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Subject: Covenant Amendment Vote Issue
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BillD15
(South Carolina)

Posts:9


11/28/2018 6:17 AM  
Our neighborhood is in SC. We recently held our annual member meeting where we voted on 7 proposed covenant and bylaw changes. My concern is the number of votes "for" did not meet the stipulation in our covenants that states there must be 3/4 in favor to pass. At the bottom are the various sections of our Covenants and Bylaws that govern voting.

In a nut shell, we get a 30 day notice of changes and the opportunity to submit a proxy or vote in person. If a member doesn't submit a proxy, their vote is counted with the majority. But what defines a majority when the clause states it takes 3/4 to pass?

The 7 different votes all had more "for" than "against" but only one had 3/4 more, the rest were all 36-30, 37-29 etc. The board then awarded all the unproxied votes with the simple majority, so all changes passed.

I believe the intent is for amendment changes to be a difficult process and not controllable by a few members. If the majority is indeed implied to be a simple 51% to get the unproxied votes, then the 3/4 rule is out the window for any votes for amendments since it would only take one more "for" than "against" during the votes to garner the unproxied votes, not a 3/4 majority as stipulated.

I view the pertinent parts of the covenants this way:
Amendments: 3/4 of votes cast in favor to approve amendments (majority is 3/4 in this case, not 51% or simple, it takes 3/4s to pass)
Sect 4 Quorum: Unless otherwise provided herein (the 3/4 vote requirement is otherwise provided herein), a majority of votes wins (the amendments clause stipulates 3/4 as the majority for amendment changes)
Sect 5 Voting: A members failure to proxy causes their vote to go to the majority present and voting (per quorum and amendments, 3/4 is the majority)
Sect 6 Proxies: members give proxy to majority present and voting (redundant to sect 5 but the implication is the same, per quorum and amendments, 3/4 is the majority)


How do others interpret how the vote count works when the requirement is 3/4 or 2/3? Does it really only take one more "for" than "against" to pass in our case? How far off base am I on this?

Thanks
Bill D.


Here are the Covenant and Bylaws sections (I don't know how to highlight the pertinent sections):
-------------------------------------------------------------------------------------------------
Covenants, Art. VII, General Provisions
Amendments. The Association expressly reserves the right to amend this Declaration or any portion thereof. The procedure for amendment shall be as follows: All proposed amendments shall be submitted to a vote of the Members at a duly called meeting of the Association and any such proposed amendment shall be deemed approved if three-fourths (3/4) of the votes cast at such meeting vote in favor of such proposed amendment. Notice shall be given each Member at least thirty (30) days prior to the day of the meeting at which such proposed amendment is to be considered. If any proposed amendment to this Declaration is approved by the Members as set forth above, the President and Secretary of the Association shall execute an Addendum to this Declaration which shall set forth the amendment, the effective date of the amendment (which in no event shall be less than sixty (60) days after the date of the meeting of the Association at which such amendment was adopted), the date of the meeting of the Association at which such amendment was adopted, the date that notice of such meeting was given, the total number of votes of members of the Association, the total number of votes required to constitute a quorum at a meeting of the Association, the total number of votes necessary to adopt the amendment, the total number of votes cast in favor of such amendment and the total number of votes cast against the amendment. Such Addendum shall be recorded in the Office of the Register of Mesne Conveyances for Dorchester County.


Bylaws, Art. III, Membership & Voting
Section 4. Quorum. The presence at the meeting of Members, or of proxies, entitled to cast fifty-one percent of the total vote of the Membership shall constitute a quorum for the transaction of business at meetings of the Association. Unless otherwise provided herein, a majority of the votes cast at such meeting shall be the vote required to adopt decisions. Any absent Member who does not execute and return the proxy form sent to him in the mailing referred to in Section 5 of this Article shall be deemed to be present for the purposes of determining the presence of a quorum.


