Annual Meeting Nightmare

Started by PWells • 18 replies • 2817 views

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PWells (Washington)
Posts: 34

Posted:

(Washington State)

I am still shock of what happened at our annual meeting.

We host a 30 open forum for owners before we call the meeting to order. This gives our owners a chance to ask questions or point out things they are concerned about.

The open forum went fine. It was once the meeting was called to order and announced that we only had 34% out of the required 51% needed to vote down the budget. Owners became more verbally during our Annual Meeting.

Owners were so mad that we didn't have the 51% and demanded a new meeting with more detailed information. They also asked if all owners could vote via mail. Which we informed owners that the budget could not be voted on via mail because of our CC&R's. So they continued to demand a new meeting and yelling at the board.

We discussed the possibility of having another meeting but we needed to make sure what our CC&R's stated first. And we informed them that we would make sure if we could before any official decision could be made.

Our manager was no help what so ever. We asked her to confirm things with our CC&R's. Which she failed to bring with her. We asked to refer to certain bills. Which she didn't have with her either.

We adjourned the meeting. And told owners to watch the mailbox kiosks and possibly their mail for any announcements. That we would come out with an official answer to whether we would or could have a new meeting. That we needed to double check our CC&R's. And our meeting may already be considered our Annual Meeting due to the fact that the total percentage of owners present has been announced. Threats and names were thrown at board members and management. It started getting ugly.

thankfully owners left faster then they arrived. Our manager admitted she failed to bring the documents needed. And apologized continually about it.

The next morning 2 board members had a meeting with the owner of the management company. To bring her up to speed on what happened. Needless to say she was ashamed of how poorly prepared her rep was. And she'd handle that issue.

She also pointed out the fact that our HOA is very unusually for allowing the owners to attend our monthly meetings, having open forums for owners and that we given the owners to much power of the activity of the board.

She recommend that we close our but the 2 required meetings to owners. And host the other 11 meetings off site.
I asked what can we do about what happened. Was the budget ratified since the percentage was announced at the meeting? If so we'd like a letter published to owners about the situation and that there would be no new meeting. And why.

Tonight we have a workshop with the owner of the property management company and our attorney. To review the notes that were taken. Review our CC&R's. Then decide what the next step is. I already know if we do not allow owners to our monthly meetings and have our meetings off site. And enforce the budget that owners refuse to address. Owners will not only become angry but they will accost board members in public locations. They've done it before.

Because the percentage was announced does this meeting our Annual meeting was legal and we do not have to have a new meeting?

I really don't want to force a budget on owners because of the prior behavior owners have shown the board outside of meetings and off the property.

Right now when I leave my unit I watch my back and my sons. Because we've been cornered in the grocery store by an owners that was screaming at us because we gave her a parking ticket for her car parked in open, unassigned parking area that had 3 month old expired tabs.

Uggg!

SusanW1 (Michigan)
Posts: 5,202

Posted:

Not clear on what you need to know. You said - it was "announced that we only had 34% out of the required 51% needed to vote DOWN the budget"

What does that mean? What EXACTLY was the vote (on the motion to approve the budget?) It sounds like the motion for approval PASSED. ???

(You could call a Special Meeting and approve the budget IF your bylaws or covenants all Special Meetings.)

Jadedone4 (Virginia)
Posts: 495

Posted:

PWells,

I agree with Susan that IF your doc's allow for a Special Meeting call one.

Some on here would probably tell your board to develop a "backbone;" however, I would advise you that each board member is a fiduciary of the community. As such you are required to wear two main hats - board member/fiduciary, and then neighbor. One is not generally "more" important than the other - however, at times they can be equally uncomfortable to wear, and carry.

Yes the PM from your MC *should* have have the doc's at the meeting. But the board is *required* to have them there - don't expect the MC to omnipotent - do your due diligence first. The PM *should* be better versed in your doc's; however the board *must* be better versed - inorder to properly provide direction to the PM/MC on what policy the community has adopted for the PM/MC to engage. Being a "HOA Jeopardy" champion is not necessary, but you do need to be able to find the information and understand how it connects to your community's other doc's and how they are applied in "real time" situations. One of which would be the criteria Susan mentioned (ability and legality of calling a Special meeting if necessary).

