

That's it.

The board announced that:

A. All directors and director candidates are requested to sign a conflict of interest statement (which is standard and has been approved by the board; it prohibits a director from having an interest in any transaction with the HOA, or an interest in any company that does business with the HOA). At the annual meeting, the board will announce which directors and which director candidates have not signed the conflict of interest statement.
As I am sure you know, "requested" is not the same as "required." In my experience with the case law, requiring this is emphatically not lawful. The courts have been clear that only requirements listed in the bylaws are allowed.

The choice of wording the board made is interesting. As if they may not be sure they are on solid legal ground and want to CYA's.

The board may get away with "requested," as long as the board does not pretend that "requested" means "required."
Quote:
B. All directors and director candidates are requested to be current on their HOA dues and other charges. The board did not say if any delinquent candidates will be announced or not; I do not think that they will be.
For the most part, see my response above. On the other hand, the Board may be on stronger legal ground to require that the person not be delinquent.
Quote:

C. Any director who is not an owner of record of a home in the HOA will not be eligible to serve as a director (other than the 3 developer directors), based on item 3 above.
This seems correct to me.
SheliaH (Indiana)
Posts: 6,964
Posted:
I hope you're not talking about the community where you had your rental property - You WERE selling that one and the closing is fast approaching, right? If so, stop worrying about that association - the new owner will have to read the documents and ask appropriate questions and what this does or doesn't do won't be your problem once the paperwork is signed.

That said, I don't have a problem with the requirements, although they'd have sharper teeth if they were written in the Bylaws. Maybe you feel differently and that's OK, but I don't want delinquent homeowners making decisions that will affect me. They're not even paying their share of assessments that keep The ball lace going and now they want to decide who The vendors will be? No, no, no!

The rule on the conflict of interest doesn't appear to be a requirement because it said request, not require. Even so, I want board members to understand the appearance of a conflict of interest is just as bad a having one, so they should be avoided. If you have one and can't fix it, refrain from any vote and discussion of the topic related to the conflict. It's a shame this isn't something thinking people can't figure out without it being written down so if this is what's necessary, ok.

Finally, I only want homeowners who actually own property in the community to serve on the board. Otherwise, how can I be sure they truly have my interests in mind when they vote?
what In the hell are they doing there anyway? At least a property manager has a motive - he or she probably doesn't want the community to go to shit because they lose a client, and therefore money.

Is this community developer controlled is not? If so it makes sense for them to make sure the board dances to their music, so I hope the other homeowners pick up on the conflict and ask questions. Better yet, don't vote for that candidate. If the community is controlled by the homeowners, this should drive home the idea that it's past time to amend those documents to delete all references to the developer. That can help ensure the developer doesn't dominate the board and the decisions it makes.


If it is not right do not do it; if it is not true do not say it. Marcus Aurelius
ChrisE8
Posts: 454
Posted:
Thanks.

This is not the NC community where I owned a property. That's been sold.

This HOA is not under developer control.
KerryL1 (California)
Posts: 14,550
Posted:
So, chris, is this the HOA in NYC you're trying to sell? Where you used to live?
SueW6 (Michigan)
Posts: 814
Posted:
Do your bylaws give the board the right to make rules and regulations?

For example, our bylaws say that only members can use the beach area, and the board sets the hours that the beach is open.
CathyA3 (Ohio)
Posts: 6,299
Posted:
I can understand why some of the proposed requirements are desirable, but I don't think the board can impose anything without amending the bylaws. Especially in cases where the new requirements contradict the existing bylaws, since the bylaws supersede any rules and regulations.

For what it's worth, in my community only those owners whose accounts are paid in full may vote (this is actually in our Declaration, which requires the board to suspend voting rights for any owner who owes the association anything). Neither the Declaration nor the bylaws say anything about any eligibility to serve on the board beyond being an owner, though. This is odd, since one of the board's duties is to deal with collections - a delinquent board owner has a conflict of interest by definition.
AugustinD
Posts: 5,144
Posted:
Quote:
Posted By CathyA3 on 12/07/2020 5:32 AM
For what it's worth, in my community only those owners whose accounts are paid in full may vote (this is actually in our Declaration, which requires the board to suspend voting rights for any owner who owes the association anything). Neither the Declaration nor the bylaws say anything about any eligibility to serve on the board beyond being an owner, though.
I think the legal thinking on this has evolved some. About fifteen years ago, one of the few HOA attorneys I respect where I live said delinquent owners could not serve on the board. The Bylaws expressly suspended the membership voting rights of those who were delinquent, but said nothing about a delinquent owner being prohibited from serving on the board. He said something about how this justified not allowing delinquent Owners to become directors.

But this has received more attention in recent years. For example, in California, by statute, a HOA/condo is prohibited from disallowing delinquent owners to serve on the Board.

I am not sure this attorney I know feels the same way on the point.

