Contentious Elections... Virginia HOA

Started by CurtR • 37 replies • 617 views

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CurtR (Virginia)
Posts: 8

Posted:

Hi All, well, this one is interesting. For 30+ years, the HOA has been operating under a 3-year, staggered term, system for the Board. There are 5-Board members currently.

The elections are in a few weeks, and just last month the current President did two things: a. declared that he wasn't running for re-election. b. said that he had had a discussion with the attorneys and the process and 3-year terms was improper because the Articles of Incorporation (AOI) state that the "directors serve for a period of one (1) year". Throwing everyone into a tizzy and now the Association is gearing up for a full election of all 5 Board members. I think something more sinister is possibly going on.

In the AOI it states the following:

ARTICLE VI
BOARD OF DIRECTORS
The directors shall serve for a period of one (1) year.
The directors shall select their successors. xxxxxxxx
shall be an initial Director.

along with the language in the ByLaws, which states

ARTICLE XIII -
AMENDMENTS
Section 2. In the case of any conflict between the Articles
of Incorporation. and these Bylaws, the Articles shall control;
and in the case of any conflict between the Declaration and these
Bylaws the Declaration shall control.

Which is where the current President seems to be saying that the "period = term" and the portion of the ByLaws that draws out the terms of the Board come into play.

However, if he's going to assert (along with support from the attorneys), the first part, then they can't throw out the second part, which would make the elections as defined in the ByLaws unnecessary because "directors shall select their successors". Could that be his angle, that he's not running again because he doesn't need to, he can just select himself again.

There's a lot of discussion on procedures, proxies and how to hold the Membership Meeting with COVID, but that might be distracting.

Any thoughts on this one, or barking up a wrong tree?

JohnC46 (South Carolina)
Posts: 14,265

Posted:

I say it is clear. One year terms though I personally prefer staggered terms.

MaxB4
Posts: 3,513

Posted:

I think there is more to this than what is posted.

The directors shall select their successors. xxxxxxxx
shall be an initial Director.

I believe this passage might be for the original directors, but not subsequent directors.

Your information will be in your Bylaws.

AdamL1 (UnitedStates)
Posts: 559

Posted:

Directors to select their successors? wooo, this will get interesting.

AugustinD
Posts: 3,698

Posted:

Is this a condominium? Or is this a single family home HOA subdivision?

Do the Articles of Inc say anything about members/owners having voting rights?

From the Virginia Nonstock Corporation Act:

If the corporation has members with voting privileges, directors shall be elected at the first annual members' meeting and at each annual meeting thereafter unless their terms are staggered under § 13.1-858.

Can you post the Articles of Incorporation in their entirety, with identifying information redacted?

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By CurtR on 09/17/2021 12:09 PM

ARTICLE VI
BOARD OF DIRECTORS
The directors shall serve for a period of one (1) year.
The directors shall select their successors. xxxxxxxx

At least post the entirety of Article VI. I see language like this on the net but it pertains to the directors selecting successors to officers.

There's a substantive and legal difference between an officer and a director.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By MaxB4 on 09/17/2021 12:42 PM
I think there is more to this than what is posted.

The directors shall select their successors. xxxxxxxx
shall be an initial Director.

I believe this passage might be for the original directors, but not subsequent directors.

Your information will be in your Bylaws.

That was my first take on it, the rules governing an HOA while under developer control can be different. But there will be language in there somewhere stating that this only applies to the developer and the homeowners who serve on the board during the period prior to transition to full homeowner control.

CurtR (Virginia)
Posts: 8

Posted:

Here are the entire Articles of Incorporation. It doesn't say anything (as I've seen in others) about "the first meeting" etc of the Board)
(sorry for any typos, it's from a rough scan... yes, the end of the one section is missing even from the version posted on the HOA's website)

ARTICLES OF INCORPORATION
OF
XXXX HOMEOWNERS ASSOCIATION
This is to certify that I, the undersigned, do hereby
establish a corporation under the provisions of, the Virginia:Non-
stock corporation Act, Chapter 10 of Title 13.1 of the Code of
Virginia for the purposes and in the name hereinafter stated and
to that end set forth the following:

ARTICLE.I
The name of the corporation is XXXXXX hereafter called the Association.