While NO board member deserves to be "accosted" during, after or anyway related to duties as a body - it does happen that every community has a "personality" which the board should tap into. This personality is what will determine the appropriate levels of interaction and communication the fellow owners will expect of the board. Also try to do one step beyond that - so that everyone feels part of the process, and also that you have executed your board's due diligence to the community.

I am NOT versed in Washington state law/code; however many states have sunshine laws/open meeting requirements. If your jurisdiction has this on the books, your PM/MC was flat out wrong about the limiting of owner's ability to attend, speak and be involved in community affairs, via meetings. And I would also add (strictly MY opinion) that to even consider such a stance is not only counter-productive, it would also only add more fuel to the fire. The more residents are involved in the community's goverance, via information and knowledge, the less "watching your back" your board will need. You stated that your PM/MC suggested closing all but 2 of the 11 meetings - if you doc's allow this, why would you do this? There is obviously a communication or apathy problem (read/research here on apathy, everyone in an HOA deals with it - it's like the "MMR" mumps, measles, rubella of HOA's), but communcation can be easily solved - with the right mix of interaction or engaging of the community.

Move away from "forcing" a budget on membership - which to me denotes that a decision was made absent membership knowledge (consent is determined by your doc's). If a owner UNDERSTANDS the line items and their need, in the overall scope of the budget, while they may not like it, they will generally accept it (like most cold medicines). Don't fall trap to "they" and "us" camp mentality. Everyone is still a neighbor.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Pwells,
Looking from afar at you situation takes emotion out of the picture.

I suspect your efforts of management falls just short of the mark. You can be sure all this yelling and bluster has little to do with anything specific and lots to do with things in general. You sound reasonable, are you really? Where is your president in all this? Your practice of allowing an open session prior to meeting is commendable. Your surprise at what happened is telling. To me it shows the board does not have a good relationship with the owners.

It is true, you can not regulate what people will say to you in public but this is also true in relationships of all kinds. You try to keep around you your friends so that doesn't happen.

You have some nice things going on in you organization so don't change that. Take a good critical look at the make up of the board. Are you all dedicated to the association? Talk in all out among the board. Then get some of the more vocal mayesayers and discuss the situation, not board to owner but owner to owner. Go back to board and have another meeting to plan how to mitigate the problems. Come out with an announcement and list some "talking points", and call a special meeting. Contact each individual home owner by members of the board and have some information sharing. At the special meeting, set the agenda and send it to each member.
Have the meeting following Robert's rules but don't use them as a club.

There is a problem in your association that is not just about a budget. Do not, at this time, make any changes in the ritual you have followed in the past at meetings, but if that is a problem, make the changes in an open meeting.

I also bet you know what really is wrong so be sure you get that talked out with the board.

DanaA (Florida)
Posts: 117

Posted:

If you want to have a BOD that is connected with its members, instead of the "us" versus "them" memtality of BODs, please do not take the advice of your management company to shut the members out from attending future meetings. It will do more harm than good in the long run, a short term solution to a greater problem. Trust me, all of my BOD meetings are nightmares, and it is truly because my BOD is not on top of things, and only some of us on the BOD understand this, or care.

PaulM (Pennsylvania)
Posts: 1,347

Posted:

PWells: ..."It was once the meeting was called to order and announced that we only had 34% out of the required 51% needed to vote down the budget. Owners became more verbally during our Annual Meeting.."

What do you mean to "vote Down the budget"? Either the budget was approved, or it was not, by a vote taken from members at the meeting, UNLESS YOUR DOCS STATE OTHERWISE.

Don't know what you mean by..."I really don't want to force a budget on owners because of the prior behavior owners have shown the board outside of meetings and off the property." A budget needs to be created and passed based on the assn's financial condition, expenses vs. income, and for no other reasons.

