Board Negotiating Contract in Secret

BobW5 (Arizona)
Posts: 21

Posted:

Thanks guys for all your previous good answers. I have one additional concern I would like your opinion about. An AZ HOA Board is conducting closed executive meetings negotiating contract terms on a land sale and related easements. They are rushing to complete the sale and have no intention of reviewing the terms with the general membership in an open meeting before signing. I and a number of members feel the Board should meet in an open meeting with the members first to explain the details. I know they have authority to sign the documents but our By-Laws do not specify notifying the general membership of contract terms beforehand. Appreciate your opinion.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Bob,

Copied below is the pertinent subsection of the State statute for planned communities (the condo statute, 33-1248 reads the same). As you can see, negotiating contracts is not cause for a closed session so your BOD is in violation of state law. Although the BOD may not be obligated to discuss this with the members before taking action, IAW state law (which supercedes your gov docs!) it should be discussed in an open session and any member has the right to voice their opinion before a vote is taken by the BOD.

Now, the question is, what can you do about this violation? In a nutshell, not much unless you're prepared to spend big bucks to take them to court. However, you and your friends can let the board know that they've violated state law and if they wish to stay on as board members they better get their act together. Give the board Pres a copy of the open meeting statute and see what he says. If he says, "So sue us!", then gather your friends and start the petition for removal. I have no use for board members who blatantly violate state law knowing there is no state agency to oversee their actions.

33-1804. Open meetings; exceptions

A. Notwithstanding any provision in the declaration, bylaws or other documents to the contrary, all meetings of the association and board of directors are open to all members of the association or any person designated by a member in writing as the member's representative and all members or designated representatives so desiring shall be permitted to attend and speak at an appropriate time during the deliberations and proceedings. The board may place reasonable time restrictions on those persons speaking during the meeting but shall permit a member or member's designated representative to speak before the board takes formal action on an item under discussion in addition to any other opportunities to speak. The board shall provide for a reasonable number of persons to speak on each side of an issue. Any portion of a meeting may be closed only if that closed portion of the meeting is limited to consideration of one or more of the following:

1. Legal advice from an attorney for the board or the association. On final resolution of any matter for which the board received legal advice or that concerned pending or contemplated litigation, the board may disclose information about that matter in an open meeting except for matters that are required to remain confidential by the terms of a settlement agreement or judgment.

2. Pending or contemplated litigation.

3. Personal, health or financial information about an individual member of the association, an individual employee of the association or an individual employee of a contractor for the association, including records of the association directly related to the personal, health or financial information about an individual member of the association, an individual employee of the association or an individual employee of a contractor for the association.

4. Matters relating to the job performance of, compensation of, health records of or specific complaints against an individual employee of the association or an individual employee of a contractor of the association who works under the direction of the association.

BobW5 (Arizona)
Posts: 21

Posted:

I failed to mention that they have been meeting with their attorney in these closed sessions to discuss the terms of this contract (sale). I know the open meeting law allows for attorney-client but this is not a litigation matter nor are we contempleting a suit. Does this make a difference in quoting the open meeting law. Thanks. Bob

SusanW1 (Michigan)
Posts: 5,202

Posted:

In general, boards have the right to enter into contracts. Gathering the information for the contract could have been done by a committee who could have presented all the findings at a board meeting, where the board could discuss and ask questions about the proposed contract - and then vote to enter into the contract.

KirkW1 (Texas)
Posts: 1,665

Posted:

For what it is worth, having a public debate during the negotiation process is not a good idea. The association will not be able to get the best deal that way.

A much better idea is that if the Board wants (or needs) feedback then they should get it before negotiation starts and possibly just before things are finalized.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Bob,

After I posted my last response, I thought it might be possible they were receiving legal advice which would allow for a closed session. But the law does state that legal advice can be disclosed to the membership "after" the case is resolved; in this case that would mean after the contract negotiations are complete. If this is a contract that the board knows many members of the assn are concerned about, they should be more forthcoming with information about the negotiations. However, it's not uncommon to want to keep as much of it a secret as possible so as not to compromise their position.