ARTICLE II
The initial registered office of the Association is located
at XXXX

ARTICLE III
XXXXX an initial director and resident of the
Commonwealth of Virginia, whose address is XXXX, is
hereby appointed the initial registered agent of this
Association.

ARTICLE IV
PURPOSE AND POWERS OF THE ASSOCIATION
This Association does not contemplate pecuniary gain or
profit to itself or to the members thereof, and the specific
purposes for which this Association is formed are to provide for
the preservation, maintenance and management of certain community
land and facilities located within the community known as XXXX.
Subdivision, Lots XXX through XXX,- both
inclusive/ and, lying in the city of XXXX, Virginia, as
recorded in the land records of the City of XXX,
together with any additions thereto, and more fully
provided in the Declaration of Covenants, Conditions and
Restrictions, and to provide architectural control for the
residential properties located therein, and to promote the

ARTICLE V
MEMBERSHIP AND VOTING RIGHTS
Membership and voting rights shall be ab set forth in the
Bylaws of the Association

ARTICLE VI
BOARD OF DIRECTORS
The directors shall serve for a period of one (1) year
The directors shall select their successors. XXXX
shall be an initial Director.

ARTICLE VII
DISSOLUTION
The Association may be dissolved with the assent given in
writing and signel. by not lass than two-thirds (2/3) of each
class of members. Upon dissolution of. the Association, other
than incident to a merger or consolidation, the *assets of the
Association shall be dedicated to an appropriate public agency to
be used for purposes similar to those for which this Association
was created. In 'the event that such dedication is -refused
acceptance, such assets shall be, granted, conveyed and assignod
to any nonprofit corporation, association, trust or other
organization to be devoted to such similar purposes.

ARTICLE VIII
DURATION
The corporation shall exist perpetually.

ARTICLE IX
AMENDMENTS
Amendment of these Articles shall require the assent of
Seventy-Five percent (75%) of the entire membership.

CurtR (Virginia)
Posts: 8

Posted:

So, do you think the language in 13.1-855 and 13.1-858 would take over after the first meeting, even without other language in the Articles?

MaxB4
Posts: 3,513

Posted:

The terms and how many will be found in your Bylaws. Forget those AOI.

CurtR (Virginia)
Posts: 8

Posted:

The current President is pushing our Property Management company (with support from the HOA's attorneys) that the 1-year period is what we need to run under, so this election is being run as if all the Board positions are up for election.

CurtR (Virginia)
Posts: 8

Posted:

This is the ByLaw language regarding Terms:

Section 2. Term of Office. The Board of Directors shall be
divided into three (3) classes of membership as near equal in
number as possible, with the term of office of one class expiring
each year. At the first annual meeting of Members, Directors of
the first class shall be elected for three (3) years, the
Directors of the Second class shall be elected for two (2) years
and the Directors of the third class shall be elected for one (1).
year. Thereafter, at each annual meeting of the Members, the
successors to the class of Directors whose terms shall then
expire shall be elected for a term of three (3) years. When the
aggregate number of Directors is changed, any increase or
decrease shall be so apportioned among the classes so as to make
all classes as nearly equal in number as may be possible. No
decrease in the aggregate number of Directors shall shorten the
term of any incumbent Director.

I agree that this addresses the Board question in the AOI. There's no conflict because there are references in this to "At the first annual meeting of Members..." and then it states "Thereafter..."

So, I'm not sure where the President is coming from...

CathyA3 (Ohio)
Posts: 6,299

Posted:

Quote:

Posted By CurtR on 09/17/2021 1:49 PM
This is the ByLaw language regarding Terms:

Section 2. Term of Office. The Board of Directors shall be
divided into three (3) classes of membership as near equal in
number as possible, with the term of office of one class expiring
each year. At the first annual meeting of Members, Directors of
the first class shall be elected for three (3) years, the
Directors of the Second class shall be elected for two (2) years
and the Directors of the third class shall be elected for one (1).
year. Thereafter, at each annual meeting of the Members, the
successors to the class of Directors whose terms shall then
expire shall be elected for a term of three (3) years. When the
aggregate number of Directors is changed, any increase or
decrease shall be so apportioned among the classes so as to make
all classes as nearly equal in number as may be possible. No
decrease in the aggregate number of Directors shall shorten the
term of any incumbent Director.