Bylaws, Art. III, Membership & Voting
Section 5. Voting. Members shall be entitled to one vote for each Lot, and the vote required to adopt decisions shall be as set out in Section 4 above. Votes can be cast only at meetings of the Association convened in accordance with the Bylaws, and in the absence of a valid proxy, an individual shall act in his own behalf, a corporation shall act by any officer, a partnership shall act by any general partner, an association shall act by any associate, a trust shall act by any trustee, and any other legal entity shall act by any managing agent. The failure of an absent Member to execute and return the proxy form sent to him in the mailing referred to in Section 6 of this Article shall constitute a proxy to and for the majority present and voting. When a Member consists of two or more persons, any one of such persons shall be deemed authorized to act for all in taking any action on behalf of such Member unless another of such persons objects and in case of disagreement among co-owners as to the vote, the vote which such co-owners may be entitled to cast may not be cast. All votes appurtenant to a single Lot must be cast together and may not be split.


Bylaws, Art. III, Membership & Voting
Section 6. Proxies. Any member may by written proxy designate an agent to cast his vote. Unless a proxy states otherwise, it shall be deemed to confer the authority to execute consents and waivers and to exercise the right to examine the books and records of the Association. A proxy may be revocable or irrevocable but shall be deemed revocable at will unless it states otherwise. No proxy shall be honored until delivered to the Secretary of the Association. If at least thirty days prior to a duly called meeting a Member is informed by mail of (1) the time and place of the meeting, (2) the agenda for the meeting, and (3) such data as is then available relative to issues on which there will be a vote, and a proxy form is included in such mailing, and the Member neither attends the meeting nor returns his executed proxy, then such Member shall be deemed to have given his proxy to and for the majority present and voting.
RoyalP
(South Carolina)

Posts:203


11/28/2018 6:43 AM  
..... the total number of votes cast in favor of such amendment and the total number of votes cast against the amendment. Such Addendum shall be recorded in the Office of the Register of Mesne Conveyances for {xyz} County. .....


It REQUIRES 3/4 of (at least) 51% actually casting an AYE vote for the amendment to pass.

Lack of a vote or proxy does NOT, repeat NOT, count as an AYE.

eg.

100 total members

3/4 x 51 = 39 MINIMUM actual AYE (rounding UP)


150 total members

3/4 x 77 = 56 MINIMUM actual AYE (rounding UP)


If you are contesting the 'outcome' an attorney would STRONGLY be recommended BEFORE your title is PERMANENTLY encumbered.
AugustinD


Posts:1208


11/28/2018 6:45 AM  
Posted By BillD15 on 11/28/2018 6:17 AM
I believe the intent is for amendment changes to be a difficult process and not controllable by a few members. If the majority is indeed implied to be a simple 51% to get the unproxied votes, then the 3/4 rule is out the window for any votes for amendments since it would only take one more "for" than "against" during the votes to garner the unproxied votes, not a 3/4 majority as stipulated.


That those who are {absent and do not submit a proxy} get assigned a vote going with the majority is unusual in my experience. But it's right there in black and white in your Bylaw Art. III.

For purposes of this discussion, I think a "majority" is not 3/4 or 2/3. It is 50+%.

I believe a court would say that those who do not appear and do not cast a proxy have legal notice of the Bylaw and know that their vote will be counted with the majority (meaning 50+%) of those "present and voting" at the annual meeting. It appears legitimate to me for one more "for" than "against" vote (of those present, in person or by proxy) to garner the unproxied votes and potentially achieve the 3/4.
RoyalP
(South Carolina)

Posts:203


11/28/2018 6:51 AM  
..... and the Member neither attends the meeting nor returns his executed proxy, then such Member shall be deemed to have given his proxy to and for the majority present and voting. .....


JABBERWOCKY

One can NOT include absentees w/o submitted proxies towards a quorum.

One can NOT vote w/o being a part of the quorum.

Your BODs are, medically speaking, idiots.


ATTORNEY ~ NOW
RoyalP
(South Carolina)

Posts:203


11/28/2018 7:09 AM  
South Carolina Not-For-Profit Corporate Law:

SECTION 33 31 140. Definitions.

