Riddle me this batman - Are residents members or owners members of the Association?

Started by TimB4 • 24 replies • 442 views

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TimB4 (Tennessee)
Posts: 21,059

Posted:

I'm reading the poorly written bylaws of our Association. The wording is:

The Association shall be formed of all residents who are Members of the Association. Each Member shall have one vote (per lot) in the Association.

So, are owners who don't live on the property members?
Are renters members?

Per the (could be written better) covenants:

An Association shall be formed with all residences belonging to said Association.

Does this mean that owners of unimproved lots are not part of the Association?

However, also per the covenants, amendments can only be done by 67% of the owners.

So, owners have the authority to amend the covenants but are not necessarily members of the Association?

Notes:
TN does not have a statute dealing with HOAs.
Being incorporated, The Association is controlled by the TN nonprofit corporation act.
Specific members/membership is not defined beyond what I have provided.

Side Notes:
Bylaws have a 2/3 quorum requirement for general membership meetings (stupid).
Bylaws have membership voting for officer positions. Zero mention of Directors.

I'm a little scared on what I might find if I am elected to the Board.
Yes, I tossed my hat into the ring.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By TimB4 on 09/07/2023 8:34 AM
Being incorporated, The Association is controlled by the TN nonprofit corporation act. Specific members/membership is not defined beyond what I have provided.

-- I am seeing different. Paraphrasing, the Tennessee Nonprofit Corporation Act defines "Member" as anyone who has the right to vote for the election of directors. The statute says more that appears to me to clarify (or trump) what the Bylaws say about residents yada. See https://casetext.com/statute/tennessee-code/title-48-corporations-and-associations/nonprofit-corporations/chapter-58-directors-and-officers/part-1-board-of-directors

-- Do the covenants define "member"?

-- Do the Articles of Incorporation define "member"? Do the Articles of Incorporation speak to voting rights of members or owners?

I would want to read the Covenants, Articles of Incorporation and Bylaws in full before offering further judgment.

The scary part is teaching the other directors how to read HOA legal language; the hierarchy of documents; and more.

SheliaH (Indiana)
Posts: 6,964

Posted:

For me, the key is "owner," so if you own a home, you're an association member. If you own and live in the community, you're a member. If you live off site, but own a home. You're still an association member.

As for the owner of an undeveloped lot, I would say he or she is an association member as well because the property is still in the community and can be developed into a home at a later date. Tenants are not association members, but residents of the community.

You're correct that this is pretty unclear and I suspect there's more mumbo-jumbo from where that came from. Clarifying something like this could be a good campaign plank for you - the more clear the documents are, the easier it will be to manage the association because no one will waste time arguing about wording. That said, I'm sure you'll have no trouble being elected because you have a lot of HOA living down pat. Good luck!

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By ElleN on 09/07/2023 9:32 AM

-- Do the covenants define "member"?

-- Do the Articles of Incorporation define "member"? Do the Articles of Incorporation speak to voting rights of members or owners?

There is not specific definition for Member in either document.

What I provided is from paragraphs that specify that an association be formed (in the covenants) and (from the bylaws) that two line paragraph I cited.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Shelia,

I agree with you on the logical thinking. Unfortunately, if challenged, the courts would go by what is written.

I also agree that I shouldn't have an issue being elected. However, it's more likely because nobody wants to run. However, I appreciate the compliment.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Ellen,

Email me, I have no issue sharing with you - [email protected]

CathyA3 (Ohio)
Posts: 6,299

Posted:

I think "residents" can include tenants, spouses of persons whose names are on the deed but whose own names are not on the deed, domestic partners who are not lawfully married to the owner but are also not tenants as defined in the state's landlord-tenant laws, relatives who are allowed to live in a home but are not tenants (have not signed a lease and do not pay rent). There are probably more.

The business about a spouse who isn't on the deed matters in some states since that person would not be considered an owner and probably not a member (my state does consider such persons to be owners and members).

My state also does not recognize common law marriage, so a domestic partner whose name is not on the deed is not an owner or member of the association.