I agree that this addresses the Board question in the AOI. There's no conflict because there are references in this to "At the first annual meeting of Members..." and then it states "Thereafter..."

So, I'm not sure where the President is coming from...

That looks like staggered 3-year terms to me. The variable length of terms at the fist annual meeting creates the staggering.

Somewhere the classes of membership of the board and the duties should be defined - there must be some reason to differentiate since any successor director is elected to a 3 year term. Do you maybe have a mixture of single family homes, townhomes and/or condos? Having classes of membership would help ensure having proportional numbers of director spots instead of, say, having a board made up entirely of single family home owners.

MaxB4
Posts: 3,513

Posted:

The terms are three years. There is an annual election each year whereby one director's term will expire. The term, once elected, will be for three years. At some point, the association will need to restart the proper procedures as set forth in the Bylaws.

This was a no-brainer, but with support from idiots, things may remain the same.

AugustinD
Posts: 3,698

Posted:

Short answer:
Consistent with like everyone's instincts, under Virginia law, I believe the owners should be electing the directors.

Long answer:

First, per the Articles of Incorporation (AoI), the HOA corporation is established "under the provisions of, the Virginia:Non-stock corporation Act, Chapter 10 of Title 13.1"

Second, some chatter from case law nationwide: a "corporation is a creature of statute, acquiring its existence and authority to act from the state." Charles Keating & Gail O'Gradney, Fletcher Cyclopedia of the Law of Private Corporations § 3635, at 226 (1990)."Where the articles of incorporation or the bylaws conflict with the statute, the statute controls. 7A Fletcher, at 226-27 (1989)."

Third, some chatter from Virginia Courts:
"A settled rule of statutory construction is that "f
apparently conflicting statutes can be harmonized and effect
given to both of them, they will be so construed." Albemarle
County v. Marshall, 215 Va. 756, 761, 214 S.E.2d 146, 150 (1975);
Blue v. Virginia State Bar, 222 Va. 357, 359, 282 S.E.2d 6, 8
(1981). We think that this rule is equally applicable when there
could be a conflict between a statute and corporate bylaws, and
the bylaws may be construed to avoid that conflict."

This was an appeal of a decision involving a dispute between a HOA and an owner in the HOA. See https://law.justia.com/cases/virginia/supreme-court/1995/1950256.html

Fourth, I think the Virginia Courts would say the same thing about a conflict between a statute and the articles of incorporation.

Fifth, the Articles of Incorporation have both internal conflicts and conflicts with the Nonstock Corporation statute and bylaws, pertaining to how directors are selected.

Sixth, the AoI at VI says the members have voting rights as given in the Bylaws. Be aware that this is the AoI saying the voting rights are as given in the Bylaws. This means everything from the Bylaws on the subject of the voting rights is now for all lawful intents and purposes incorporated into the AoI.

Seventh, with the voting rights in the Bylaws now in the AoI, the AoI has an internal conflict about how directors are selected. Are they selected by an owners' vote, or to the incumbent directors select their directors?

Eighth, the Virginia Nonstock Corporation Act, § 13.1-855. Number and election of directors, states:D. Directors shall be elected or appointed in the manner provided in the articles of incorporation. If the corporation has members with voting privileges, directors shall be elected at the first annual members' meeting and at each annual meeting thereafter unless their terms are staggered under § 13.1-858.

Ninth,applying what Virginia courts say and also the rule that the corporation is first and foremost subject to the Virginia Nonstock Corporation Act, the conflict is resolved in favor of
both (1) letting the Bylaws, as authorized by the AoI, control the election of directors; and (2) letting the statute control, in particular the section saying directors shall be elected at the owners' annual meetings. (Take your pick.)

Tenth, anyone upset about the fact that the AoI says "directors shall select their successors" should go back to the Virginia case law cited above. This language is to be interpreted as the directors arranging for the annual meeting with the understanding that the annual meeting selects their successors.