Unless the context otherwise requires;
(1) “Approved by the members” or “approval by the members” means approved or ratified by the members entitled to vote on the issue through either:
(a) the affirmative vote of a majority of the votes of the members represented and voting at a duly held meeting at which a quorum is present or the affirmative vote of the greater proportion including the votes of any required proportion of the members of any class as the articles, bylaws, or this chapter may provide for specified types of member action .....


SECTION 33 31 723. Voting requirements.

(a) Unless this chapter, the articles, or the bylaws require a greater vote or voting by class, if a quorum is present, the affirmative vote of the votes represented and voting, which affirmative votes also constitute a majority of the required quorum, is the act of the members.


Now, the question becomes:

? How can a corporate member actually, in practice in the 'real world', enforce said law ?

JohnC46
(South Carolina)

Posts:7865


11/28/2018 7:25 AM  
Bill

It was wrong to count non submitted proxies with the majority, or for that matter, with the minority. They are non votes.

You won that argument so now what are you going to do about it? I doubt the BOD will take any action unless forced to.





AugustinD


Posts:1208


11/28/2018 7:39 AM  
JohnC46, are you saying that the following clause from this HOA's Bylaws is unlawful and so not enforceable?

Posted By BillD15 on 11/28/2018 6:17 AM

Bylaws, Art. III, Membership & Voting ... The failure of an absent Member to execute and return the proxy form sent to him in the mailing referred to in Section 6 of this Article shall constitute a proxy to and for the majority present and voting. ...
BillD15
(South Carolina)

Posts:9


11/28/2018 8:06 AM  
All, thanks for the input so far. This is actually the tip of the iceberg. As far as what am I going to do, its like the character Jim Carey played in the movie Liar Liar where he goes to get his car from the impound lot, I feel that pretty much explains my options.

To add insult to injury, the proposed amendment changes were presented 30 days in advance as required but they didn't include the exact wording that was going to be added/modified. The existing clauses were given and the intent of what they wanted to change, but not the verbiage. One was for administrative corrections but others were more impactful on everyone (unregistered/inoperative cars, simplifying penalties/fees, etc), things that can really go bad if they don't word it correctly.

And, I tried to make an amendment to the proposed budget, not change the bottom line, but change a fee structure for rental spaces in our boatyard. The board wouldn't allow a binding vote on it. These are the clauses governing budget proposals and voting:

Section 2. Budget. The Board of Directors shall prepare and submit, or cause to be prepared and submitted, to the Members at their annual meeting a proposed budget for the Association for the fiscal year. The proposed budget shall set forth with particularity the anticipated common expenses for the fiscal year and the amount of money needed to establish reasonable reserves for the payment of common expenses and contingencies.

Section 3. Approval of Budget. The proposed budget, as it may be amended upon motion by any Member, shall be submitted to a vote of the Members and when approved shall become the budget (Budget) of the Association for the fiscal year. The terms of the Budget shall be binding upon the Board of Directors unless and until such terms are amended by action of the Members.


To be fair the BODs are nice people (I'm not on the board), volunteers like myself. I think they are being misled by our property management company and their lawyer (who stated last year that we are not allowed line item amendments to the budget).

Sorry, I side tracked. The above are probably better suited for 2 other topics. I still feel "majority" is the critical term that is not well defined but governs where the unproxied votes go. Also, as RoyalP pointed out, can our covenants override our state's not-for-profit corporate law (if I'm reading it correctly)?
RoyalP
(South Carolina)

Posts:203


11/28/2018 8:11 AM  
Question for an attorney.

but

only if SC law 'defers' to your bylaws ON THAT SPECIFIC POINT


in my PERSONAL opinion, NO
RoyalP
(South Carolina)

Posts:203


11/28/2018 8:17 AM  
Posted By AugustinD on 11/28/2018 7:39 AM
JohnC46, are you saying that the following clause from this HOA's Bylaws is unlawful and so not enforceable?