We ran into similar weirdness in the past since our old parking restriction referred only to owners and guests - and tenants, domestic partners, and other persons living in the community without a formalized relationship with the owner fall into neither category.

This sentence bothers me, though:

An Association shall be formed with all residences belonging to said Association.

For one thing, I view the Association as a corporation which is a legal entity, not a physical one. Unless the community is a condominium which may be different? Second, while the developer is still in the picture, does that sentence say that the owner of undeveloped lots is not a member of the Association? That would make no sense.

Is there enough time prior to the election to consult with a knowledgeable attorney about this? I share your concerns about the governing documents being poorly worded in some places.

ElleN (Idaho)
Posts: 4,420

Posted:

TimB4, I just emailed you. Watch for it in your inbox, spambox or other email box.

TimB4 (Tennessee)
Posts: 21,059

Posted:

The developer is no longer in the picture.

As best as I can tell (without access to additional records):

Development has two phases.

Developer was gone by 2004.
Association was formed in 2002.
Association was incorporated in 2005.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Since this came up in a previous thread a while back, in some states (FL?) if a home is owned by an LLC or other non-person legal entity, an agent of the LLC is not permitted to run for the board.

I don't know how common that is; it's certainly not true in my state. On the one hand, it'll help keep the professional investors off the board and maybe make deconversion harder - but on the other hand, it also prevents someone who purchased their home in trust, who lives in the home, and who is to all intents and purposes the owner from serving on the board.

Buying a home in trust is a common estate planning tool for us older folks, so just in case that may be an issue...

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By ElleN on 09/07/2023 9:55 AM
TimB4, I just emailed you. Watch for it in your inbox, spambox or other email box.

Responded. Large file sizes.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By ElleN on 09/07/2023 9:32 AM

Posted By TimB4 on 09/07/2023 8:34 AM
Being incorporated, The Association is controlled by the TN nonprofit corporation act. Specific members/membership is not defined beyond what I have provided.

Oops; wrong link. I meant to post this:

https://casetext.com/statute/tennessee-code/title-48-corporations-and-associations/nonprofit-corporations/chapter-51-general-provisions/part-2-definitions/section-48-51-201-definitions-for-chapters-51-through-68

TimB4, I read the governing docs you sent quickly and am just double checking my thoughts for consistency with the statute and logic. May I post my response here (without including any identifying information)? Or do you prefer a response by private email?

TimB4 (Tennessee)
Posts: 21,059

Posted:

email for now.

TimB4 (Tennessee)
Posts: 21,059

Posted:

I looked at that section in the statutes that define member and agree with it (those who have a right to vote for director).

However, the bylaws implies that members are residents not owners.
Additionally and technically, although likely controlled by statute (I haven't checked), the bylaws give members the right to vote for Officers not directors.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By TimB4 on 09/07/2023 8:34 AM
I'm reading the poorly written bylaws of our Association. The wording is:

The Association shall be formed of all residents who are Members of the Association. Each Member shall have one vote (per lot) in the Association.

So, are owners who don't live on the property members?
Are renters members?

Per the (could be written better) covenants:

An Association shall be formed with all residences belonging to said Association.

The wording is so similar that I think the Bylaws sentence above denotes a scrivener's error. As you know, in the hierarchy of documents, when a conflict arises between the bylaws and the covenants, the covenants control.

With regard to elections, the Bylaws only express reference to who will be elected is to officers. But the bylaws also expressly state (more than once) that the HOA is such-and-such corporation with a charter (Articles of Incorporation). Which brings the state statute into the picture.

I elaborated further in my email to you.

TerriS6 (California)
Posts: 3,284

Posted:

Only people in title are members, resident or non-resident.

TerriS6 (California)
Posts: 3,284

Posted:

On title not in title.

