bylaw interpretation

We are "members" of a Not for Profit Corp that manages communal properties held in title as prescribed in the articles of inc (AOI). There is no recorded declaration or covenant because the subdivision was developed over an 8 year period almost 100 years ago. The IRS form 1120-h is titled homeowner association that includes timeshares, condos and "residential real estate associations". This is the closet category of the subdivision for IRS filing to not pay taxes on members assessments collected each year. The concern is that a recent rewrite of the bylaws changed the term "corporation' to "homeowner association" that says developed as an HOA. The other issue are or the appearance of "board" oversteps to regulate subjects that are regulated by either local or state ordinances and laws. The AOI document was recently discovered that prescribes that property "held in title" and to manage the same. The core issue is the finding of the document that dates back 52 years with possibly 1 or 2 prior corps tasked with the same language. The board is comprised of 25 members of 113 residences. Little is shared amongst 25 board members from a small circle that essentially run the organization and certainly not shared with the entire membership. The organization now referred to HOA is run more like a private corporation. Board meetings are never disclosed to the general membership and requests to attend are met with disdain and the requirement of an invitation to state your concern and then you have to leave. The state does not have an open meetings act and HOAs are not regulated in the state similarly to other states. Should the AOI be distributed to all members of the not for Profit so that they understand the limits of board authority? Even a board slate process and very limited ability to "run" for a board position, how would anyone suggest to turn this tides that all members are fully informed of what we own in terns of private real estate not attached by a HOA declaration/covenants? I do not serve the board and will not run unless there is an overtake of those dug in all circle that has been in positions for decades. The board slate is coveted and essentially is an appointment when presented at a general meeting. Any suggestions? Would love to hear any comments. Thank you

-- What, if anything, do the AOI say about amending the AOI?

-- What, if anything, do the AOI say about amending the Bylaws?

-- What, if anything, do the AOI say about conflicts between the two documents?

-- It's almost guaranteed that either Michigan statutes; Michigan case law; the AOI; or the Bylaws state that, when a genuine conflict exists between the AOI and the Bylaws, the AOI control.

-- In other words, the yokels who amended (or pretended to amend) the bylaws cannot terminate the corporation simply by changing the Bylaws.

Thank you very much for responding. The AOI is very brief, one simple paragraph. No language about amending bylaws or the AOI. This may fall under state laws of MI corp. The bylaws are not necessarily in conflict but they might be. This would take another round of legal exploration and personal expense. Very good point of view concerning a conflict, thank you! The corp is not terminated, it is in good standing. The executive director does not know who the registered agent is and apparently thinks we don't have one when the MI Corp Act mandates such a requirement. I requested the registered agent because the MI corp act mandates that record retrieval is to include the registered agent of the corp. There is one amendment filed by the then lawyer, but the Exe Director said there is no amendment. All the amendment says (or is added) are the specific 3 subdivisions NAMED that are already referenced by plat name in the AOI. The purpose has not been altered. The other board executive (Recording Secretary) would be responsible for retrieval of "proceedings" of the corp. The Exe Director thinks that position prescribed in bylaws only includes minutes. The madness for clarity is madness. This is over 30 years of asking the wording people questions. The corporation is not terminated. Full stem ahead with blackened out windows, we don't see where we are going. Any other thoughts on how to end this HOA naming based on a tax filing when no recordings of party are discoverable?

For a copy of the Michigan Nonprofit Corp statute, see:

https://www.legislature.mi.gov/documents/mcl/pdf/mcl-Act-162-of-1982.pdf

DavidB57, I think you and I are just about on the same page. My concern (maybe like yours) is that the bylaws may have been (unlawfully) amended so that suddenly the subdivision has restrictions on the use and appearance of homes and lots (e.g. like you said: Height of bushes; types of flowers; parking).

I think you get it, but just to be clear: The courts would never accept amending the bylaws to create restrictions on the use of the home and lot, unless maybe there were a 100% vote. The courts say amendments have to pass a "reasonable" test. This HOA has no declaration nor as far as you know any covenants. You are right to home in on the Articles of Incorporation. The AOI and the nonprofit corporation statute, with maybe a bit of case law, are the legal structure and the mission of the HOA. Call it HOA; call it "association"; call it "corporation"; it does not matter to me. The AOI, statute and bylaws control.