There are many facts that could/should have been brought to light prior to the vote or ratification of the budget.

You have not stated how your documents define the process for the 'budget review' or who (Board and/or membership) has authority to approve the budget. Have you followed the process as outlined by your documents?

- Normally, a 'proposed' budget is mailed to the membership prior to the annual meeting so residents are informed beforehand and if they have questions, they can be addressed to the Board or Prop.Mgr. before the vote takes place.

- A complete financial report should be prepared showing last year's budget by line item and the new year's budget which is 'proposed' until it is ratified. This means residents can see 'by line item' where the increase or decrease will occur.

- The fact that the membership was very 'verbal' over the budget during the meeting says to me they had a lot of questions that were not answered, especially in view of the fact that the PM and Board were unprepared. It's unfortunate, but you can understand why residents were heated and unsatisified. Money has a way of bringing out the best/worst in people.

It is the Board who has the responsibility to assn. members to show where/how 'their' money is to be spent and why. If it takes the landscaper to speak at the meeting to explain why the increase in maintenance, then make it happen. Whatever it takes to clearly define the budget must be done.

It is extremely unfortunte that your PM was not prepared, but it was the
Board's responsibility to ensure 'someone' had the numbers and the answers to what was asked. It doesn't sound like this was a matter of discussion between the Board and PM prior to the meeting.

The budget was not ratified/approved; therefore there needs to be another meeting for this purpose which perhaps can be a 'special meeting for one purpose' to ratify the budget. I would caution you to always be open and honest with financial information. It is the single most important way to instill confidence in association members.

If you will be scheduling a special meeting, then prepare, prepare, prepare ahead of time. You may want to include in the mailing--the notice of meeting, a financial report showing past year and the new year's numbers, where/why the increase has occurred, what ways the Board is working on to spend the funds wisely (any CDs opened for Cap.Reserve Funds, reviewing maintenance costs with other contractors, etc.) AND (IMPORTANT!) a recap from your documents confirming that the Board will be following the budget
process AS SPECIFIED in your documents, as well as the process/schedule for
holding member meetings.

As long as you are following the documents, that is your duty. And, if members want an amendment change to what the docs state, well, that is another story.....

Good Luck and keep us posted on your progress.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

DanaA,
You are now cutting close to the bone my friend. Excellent post.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Paul,
Two in a row, another excellent post.

ArthurG2 (Florida)
Posts: 15

Posted:

PWells.

Hi. I am on the board of an HOA and a licensed Community Association Manager. I am also a parliamentarian (bylaws and Robert's Rules). I have dealt with bylaws and covenants for years. I might be able to help with your dilemma in some way.

First of all, we have CC%Rs and bylaws. You should too. In fact, your state laws dictate that you have bylaws. The CC%Rs dictate the use of the land. The bylaws dictate your organizational structure. Your laws DO require your homeowners to vote on the budget. After your board passes it themselves, they give it to you to vote on. And, yes, your laws do say that unless a majority (51%) of your homeowners reject the budget, it is considered RATIFIED. Our budget procedure is in our bylaws. I suspect yours is too. Our budget is adopted by our board. We do not have to have the homeowners ratify it.

You say your owners want a special meeting. Your laws allow for special membership meetings, called by the president or a majority of the board or by 10% of the members, with notice of at least 14 days. Without seeing your documents, I can't say for sure, but Robert's Rules (if that is your authority) say many things that are adopted can be amended or rescinded.

If you could somehow email me or send me a copy of your bylaws and CC%Rs, I might be able to help. My email is [email protected].
I can give you my phone number as well, if you need it. We can talk.

Your state laws state that all board meeting shall be open to the owners. Your management company is WRONG in telling you to hold your monthly board meetings off site somewhere, and not allowing owners to be there. That comes from state law 64.38.035, if she would care to read it. Open forums are something that is up to the board, as well. The Board can suspend the agenda and allow owners to speak. Actually, members are free to gather in the room to talk before the board meeting anyway. They usually do.