JeffT2 (Iowa)
Posts: 880

Posted:

If a term such as resident can have more than one meaning (which I think it does in this case), then the term can be said to be ambiguous. You might want to look at the rules for interpreting contracts, which allows a court to interpret the meaning of an ambiguous word using concepts such as the overall intent of the document, reasonableness, the document(s) as a whole, and possibly property law (CC&Rs) or precedent.

I don't think a court would interpret the words differently than most of the posters here, in other words that only owners are members.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Thanks to all who responded.

A special thanks to Elle who took the time to do the research I hadn't gotten around to.

Basically, since the corporate statutes apply to the Association, the statute clears up the wording.

If the board and membership are receptive, I would like to remedy this in the future.

Thanks again,

Tim

KerryL1 (California)
Posts: 14,550

Posted:

Hope I'm not being repetitive of analyses of materials in the Tenn. corporations code that you & Elle exchanged.

To Jeff's, point which prompted my thinking in this direction. In CA, the Board may amend Bylaws if there are clear errors in them. So, perhaps your Tenn. Corps. Code outlines how Bylaws may be amended to state that Owners are Members, i.e., to repair vocabulary errors.

I've seen the word "resident" used incorrectly on this board a few times and when it is, the writer alway has meant owner. But, as we all know, not all Owners reside in the association. Similarly, we all know that not all residents--those who reside in the association's residences -- are Owners/Members. Unlike Jeff, I don't see that word as ambiguous.

I wonder what TN state agency is in charge of "certifying" a development as an "HOA." In CA, it's the state Dept. of Real Estate. The original documents sent to the TN Dept. of real estate could help.

Meanwhile, those original docs, which estimate, budges, reserves, etc., and also the CC&Rs will be signed most likely by a law firm that wrote them whether boiler plate or not. With the Board's blessing, inspired by Jeff, I'd request an interview with that firm to hear and read their explanations of their intent. This is an opinion our HOA gave us in writing about an unclear and ambiguous passage in our original CC&Rs. Luckily, we were able to resolve the ambiguity without interviewing that attorney, who, by then, was quite elderly.

Related to that law firm. I would urge the Board to not hire them if the topic comes up.

(even the original very sharp person who "grew" our MC into a very large firm, misused the word "resident." In our HOA all residents and owners and the general public may access our public website. It has lots of info on it that renters need. The Portal that is ONLY for Owners was developed by our MC several years ago and unbelievably, it is called the "Resident Portal, and the web address is ResidentXXXX.XXX.com.)

JeffT2 (Iowa)
Posts: 880

Posted:

Quote:

Posted By KerryL1 on 09/10/2023 7:27 PM
Hope I'm not being repetitive of analyses of materials in the Tenn. corporations code that you & Elle exchanged.

To Jeff's, point which prompted my thinking in this direction. In CA, the Board may amend Bylaws if there are clear errors in them. So, perhaps your Tenn. Corps. Code outlines how Bylaws may be amended to state that Owners are Members, i.e., to repair vocabulary errors.

I've seen the word "resident" used incorrectly on this board a few times and when it is, the writer alway has meant owner. But, as we all know, not all Owners reside in the association. Similarly, we all know that not all residents--those who reside in the association's residences -- are Owners/Members. Unlike Jeff, I don't see that word as ambiguous.

I wonder what TN state agency is in charge of "certifying" a development as an "HOA." In CA, it's the state Dept. of Real Estate. The original documents sent to the TN Dept. of real estate could help.

Meanwhile, those original docs, which estimate, budges, reserves, etc., and also the CC&Rs will be signed most likely by a law firm that wrote them whether boiler plate or not. With the Board's blessing, inspired by Jeff, I'd request an interview with that firm to hear and read their explanations of their intent. This is an opinion our HOA gave us in writing about an unclear and ambiguous passage in our original CC&Rs. Luckily, we were able to resolve the ambiguity without interviewing that attorney, who, by then, was quite elderly.

Related to that law firm. I would urge the Board to not hire them if the topic comes up.