Has the board in recent years added amendments to the bylaws that are, by nature, really (attempted) covenants on the use of land and homes?

I wonder if the AOI and Bylaws meet the requirements of the Mi Nonprofit Corporation statute. It's worth reading through the statute quickly and highlighting parts that seem relevant.

And again, anyone trying to be cute who says, "Well our AOI do not meet the requirements of the NFP Corp statute. Hence the corporation does not exist!" Wrong. For one thing, as long as the association owns land, there is a corporation, and it is the one registered with Michigan.

You asked about board slates. Do you mean is it permissible for a group of owners to run together, such that owners have to vote for the entire group or none of the group? I say no. But nothing says the group cannot run on the same platform and urge owners to vote only for the candidates in the group.

The NFP corp statute has certain board election requirements. You want to start holding the incumbent directors' feet to the fire and making them comply with the law. That is, if you can stand the very likely retaliation that will follow. Give an all-volunteer board an attorney that others are paid for, and they often go out of control, with ego-driven wrath.

David

Please learn to us paragraphs.

So well stated, thank you. Paragraphs it is- I was afraid to hit return thinking the message would transmit premature.

You can imagine that I have already been the recipient of backlash because I have been asking questions for 30 plus years. Although many are very supportive neighbors who understand why these questions must be asked. To be clear, I have no interest of any court action because it becomes a (financial) rabbit hole. I have spent personal funds on a lawfirm/attorney who provided a very comprehensive explanation to answer some questions. That took 11 months to receive. I have not and will not share that opinion publicly, unless I have to. The engrained circle 6 of the board as they are sometimes referred to, seem to do a fine job managing the physical community property of which that duty is prescribed in the AOI.

Fyi: here is the language of the AOI: "To bring about, install improvements and others maintain and develop a community organization for the comfort and enjoyment of the homeowners of Mt. Pleasant Subdivision, Allegan County, Michigan to hold title to such property, both real and personal, as shall be necessary to carry out the foregoing purposes."

It's ALL the other nonsense that needs to be kicked down the road. An attempt to control new construction of $750-$1M residences compared to a 1920's, 30'3. 40' 50's style cottages that still are (barely)standing that may inhibit property values, you can imagine the jealousy. What was once a moderate group of folks forming a residential community in the 20's with moderate means has morphed to some every expensive and wealth not seen for decades. Anyone who pursues a second home even back in the 20's must have such income to do so.

I believe the goal should be to let these circle 6 know and understand that some homeowners are paying attention and to let them know that their authority is limited to the AOI. The Legal Committee prescribed in bylaws has been dormant for years. The Executive Director has opined that because something (A prescribed committee) is in the bylaws, the board is not required to follow it.

I wanted to add that a recent movement and vote, that any new (private) residence that is constructed requires a $20K buy in fee to join the NFP corporation that controls the access to the beach, a playground and Recreational Bldg for children (and meetings). This is a beach access community comprised of Lots that have always had access to the beach. Additionally, any transfer of a private residence requires a $5000 transfer fee paid to the NFP Corp by the new owner in order to join the NFP. These requirements were added to the corp bylaws. The AOI has no such membership language. No idea of this is proper or legal.

I did receive another attorney opinion (no supporting research) that even if the Association are tenants in common to the beach (in which a court order concluded), the association can never block access to the beach to Lot owners. I'm not sure I want to spend any more personal funds to have that researched.

I have no idea if the buy in fees are legal when the private residences are not recorded to the community property. I have had real estate agents tell me some HOAs have buy in fees. There was mush backlash at the time but given human nature, most "go along to get along." The buy in fees do not effect us, yet. Unless an adult child decides to build in this bizarre fercaca' subdivision.

I have purused the MI Corp Act. Most time my eyes gloss over. What is key is case law to support statutes. Otherwise they are simply words untested. As yes, the use of bylaws in lieu of covenants is an interesting point of perspective.

The latest direct request of the Executive Director is to upland the AOI document to the documents section of the community website and inform the membership of the document upload. This request is currently denied by the Executive Director (president). Clearly the circle 6 don't want members to read the document not understand what they pay dues pay for the prescribed duties of the NFP board to carry out the purpose stated in the AOI.

