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Subject: New Pres, Down to 2 Board members, Reduce Quorum.
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JayF1
(Washington)

Posts:52


02/01/2018 11:18 AM  
I am a new President & finished my 1st year. Within my 1st year, I have lost my Secretary & Treasury due to life changes & 8 plus years serving as board members. Due to lack of membership participation, we are down to 2. Each board member force to take on 2 roles. I am Pres/Treasurer, the other is VPres/Secretary. I know being Pres & Treasurer is not recommend due to checks & balances but the other doesn't want to be Treasurer. There is no restriction in our governing docs/bylaws & I have no choice.

Here is my problem, What does the Board do at this point? Especially regular meetings and HOA business matters. I need a quorum to have a valid meeting? Therefore, the Board vote to drop it down to 2 homeowners but was that the right decision?? We don't need a management company, we can take care of the HOA matters on the backend side. It is the formality & legality that I am worried about. Any input I would be greatly appreciated.

40 homeowners
16 year development
WA State
Quorum 2
No need for a management company

KerryL1
(California)

Posts:5160


02/01/2018 1:05 PM  
How many directors do your bylaws or some other doc say you should have? And many for a quorum of the Board?
TimB4
(Virginia)

Posts:15724


02/01/2018 1:56 PM  
What you did was likely improper.

If you have less then a quorum, you can't simply say we will continue.
If you want to change the quorum requirement, you have to change the document that identifies the quorum.

My suggestion, appoint a spouse to the Board.
They can show up at the start of the meeting and then leave.
This will give you a quorum and the quorum will remain even if someone leaves.

It's not proper, but it will allow things to get done.

The other option is to place the fear of the courts into the membership.
Explain that without a quorum, the Board has no power but to pay existing contracts.
Without a quorum, the Board will be forced to petition the court for receivership which will place control of the Association with the receiver and the Association will incur additional assessments to pay for the receivers salary.



When I faced a similar issue within my Association, prior to people leaving, the Board passed a resolution empowering the Officers to renew contracts if needed and the authority to enter into contracts to pay for any needed repairs. This allowed the Officer to do the work without further approval of the board.
BenA2
(Texas)

Posts:401


02/01/2018 2:07 PM  
The requirement for quorum should be in your CC&Rs or bylaws. If it is in the CC&Rs or bylaws, then you have to follow the procedure for amending that respective document.

I'm confused when you say you dropped it to two homeowners. Are you counting homeowners who are not board members? The quorum is only for voting members so, if you are talking about a board meeting, you would only count board members.

I would also check your state laws for quorum requirements.


RichardP13
(California)

Posts:2538


02/01/2018 2:28 PM  
First, as was asked, how many Directors did you have, 5 or 3?

What does your Bylaws state as the number of Directors required, 3 or 5, or 3 up to 5. With an association of 40 units, 5 Directors can be overkill. If it is the later, and is only three, then you are fine.

My strong recommendation is get a management company to handle financials only. For a couple hundred dollars, they can send statements/coupon out, receive payments, pay bills and compile monthly financials. It is possible they can handle annual reviews and taxes. Then the Board can handle the day to day operation of the complex.

Don't appoint a spouse, call a member meeting and lay it on the line that someone needs to step up to the plate.
JayF1
(Washington)

Posts:52


02/01/2018 5:19 PM  
Only 2 board members
40 Homeowners
16-year Development
WA State
Quorum 2
No need for a management company

ByLaws: The affairs of this Association shall be managed by a Board of one(1) Director but not more than five (5) Directors.
ByLaws: To constitute a quorum at any meeting of the members, there only needs to be five (5) lot owners present which shall
constitute a quorum for any action.

ByLaws originally stated 5 homeowners must be present. It was drop down to 3 before I took over. Finally, we amend it to 2 before the Secretary resigned.

I suspect that was improper. Just not experienced enough to confirm this. We have been having membership participation dwindling over the years. I was wondering what are other HOAs with the similar issue doing?

Tim-resolution empowering officers sounds good but appears dangerous or high risk of liability to the officers. Did this work for you?
JayF1
(Washington)

Posts:52


02/01/2018 5:28 PM  
I am a small business owner. I got the business side of HOA taken care of. I really like to save as far as our HOA budget and get our reserves back. We did use separate management companies but both failed for some reason. Because of that, we lost most of our reserves. I just lacking experience on the board formality & legality side of Board meetings. I was they had President manual but I guess it would be a 1000 page book to cover these misc procedures.

KerryL1
(California)

Posts:5160


02/01/2018 5:46 PM  
Two board members are fine for board meetings according to your bylaws as they only require one.

The quorum of 5 is for MEMBERS meetings, which usually just are annual meetings and elections.

Not sure how you "lost reserves" paying a MC as that pay should have come out of your operations budget not your reserves.
JayF1
(Washington)

Posts:52


02/09/2018 5:56 PM  
Hi Kerry.

Is this true? Quorums are for Member meetings only and not regular meetings? This sounds too good to be true.

I agree with you. I just took over, we had 2 management companies and eventually they drop us after draining our reserves. They are very expensive and taking half of our assessments.