I would say your board does give too much power to the owners to dominate the meeting. They should all be asked to either sit down or to leave the meeting. The board meeting is for the board, not the owners. The president has the power to remove offenders.

Your state law says (and I quote) "all meetings of the board of directors shall be open for observation by all owners of record and their authorized agents." As I read that, you cannot close your regular monthly board meetings to the owners, unless you go into executive session. You must post them and leave them open, unless you go into executive session. We cannot close our monthly meetings to the owners. They could sue us for that.

Judging from what I hear from you, I would make your management company prove what they say. Otherwise, they will steer you into legal trouble. It happens with lots of them.

As for the legality of the meeting. As I read the state law, as long as you had at least 34% of your membership there, in person or by proxy, it was a legal membership meeting. However, your state law allows for special membership meetings to do most anything you want.

Again, if you could fill me in more on what is going on, I might be of some help. We have had similar problems with my board.

Art (Florida)

PaulM (Pennsylvania)
Posts: 1,347

Posted:

ArthurG2: YOU are a breath of fresh air on this day of Christmas Eve!!!
It is good of you to offer a 'professional post' to PWells situation. Thank you.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

ArthurG2,
Yesterday I attended a stage production of Camelot.
He could have used your services, almost as much as those of us who post on the site.
We tend to be "right fighters", to our detriment.

A clinical evaluation is always welcome here, and needed, in my opinion.

I agree with Paul.

GloriaM (North Carolina)
Posts: 829

Posted:

PWells:

This is one reason to hold your open forum at the end of a meeting and not the beginning. #1 by opening the meeting you would need to establish a quorum of that meeting. The other reason to hold the Q&A at the end, is that many times the Owners questions are answered during the meeting, and if not they can write their questions down and ask at the end.

Does your CCR's call for the budget to be ratified? And if so some governing documents do not require a quorum. I would start there.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Arthur,

First of all, we have CC%Rs and bylaws. You should too. In fact, your state laws dictate that you have bylaws. The CC%Rs dictate the use of the land. The bylaws dictate your organizational structure. Your laws DO require your homeowners to vote on the budget. After your board passes it themselves, they give it to you to vote on. And, yes, your laws do say that unless a majority (51%) of your homeowners reject the budget, it is considered RATIFIED. Our budget procedure is in our bylaws. I suspect yours is too. Our budget is adopted by our board. We do not have to have the homeowners ratify it.

Does the above mean you live in a defferent state and therefore you are not required to have your members accept or approve the Budget.
SC seems to be all over the place and I have tried to hold the board to the by-laws that says the budget has to be presented to the members at the annual meeting. I contend that if the members do not accept the budget, they can keep the meeting upon until agreement is reached, and of course they can object at the next Board meeting, which is closed, by the way. Confusing?

In SC the Attorney Generals opinion and down the line to county o0fficials is the state expects private communities to have wide lattitude in solving their internal problems, and loosely that seems to me everything.
I do not have a written opinion from anyone as that seems to be something they are not going to do.

ArthurG2 (Florida)
Posts: 15

Posted:

Robert

Yes, I live in Florida. Our state laws leave it up to the Association to decide how the budget is adopted. Our Bylaws specifically require the Board to adopt it, unless it is more than 15% greater than the previous year. Our Board hands out the proposed budget at least a month before and discusses it at a Board meeting before we adopt it. That way the members won't get blind sided.

If, as I mentioned, ours is too high, the membership can petition for a special meeting to consider a substitute budget, if at least 10% of the members sign the petition. The petition has to be delivered to the Board within 21 days of the Board's adoption of their budget. The membership meeting must be held within 60 days after the Board is presented with the petition. Then the members have to get a majority vote to pass their budget. How many have to be at the meeting for a quorum. Our laws have reduced the number to 30% of the total membership. It used to be at least 230 units of out 452. Not anymore. Some of the laws here have made it easier for members to fight for their rights.

As for SC, at first glance, I had trouble finding anything relating to homeowners associations. Condos are covered under their own section. HOAs seem to be covered under the corporation or nonprofit corp acts. It looks like it is part of Chapter 31 of Title 33, Corporations, Partnerships and Associations.