All that I can accomplish is transparency. What others do with the information is that they would be informed and forewarned. Then, they can acquire some ice cream and a day at the beach.

I may push for the upload request of the document to the website with a "board" explanation to the membership of what the document is and why it should be available to members who pay dues.

As for the existing board slate that has been present for decades, I am informed that some corps run elections in this manner. Given the HOA naming in bylaws, I don't know if its fair (or legal) that owners can not simply throw in their hat and resume to run for one of the 25 board positions now that the community is referred to as a "homeowner association". Not one other HOA we have belong or belonged, is operated in such a controlled manner. With the slate, the 3 -5 member committee slate committee picks the board every 2 years. Some have been on for decades. If not them, the following generation continues.

Thank you very much for your perspectives and responses!!

HOA HOA HOA. This set up is not a traditional legally recorded HOA. It's a corporation that owns land- so I am informed by counsel.

I agree that buy in fees may be common in (some) HOAs when a recorded covenant describes what responsibilities are present in the prescribed language that the original developer wrote in the covenants when originally developed. What seems odd, and many neighbors agree, the (high) buy in fee was a move to limit new construction. Back to jealousy and the appearance of segregation. More like a penalty, if you will. Given the simplicity of the AOI language, most recorded HOA reserve funds are started by the first buyers. My wife and I bought our first condo from a developing company.

To start the reserve fund, each first buyer had to pay $200 to jump start the reserve fund. That's reasonable. To charge a new buyer $20 grand for new construction and also charge a transfer fee of $5K when a private residence changes hands when NONE of the private residences are attached by a declaration/covenant to community property, does NOT seem reasonable. To provide history, there use to be an elevator key fee for new buyers who bought land and built. The bluff elevator down to the beach 4-5 stories was constructed in 1955. Works sometimes, out of order often. When we first came around 35 years ago, I believe that "key fee" number was $800. Then it jumped to $1500. Then $3000. Then $10K, and now $20K.

The thinking was, "here we have this infrastructure that a new buyer gets to enjoy on the backs of the predecessor property owners who were present heretofore. Somehow, this seems odd. Its like saying a new born baby must pay society a feee because the predecessors created such a wonderful living environment they are born into. OK, maybe a not a good example. I don't mean to be flippant. I don't get $20K. The $1500 contribution to the elevator reserve fund seemed reasonable. OK $3K. But $10K and $20K. Why not a $100K. The undeveloped Lot owners will suffer because they would be burdened with the discounted selling price for the buy in- this is what is happening. The new buyer tells the seller, no. If you want to buy the land or the house, reduce the purchase price by the $5K or $20k depending if its a transfer or a newly constructed residence. The Association is essentially hurting the current property owners of either finished dwellings or land owners.

If we were to further compare MI bluff property close by the lake, there are numerous old subdivisions developed way back that are not HOAs (recorded HOAs that have no covenants). They are all over the state of MI. They are, according to lawyers, voluntary communities. It's your choice to participate in their amenities and their fees to do so. We learned of the legal term negative reciprocol servitude because an owner bought and fought the right to not join the club nor use the amenities. He filed the settlement agreement to his deed. That settlement agreement is popping up on other deed searches. However, there is some belief that communities such as this are mandatory. It would take $100K, a court and a judge to rule. Personally, I would never not consider paying dues and being a member to access the beach. THAT is the value of the residence, to access the beach close by.

Btw, the roads in the community are public,. The community had the opportunity way back to have the roads vacated to the association, possibly to the corp prior of the current corporation established in 1971. The confusion that exists amongst property owners is not necessary. Why is transparency perceived as a burden when it should be perceived as a right? Not my quote, a neighbor's.

And lastly, we have no recorded covenant that prescribes anything remotely close to a homeowner association. There are 4 paragraphs from the original developer. 1. Who can buy lots, (would never pass the litmus test today), 2. how close the residences can be to the road, and 3. that the Lots are to be used for residences only. (no 711's, no car washes, lol). I forget the 4th at the moment. Yes, moldy smelly cottages are selling close to $400K that were originally built for way less than $40K.

Requirements to amend: the quorum for general mtg is 35% of the community of 113. The board is comprised of 25 members. Do the math and see that is if all 25 show up at a general mtg to discuss and vote on a bylaw amendment, it does not take much to pass amendments or any vote because of the structure of numbers. Not to mention that non-board members are not allowed to attend board of director meetings. Nor are board of director meetings ever noticed to the general membership. Shall I go on?