"Two board members are fine for board meetings according to your bylaws as they only require one.
The quorum of 5 is for MEMBERS meetings, which usually just are annual meetings and elections.
Not sure how you "lost reserves" paying a MC as that pay should have come out of your operations budget not your reserves."
TimB4
(Virginia)

Posts:15724


02/09/2018 6:09 PM  
Jay,

What Kerry is saying is the citation you provided is for the general membership meetings and not board meetings.

A quorum of the Board is a simply majority.
If you have 5 seats on the board (regardless of how many are filled), the quorum for board meetings is 3
TimB4
(Virginia)

Posts:15724


02/09/2018 6:17 PM  
Note, the basis for saying this is Washington State Corporate Law:

RCW 24.03.110


A majority of the number of directors fixed by, or in the manner provided in the bylaws, or in the absence of a bylaw fixing or providing for the number of directors, then of the number fixed by or in the manner provided in the articles of incorporation, shall constitute a quorum for the transaction of business, unless otherwise provided in the articles of incorporation or the bylaws.


Basically, the Board needs to appoint one person to the Board to make quorum (if you are down to 2 seated directors). It can be an uninterested individual who shows up to establish a quorum and goes home if needed.
JayF1
(Washington)

Posts:52


02/10/2018 12:56 AM  
thanks tim & kerry, obviously I need to understand this all this formality.

By my understanding, without a quorum, there Board cannot meet and vote in HOA matters (fines, contracts, amendments, legal action). The directors can only maintain the status quo, paying bills, collecting annual assessments & unpaid balance dues. It appears our governing docs are standard and the bottom line everything must be approval of % of the membership. Any clarification I would greatly help, just thankful to have access to experienced folks like you both. I am self-employed and learning the ropes the proper way to run our HOA. The experience members left me once they saw the first window to exit.
TimB4
(Virginia)

Posts:15724


02/10/2018 4:25 AM  
Jay,

You have it.


However, reality is if you do what needs to be done that is likely not to be challenged (renewing/new contracts for services, collection actions, amendments by the membership, etc.) then there will likely be no issues. If you do things that may be challenged (fines, changing governing documents at the Board level) you run the risk of all of those actions being ruled null and void by the courts.
JohnC46
(South Carolina)

Posts:7503


02/10/2018 7:29 AM  
Jay

Look at how the BOD can fill vacancies. I expect you two could appoint a 3rd.
JayF1
(Washington)

Posts:52


02/13/2018 2:18 PM  
I hope so John. Just worried about liabilities. We can simply appoint our wives but they will not willing to do any such fiduciary duties in regards to what they are appointed to. We really need someone to commit and volunteer what is expected because of that.
JohnC46
(South Carolina)

Posts:7503


02/13/2018 3:52 PM  
Posted By JayF1 on 02/13/2018 2:18 PM
I hope so John. Just worried about liabilities. We can simply appoint our wives but they will not willing to do any such fiduciary duties in regards to what they are appointed to. We really need someone to commit and volunteer what is expected because of that.




Jay

Some Covenants/Blaws prohibit co-owners (husband and wife) from being on a BOD. Others allow it. Read your own closely.

Myself, I am against such.
KerryL1
(California)

Posts:5160


02/13/2018 3:55 PM  
But, very one, how do you t read this, which apparently is in Jay's bylaws: "The affairs of this Association shall be managed by a Board of one(1) Director but not more than five (5) Directors."

It looks as though 2 would be OK?????
TimB4
(Virginia)

Posts:15724


02/13/2018 4:01 PM  
Two would be ok.
However, in my opinion, the quorum would still be 3.
JohnC46
(South Carolina)

Posts:7503


02/13/2018 4:06 PM  
Posted By TimB4 on 02/13/2018 4:01 PM
Two would be ok.
However, in my opinion, the quorum would still be 3.




That says to me one person can control. If two, then 2 agreeing works same two not agreeing works. One to one is a tie vote.
DouglasM6
(Arizona)

Posts:722


02/13/2018 4:20 PM  
The way it's written, and the way I interpret it, having only two board members is okay but you would need unanimous voting on all decisions. Just remember there are two types of meetings, member and board, each having a different quorum requirement.

If I were in your shoes, I would pen some questions and go spend 30 minutes with an HOA lawyer. I was actually in your shoes as far as being thrown in the fire. But I had three others who were thrown in with me. Our quorum is 3 since we have 4 directors. The lawyer helped me allot.
KerryL1
(California)

Posts:5160


02/13/2018 5:28 PM  
I agree with Douglas, Jay. You & the other director should spend a hour or less with an HOA lawyer to get a lot straightened out.
KerryL1
(California)

Posts:5160


02/13/2018 5:29 PM  
I agree with Douglas, Jay. You & the other director should spend a hour or less with an HOA lawyer to get a lot straightened out.
JayF1
(Washington)

Posts:52


02/13/2018 5:49 PM  
thanks all for seeing my dilemma. that's why I am these discussions. Need to get familiar with areas like this so I can ask the appropriate questions to our lawyer.

BTW-anyone knows a good HOA lawyer in WA State?? Just asking this brings up more questions regarding our existing lawyer with current fillings. Seems to be ongoing when you are new. I can see why 3 or odd number directors is required, to break a tie.
Any more advice I greatly appreciate, especially someone thinking outside the box. Just like to get more views regarding this situation.
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