CurtR (Virginia)
Posts: 8

Posted:

It's all Townhomes.

Initially, there were two classes of Membership. The Class A Members were the homeowners, where the Class B members were the "Declarant" (aka Developer), which were all converted to Class A once 75% of the community's lots were purchased by individuals. Well past that as the community was developed in the early 1990's.

In the ByLaws the language about classes in the "Term of Office" section was confusing, I'm pretty sure it meant that since you can't work into three staggared terms starting at the same time, you'd split the Board seats into three "classes" (like Class of 2021, Class of 2022, Class of 2023) as evenly as possible, then assign the first Board seats that correspond to those.

AugustinD
Posts: 3,698

Posted:

I say each director's term is one year. The Bylaws say Bylaw conflicts with AoI are to be resolved in favor of AoI. AoI says the terms are one year. The AoI do not conflict with statutes.

BenA2 (Texas)
Posts: 1,273

Posted:

Quote:

The problem is that the Articles of Incorporation are higher rank than the Bylaws, according to the hierarchy of documents. If there is a contradiction the document that ranks higher wins. Is there anything in the CC&Rs about elections?

The usual Hierarchy of Documents is:

1. FEDERAL, STATE, & LOCAL LAWS
2. RECORDED PLAT
3. CC&Rs
4. ARTICLES OF INCORPORATION
5. BYLAWS
6. RULES, REGULATIONS, AND GUIDELINES

It is possible this is different in Virginia but my guess is your attorney is going by this.

CurtR (Virginia)
Posts: 8

Posted:

No, not in the current CC&R's from when the community was created. (there's a revised set that have not been adopted yet)

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By CurtR on 09/17/2021 1:37 PM
So, do you think the language in 13.1-855 and 13.1-858 would take over after the first meeting, even without other language in the Articles?

When it comes to how long each director serves, the Articles of Incorporation do not conflict with the statute. As noted above, when a conflict exists between the AoI and the Bylaws, the AoI trumps the Bylaws. The AoI say the term is one year. The Bylaws say the term is something else. The AoI wins.

CurtR (Virginia)
Posts: 8

Posted:

Great! Thanks for the feedback!

MaxB4
Posts: 3,513

Posted:

Curt,

Augie is absolutely right!

The AOI say one year. In addition, the Members no longer elect Board members, as the AOI states, the Board selects their successor.

Apparently, common sense left this site.

MaxB4
Posts: 3,513

Posted:

Curt

It is true that AOI have higher priority over a set of Bylaws, but please your AOI start to finish and look at what it is doing. It is setting up a corporation for when the developer/declarant is in control. The number of directors is the initial set of directors and a term of one year, which makes perfect sense, as it might be a quick turnover.

The Bylaws are the foundation for running the corporation, who is eligible to be a board member, the term, what happens when there is a vacancy, what is quorum, what are your officers, on and on. An attorney or anyone that understands HOA's and legal documents should see it for what it is.

Here is a link to a HOA in Virginia, http://woodstream.org/covenants-and-by-law/whoa_ccr_bylaws_guidelines/

CathyA3 (Ohio)
Posts: 6,299

Posted:

There must be something somewhere in all of those various documents that make it clear that one-year terms and directors appointing successors happens when under developer control, not after transition to homeowner control. Otherwise, there would no need for elections or annual meetings at all, and clearly these things are called for.

If there is no qualifying language - and the fact that the HOA attorney agrees with the nonsense does give me pause - then those documents were badly written and need to be amended. Because this is not a workable scheme, and I've never heard of a single HOA that functions this way except while the developer is calling the shots. Who would buy in HOAs under such conditions?

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By MaxB4 on 09/17/2021 3:43 PM
as the AOI states, the Board selects their successor.

Nope. The members elect directors pursuant to their voting rights as authorized by the AOI's express reference to the bylaws and pursuant to state statute.

The AOI is still a contract, but with flaws resolvable by long-established rules.

MaxB4
Posts: 3,513

Posted:

Quote:

Posted By AugustinD on 09/17/2021 6:06 PM
Posted By MaxB4 on 09/17/2021 3:43 PM
as the AOI states, the Board selects their successor.