Posted By BillD15 on 11/28/2018 6:17 AM

Bylaws, Art. III, Membership & Voting ... The failure of an absent Member to execute and return the proxy form sent to him in the mailing referred to in Section 6 of this Article shall constitute a proxy to and for the majority present and voting. ...




For the sake of argument, assuming it IS lawful and enforceable:

There would ALWAYS be a quorum of 100% as ALL members would be 'represented' at the meeting.

? ABSURD ?

! OBVIOUSLY !



BillD15
(South Carolina)

Posts:9


11/28/2018 8:28 AM  
Posted By RoyalP on 11/28/2018 8:17 AM
Posted By AugustinD on 11/28/2018 7:39 AM
JohnC46, are you saying that the following clause from this HOA's Bylaws is unlawful and so not enforceable?

Posted By BillD15 on 11/28/2018 6:17 AM

Bylaws, Art. III, Membership & Voting ... The failure of an absent Member to execute and return the proxy form sent to him in the mailing referred to in Section 6 of this Article shall constitute a proxy to and for the majority present and voting. ...



For the sake of argument, assuming it IS lawful and enforceable:

There would ALWAYS be a quorum of 100% as ALL members would be 'represented' at the meeting.

? ABSURD ?

! OBVIOUSLY !







100% minus those that are not in good standing with their HOA dues and other fees.
RoyalP
(South Carolina)

Posts:203


11/28/2018 8:30 AM  
..... To be fair the BODs are nice people .....


? who cares if they are nice ?

they are VOLUNTEER corporate directors and are REQUIRED to exercise fiduciary responsibility

they are REQUIRED to actually perform as corporate directors OR stop being directors


'ignorance of the law is no excuse'


they have access to the same material as everyone else

BECAUSE they, like most other directors, volunteered, they are held to the SAME standard(s) as any other corporate directors.

THIS IS THE LAW

SECTION 33 31 830. General standards for directors.

(a) A director shall discharge his duties as a director, including his duties as a member of a committee:
(1) in good faith;
(2) with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and
(3) in a manner the director reasonably believes to be in the best interests of the corporation.
(b) In discharging his or her duties, a director is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:
(1) one or more officers or employees of the corporation who the director reasonably believes is reliable and competent in the matters presented;
(2) legal counsel, public accountants, or other persons as to matters the director reasonably believes are within the person’s professional or expert competence;
(3) a committee of the board of which the director is not a member, as to matters within its jurisdiction, if the director reasonably believes the committee merits confidence; or
(4) in the case of religious corporations, religious authorities and ministers, priests, rabbis, or other persons whose position or duties in the religious organization the director believes justify reliance and confidence and who the director believes is reliable and competent in the matters presented.
(c) A director is not acting in good faith if the director has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (b) unwarranted.
(d) A director is not liable to the corporation, a member, or any other person for any action taken or not taken as a director, if the director acted in compliance with this section.
(e) A director shall not be deemed to be a trustee with respect to the corporation or with respect to any property held or administered by the corporation, including without limit, property that may be subject to restrictions imposed by the donor or transferror of the property.
(f) An action against a director asserting the director’s failure to act in compliance with this section and consequent liability must be commenced before the sooner of (i) three years after the failure complained of or (ii) two years after the harm complained of is, or reasonably should have been, discovered. This limitations period does not apply if the failure to act in compliance with this section has been fraudulently concealed.

RoyalP
(South Carolina)

Posts:203


11/28/2018 8:31 AM  
Posted By BillD15 on 11/28/2018 8:28 AM
Posted By RoyalP on 11/28/2018 8:17 AM
Posted By AugustinD on 11/28/2018 7:39 AM
JohnC46, are you saying that the following clause from this HOA's Bylaws is unlawful and so not enforceable?

Posted By BillD15 on 11/28/2018 6:17 AM

Bylaws, Art. III, Membership & Voting ... The failure of an absent Member to execute and return the proxy form sent to him in the mailing referred to in Section 6 of this Article shall constitute a proxy to and for the majority present and voting. ...