All we want is transparency. To understand the limits of the board authority. For all to have a copy of the AOI that we all pay dues to. And perhaps have a reasonable quorum and a board that is not essentially a congress. Thats it.

Well stated and thank you. Very grounding. I am aware that in MI there are no HOA requirements. And yes, in MI with no open meetings act, board meetings can be private/closed. However, in real HOAs if this one is real, transparency is key in residential communities.

There are no secrets )other than litigation and past due members) because all who pay dues have the same financial interest as anyone else- including board members. And yes, volunteer board members when hauled into court can face personal severe financial consequences for breaches especially when a subject is not within the purview of the AOI. Btw, the NFP corp is formed on a membership basis. This means members HAVE voting rights. A directorship basis NFP corporation, members have no voting rights if members exist.

Several years ago, proxies were eliminated because one owner showed up twice with numerous proxies and abused the proxy use. He ran the meeting. Rather than regulate proxies, they eliminated proxies. Most don't live in MI, owners are all over the country. We are trying to have the zoom participation available for every general mtg. There is much resistance from the board circle 6. Maybe this will change if enough speak out and ask for Zoom participation.

This is the point of much of the frustration amongst the owners who pay attention. What exactly is the community and why are some features run the way that it is?

As a homeowner, not elected, it is not my responsibility go mail or post the AOI. This is the responsibility of the elected volunteer Executive Director. The membership list is readily available. Perhaps I should reconsider, not sure I desire such repercussion.

All I am asking, is to post the AOI that no one seems to know exists. And then let the cards fall as they may.

This at the only key document that explains what the community is and what the powers of the board formed to mange the NFP Corp are suppose to be.

Yes, it seems they make it up but they constantly contact the associations's Lawfirm. There is some belief that a Lawfirm counsels with the thought of who will spend the $ to object. And if they do, the Lawfirm gets extra billing hours paid for from Association funds. It appears a no wind situation.

Some say sell. Our family is engrained for over 3 decades. We can not replace the real estate for equivalent or even close to equivalent monies.

I'll end that mysteriously in minutes several months back, one sentence reads "we are reminded that we are formed to manage communal property". This was one sentence in board discussion of an attempt to engage to regulate and limit the size of new construction. So someone in the background, assuming counsel? added such guidance. For some miraculous reasons that counsel or comment was not edited out. The township governs such building regulations.

Thank you so much for your responses and perspectives. it surely is helpful.

Thank you for the encouragement to create a blog. Given my dna (age and possibly labeled as luddite), I'd have to find a youngster to create it. We do have a membership directory with every email available. Please note, most neighbors do not know how or where to look for state documents. I certainly did not know where or how. This is why we rely on the volunteer BOD to provide relevant documents for review.

As for a legal basis to complain, I'm not sure one requires a legal basis to do so when living in these residential communities. I may start by sending the AOI to some neighbors who know that I have been investigating the history of the community. Given the age of the community and the families that are still present, 2nd, 3rd and 4th generations, I have always found the community a fascination because of the age/history.

While there may be no legal basis for the Executive Director to upload the AOI, clearly to not do so, is a clear indication they don't want the document read by the general membership. This speaks volumes of my core complaint; transparency. The community is run more like a private corporation rather than an Hoa or residential community that it is.

This AOI document is no different (in my opinion) than the NFP bylaws that change like the weather and are always uploaded to the community website. They use the website for notice most times, and that may not be consistent to the Corporation Act. It is unknown if any of the provisions in current bylaws are a contradiction to the simplicity of what was written in 1971. A court of law would have to make a determination. I have no interest in that cost. I have requested the bylaws and AOIs of the 2 prior corporations that were formed prior to 1971. If only for historic purposes to read what was previous written to 1971. They have in storage boxes all minutes and preceding dating back to day 1.

It is odd and the question is why; that after 42 years of the bylaws stating the term "corporation formed in 1925" changed to "homeowner association formed in 1925". An elderly neighbor resident asked "why" the name change?

Thanks again for your recommendations and perspectives. Very very helpful!

David

One key question:

What are the requirements to amend a bylaw?