(even the original very sharp person who "grew" our MC into a very large firm, misused the word "resident." In our HOA all residents and owners and the general public may access our public website. It has lots of info on it that renters need. The Portal that is ONLY for Owners was developed by our MC several years ago and unbelievably, it is called the "Resident Portal, and the web address is ResidentXXXX.XXX.com.)

I agree that resident is not or should not be ambiguous, but it is certainly used with more than one meaning, as you noted. It should be defined or changed.

A word or phrase is ambiguous if it is reasonably susceptible to more than one interpretation, or a reasonable person can find more than one meaning, or other test depending on your state/courts/precedent. In that sense, resident is ambiguous. You gave some examples.

If a tenant or other non-owner wanted to vote in Tim's HOA, the HOA or their attorney in court could say that the term resident is has more than one interpretation (or meaning or usage) and is therefore ambiguous, and then interpret resident using other factors, such as intent, to establish that it should mean owner.

ElleN (Idaho)
Posts: 4,420

Posted:

When words in a covenant or contract are ambiguous, the only "intent" that counts is what words elsewhere in the contract state.

What an author of a Declaration, Bylaws et cetera states, years later, the "intent" was is legally 100% irrelevant. Why? Because owners only have the actual written Declaration, Bylaws et cetera to go by when they buy a home. Springing an unwritten "intent" on them later is legally not fair.

KerryL1 (California)
Posts: 14,550

Posted:

Oh, I see my above typo. Our very experienced and respected HOA attorneys advised our Board to learn the intent of the author of our CC&Rs and submissions to the Calif. DRE in an ambiguous area. I took their expert opinion seriously as did our entire Board and a credentialed "Budget Consultant" whom we had to hire to get clarity. So I take their opinions as correct.

The attorneys used the language of the Board should "consult with" the original budget preparer to seek an "explanation" because of a seeming "anomaly." In short, an element of the budget to the DRE contradicted the CC&Rs. They stated that the Board must endeavor to correct "...any patently wrong attribution of expenses..." "as an issue of fairness, and based on equitable legal principals..." Our complex crazy budgets splits among "special benefit areas" tripped up even the original budget preparer and HOA law firm. The ultimate correction did lead to two "sets" of owners paying more in assessments than previously. Members of one set were, of course, upset. The correction was a matter of fairness and in our GC's opinion required no owner vote.

Yes, Jeff, I see that there's ambiguity, but to me, anyway, it's not the word "residents" that is ambiguous, it's that the author did not understand its meaning. By using the word incorrectly, an ambiguity of phrasing was created. Our CC&Rs and I think most have a set of definitions at the beginning,; ours is Article Two: 2.51 "MEMBER. The term 'Member' means every person or entity who holds a membership in the Association. Membership shall be appurtenant to and may not be separated from ownership of a Condominium."

My curiosity would drive me to read a few CC&Rs from other TN associations to see what's typical. What I've been trying to get at is that repairing Tim's documents may not need a votes by owners, but that also depends on Corp. Code.

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By KerryL1 on 09/11/2023 11:52 AM
Oh, I see my above typo. Our very experienced and respected HOA attorneys advised our Board to learn the intent of the author of our CC&Rs and submissions to the Calif. DRE in an ambiguous area. I took their expert opinion seriously as did our entire Board and a credentialed "Budget Consultant" whom we had to hire to get clarity. So I take their opinions as correct.

The courts blow off all the time any claims that such-and-such was the intent when such-and-such is not evident in the totality of the document with the ambiguity. Your attorneys were just aiming to get to a good-enough solution.

The ambiguity in question in this thread is obviously a scrivener's error. You would know that if you read the whole thread.

KerryL1 (California)
Posts: 14,550

Posted:

As you know by now, Elle, what the "courts might think" is rarely what I write about. The attorneys' 7-page opinion included an analysis of our entire C&CRs and of our complicated many-page budget required by the Calif. DRE back in 2001.

As with most HOA "problems," our attorneys were advising us about how to find ways to work out this contradiction -- not prepare for a trial. And your talents have increased! You're now divining what our attorneys were "aiming" to do. So impressive...

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