The AOI says the directors select their directors, so what rule do you suggest people use? As far as voting rights, under your interpretation, they can vote on anything other than directors, as they have that taken care of.

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By MaxB4 on 09/17/2021 6:29 PM
The AOI says the directors select their directors, so what rule do you suggest people use? As far as voting rights, under your interpretation, they can vote on anything other than directors, as they have that taken care of.

Asked and answered above.

The HOA attorney so far seems to be letting the owners vote on directors. The HOA attorney has also declared that the terms are one years. Per the rules of interpreting contracts (including AoI) with contradictory provisions, I think the HOA attorney got everything right.

MaxB4
Posts: 3,513

Posted:

Curt

Augie has no clue to what he is talking about.

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By MaxB4 on 09/17/2021 6:50 PM
Augie has no clue to what he is talking about.

Come on. Even you know that, when the governing documents conflict with state statute, the state statute prevails. Even you should understand that the state statute's provision on how directors are selected conflicts with the AoI. Even you should be able to conclude, "This means the state statute provision prevails."

That "shall" in Virginia Nonstock Corporation statute section 13.1-855 is not there for nothing.

MaxB4
Posts: 3,513

Posted:

The language in the AOI was for the initial setup. Even my grandson can figure that out.

According to the AOI, how many directors should there be?

Is this how you would run an association, we'll use a line from here, a line from this, a couple from the third? Everything spells "initial", both Article II and Article III.

If you were an attorney, and that's a big if, the association would be bankrupt. A 5-minute look over has turn =ed into how many hours?

AugustinD
Posts: 3,698

Posted:

Quote:

Posted By MaxB4 on 09/17/2021 7:13 PM
The language in the AOI was for the initial setup.

The judge would say, "There's no evidence of this. Got anything else, counselor?"

This is a two-minute exercise for any competent HOA attorney: Terms are one-year. The owners elect the directors.

MaxB4
Posts: 3,513

Posted:

Quote:

Posted By AugustinD on 09/17/2021 7:21 PM
Posted By MaxB4 on 09/17/2021 7:13 PM
The language in the AOI was for the initial setup.

The judge would say, "There's no evidence of this. Got anything else, counselor?"

This is a two-minute exercise for any competent HOA attorney: Terms are one-year. The owners elect the directors.

I have been interpreting HOA docs for a number of years and have never been sued, which in layman's terms, probably means I got it right.

MaxB4
Posts: 3,513

Posted:

Augie's quote, The judge would say, "There's no evidence of this. Got anything else, counselor?" and my response would be, from the OP's initial post, For 30+ years, the HOA has been operating under a 3-year, staggered term, system for the Board. , Rest my case!

MaxB4
Posts: 3,513

Posted:

Anyone, other than Augie, find it strange that after using the Bylaws for 30 years, the president who is not running has a come to Jesus moment and now decides that they had been doing it all wrong for all these years. And god knows, an attorney could never, ever, get anything wrong.

SheilaJ1 (South Carolina)
Posts: 291

Posted:

It’s 3 years after the builder has left.. Bylaws do not conflict with the va corp code. So obvious.

The law is just meant to keep the terms staggered.

Who’s saying 1 year? I do see no conflict.

SheilaJ1 (South Carolina)
Posts: 291

Posted:

You also have to look in the articles of incorporation not just bylaws. For our community they have it clearly stated it’s 3 years.

SheilaJ1 (South Carolina)
Posts: 291

Posted:

13.1-857. Terms of directors generally.
A. In the absence of a provision in the articles of incorporation fixing a term of office, the term of office for a director shall be one year

SheilaJ1 (South Carolina)
Posts: 291

Posted:

§ 13.1-814.1. Special provisions for community associations.

B. Notwithstanding the requirements of §§ 13.1-851, 13.1-852, 13.1-855, 13.1-856, 13.1-857, 13.1-858 and 13.1-862, the provisions set forth in those sections need not be set forth in the articles of incorporation of a community association and shall be effective if set forth in the bylaws.

Obviously 13.1-857 is the important one.

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