I think there is some logic to this. Some Owners don't pay because they think the HOA/condo is being poorly run and they are not getting their money's worth. Delinquent Owners wanting to serve to get the HOA/condo back in shape arguably have appropriate motivation.

Granted some delinquent owners who loathe the HOA/condo may have as their mission dissolution of the HOA/condo. But this is their right. It's democracy at its best?

Quote:
This is odd, since one of the board's duties is to deal with collections - a delinquent board owner has a conflict of interest by definition.
Right. Some states require at least disclosure of such a conflict of interest.
JohnC77 (California)
Posts: 562
Posted:
Actually, in California, HOA's can adopt rules prohibiting delinquent owners from serving on a Board.
AugustinD
Posts: 5,144
Posted:
Quote:
Posted By JohnC77 on 12/07/2020 12:04 PM
Actually, in California, HOA's can adopt rules prohibiting delinquent owners from serving on a Board.
Actually, a flat-out prohibition on all delinquent owners is not allowed. More at https://www.davis-stirling.com/HOME/Candidate-Qualifications
JohnC77 (California)
Posts: 562
Posted:
Quote:
Posted By AugustinD on 12/07/2020 1:31 PM
Posted By JohnC77 on 12/07/2020 12:04 PM
Actually, in California, HOA's can adopt rules prohibiting delinquent owners from serving on a Board.
Actually, a flat-out prohibition on all delinquent owners is not allowed. More at https://www.davis-stirling.com/HOME/Candidate-Qualifications

Well, I wrote 23 Election Rules, effective for January 1, 2020 and they all prohibited owners from running if they were delinquent unless they has entered into a payment plan.
AugustinD
Posts: 5,144
Posted:
Quote:
Posted By JohnC77 on 12/07/2020 1:45 PM

Well, I wrote 23 Election Rules, effective for January 1, 2020 and they all prohibited owners from running if they were delinquent unless they has entered into a payment plan.
Yup, as shown at the aforementioned davis-stirling site.
JohnC77 (California)
Posts: 562
Posted:
Quote:
Posted By AugustinD on 12/07/2020 1:47 PM
Posted By JohnC77 on 12/07/2020 1:45 PM

Well, I wrote 23 Election Rules, effective for January 1, 2020 and they all prohibited owners from running if they were delinquent unless they has entered into a payment plan.
Yup, as shown at the aforementioned davis-stirling site.

Actually the rules were written off the actual legislation, not the davis site.
GenoS (Florida)
Posts: 4,276
Posted:
Florida, too, prohibits delinquent owners from running for a seat on the board. Curiously, Florida does not prohibit delinquent owners from being on the board; the restriction is that they cannot be a candidate on a ballot. The third leg of this stool in Florida is that a Director on the Board who becomes 90 days delinquent in any money owed to the association is automatically, by statute, deemed to have abandoned their seat on the board, thereby creating a vacancy.
AugustinD
Posts: 5,144
Posted:
Quote:
Posted By JohnC77 on 12/07/2020 1:50 PM
Actually the rules were written off the actual legislation, not the davis site.
Non sequitur.
KerryL1 (California)
Posts: 14,550
Posted:
The davis-stirling site discussion DOES have the actual civil code in it to click on.

A delinquent owner in CA may not be a candidate for the Board, and continuing to serve UNLESS they're in a payment plan or in IDR
JohnC77 (California)
Posts: 562
Posted:
Quote:
Posted By AugustinD on 12/07/2020 4:40 PM
Posted By JohnC77 on 12/07/2020 1:50 PM
Actually the rules were written off the actual legislation, not the davis site.
Non sequitur.

What?// You forgot how to speak English?
JohnC77 (California)
Posts: 562
Posted:
Quote:
Posted By KerryL1 on 12/07/2020 5:21 PM
The davis-stirling site discussion DOES have the actual civil code in it to click on.

A delinquent owner in CA may be a candidate for the Board, and continuing to serve UNLESS they're in a payment plan or in IDR

Actually, unless an Association drafted new elections rules, delinquent owners can serve on Boards and be candidates. They could have that qualification in their Bylaws or CCRs, but they must have election rules.
TimB4 (Tennessee)
Posts: 21,061
Posted:
I wish to point out that A & B were requests, not requirements.

C being enforceable would depend on the wording in the governing documents.
GeorgeS21 (Florida)
Posts: 3,808
Posted:
I personally like provisions in CCRs/Bylaws that prevent owners in arrears to the HOA from being on the Board.

OTOH, if the membership is dumb enough to vote for them when they know they are in arrears ...

Then, there is the situation where a member is elected to the Board for three years - then, they decide to stop paying assessments, or start accruing fines - and, refuse to step down ... scenario creates a very negative environment on the board and would, I believe, tend to make those on the board or considering being on the board, want to walk away.
GenoS (Florida)
Posts: 4,276
Posted:
Quote:
Posted By GeorgeS21 on 12/08/2020 6:16 AM
... OTOH, if the membership is dumb enough to vote for them when they know they are in arrears ...

That's a pretty low bar.

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