Part of the dilemma of corporations is how much control the state wants to exert on them. In Florida, condos are very highly regulated. Condos are told in some painful details how they will behave. HOAs are different. We have little regulation. However, that leaves us wide open for a real mess with bylaws and covenants. Few attorneys know, or want to know anything about what bylaws should say, and the bylaws here are often a mess. You can't find anything, and when you do, the attorneys will argue it doesn't say what you think it says. It makes loads of money for them.

What I read for SC tells me you are free to write your bylaws most any way you wish that doesn't conflict with the Articles of Incorporation or state law. As for approval of the budget, I don't see any requirement for budget approval procedures in your state laws. The state does demand accounting and financial statements. That being so, to me, you are free to adopt whatever budget approval process you like. We do it in ours. We let our board approve the budget. One fell swoop, that's it. All done.

Keeping a meeting open until a budget is approved is another story. Besides, there are supposed to be limits on debating anything in a meeting, especially in Robert's Rules. Robert's sets it at 10 minutes. Your laws say your president has to give financial reports. So what part of the reports did members miss that they didn't know how much budget is needed?

As mentioned, I see no state requirement for budget approval. The state says you have the power to do what you need, including a budget, to keep running. If your budget is that bad that the members are in revolt, I suggest special board meetings or membership meetings, and meetings with your accountants, if necessary, to work it out. Closed or executive sessions of any organization are usually reserved for sensitive personnel issue or possible law suits, not budget disputes. Besides, depending on what your bylaws say, the members can usually demand a special membership meeting and demand answers. The members own the organization.

Actually, there is one HOA in this state that right now is under the gun for missing funds in the tens of thousands.

Keep me informed if you would. I check my emails. These issues are actually rather stimulating for me.

Art

JennN (Washington)
Posts: 8

Posted:

PWells, I am a homeowner in a community in Washington State as well. Our Board holds a number of closed meetings and/or dismisses the general meeting for "executive session." Our management company rep encourages this style of conducting Board business. It has created dissention among the homeowners and a general distrust of why the Board conducts so much business behind closed doors. Is this a common practice in Washington State or do we have the same management company? Everything I read recommends the Board hold open meetings.

DeniseA2 (Washington)
Posts: 15

Posted:

Washington State requires Property Managers to have a State Real Estate License if they do not own the property.

Very Important. Folks must remember that property managers have access to your association funds and must be accountable for this measure and responsibility.

RCW 18.85.011
Definitions.

(16) "Real estate brokerage services" means any of the following services offered or rendered directly or indirectly to another, or on behalf of another for compensation or the promise or expectation of compensation, or by a licensee on the licensee's own behalf:

(h) Performing property management services, which includes with no limitation: Marketing; leasing; renting; the physical, administrative, or financial maintenance of real property; or the supervision of such actions.

RCW 18.86.030
Duties of licensee.
(2) Unless otherwise agreed, a licensee owes no duty to conduct an independent inspection of the property or to conduct an independent investigation of either party's financial condition, and owes no duty to independently verify the accuracy or completeness of any statement made by either party or by any source reasonably believed by the licensee to be reliable.

You can put in your property managers name/business name to verify if they are real estate licensed

http://www.dol.wa.gov/business/checkstatus.html

DeniseA2 (Washington)
Posts: 15

Posted:

Jenn- Make sure your property manager is real estate licesed. See above comments.

DianneL1 (Washington)
Posts: 34

Posted:

Denise,
Thanks for that detailed information. I used the link to learn that my PM's owner and son do have a license. What is not clear (and maybe you know this) is that we have a "manager's Rep" assigned to our complex; is that individual required to have a license or does he fall under the owner's license?
The managers Rep. is extremely useless and lacks even the most basic knowledge. This is the third Rep assigned to us as they have all quit, been terminated, etc. Needless to say we are considering firing the firm.
Dianne

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

This thread is from 2007.

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