For the sake of argument, assuming it IS lawful and enforceable:

There would ALWAYS be a quorum of 100% as ALL members would be 'represented' at the meeting.

? ABSURD ?

! OBVIOUSLY !







100% minus those that are not in good standing with their HOA dues and other fees.





D'OH
RoyalP
(South Carolina)

Posts:203


11/28/2018 8:32 AM  
bullshitometer now at 100%

OUT
AugustinD


Posts:1208


11/28/2018 9:01 AM  
Posted By BillD15 on 11/28/2018 8:06 AM
... the proposed amendment changes were presented 30 days in advance as required but they didn't include the exact wording that was going to be added/modified. The existing clauses were given and the intent of what they wanted to change, but not the verbiage. One was for administrative corrections but others were more impactful on everyone (unregistered/inoperative cars, simplifying penalties/fees, etc), things that can really go bad if they don't word it correctly.


I agree the above is a big deal and worthy of a polite objection, followed within ten days by a letter of demand.

I suggest starting a new thread on the budget amendment issue.
AugustinD


Posts:1208


11/28/2018 9:14 AM  
Posted By RoyalP on 11/28/2018 8:17 AM
There would ALWAYS be a quorum of 100% [less those who are delinquent] as ALL members would be 'represented' at the meeting.


I am not sure I see this as either outright contradicting anything or something that is bad. The members are duly noticed of this reality and understand that it is likely that a quorum will always be present. They have also been duly noticed that, if they either do not attend or do not submit a proxy, a simple majority (meaning 50+%) of those present may control the outcome of annual meeting votes. "May control" is key. The minority on any vote may be present in sufficient numbers to avoid the 3/4's necessary for an affirmative vote. If certain members strongly oppose an agenda item on which there will be a vote, they better gather proxies or show up at the annual meeting.
BillD15
(South Carolina)

Posts:9


11/28/2018 11:39 AM  
I wish our situation was BS, but its not.
BillD15
(South Carolina)

Posts:9


11/28/2018 11:40 AM  
Posted By RoyalP on 11/28/2018 8:32 AM
bullshitometer now at 100%

OUT



I wish our situation was BS, but its not.
BillD15
(South Carolina)

Posts:9


11/28/2018 11:46 AM  
Posted By AugustinD on 11/28/2018 9:14 AM
Posted By RoyalP on 11/28/2018 8:17 AM
There would ALWAYS be a quorum of 100% [less those who are delinquent] as ALL members would be 'represented' at the meeting.


I am not sure I see this as either outright contradicting anything or something that is bad. The members are duly noticed of this reality and understand that it is likely that a quorum will always be present. They have also been duly noticed that, if they either do not attend or do not submit a proxy, a simple majority (meaning 50+%) of those present may control the outcome of annual meeting votes. "May control" is key. The minority on any vote may be present in sufficient numbers to avoid the 3/4's necessary for an affirmative vote. If certain members strongly oppose an agenda item on which there will be a vote, they better gather proxies or show up at the annual meeting.




That's the problem I have, its the simple majority does control in this situation even when the covenants says you have to have 3/4 in favor to pass. In order to defeat a change the "nae"s have to get 51% where 25% should suffice. I've talked with a couple former presidents, they explained the process the same as you did: 30 day notice is given, either go in person or proxy your vote otherwise you are one of the majority (whatever that should be), and the quorum is always achieved.

We have over 370 members, we had about 70 voters (in person or by proxy) at the meeting. A lot of apathy here.
AugustinD


Posts:1208


11/28/2018 12:06 PM  
Posted By BillD15 on 11/28/2018 11:46 AM
That's the problem I have, its the simple majority does control in this situation even when the covenants says you have to have 3/4 in favor to pass. In order to defeat a change the "nae"s have to get 51% where 25% should suffice. I've talked with a couple former presidents, they explained the process the same as you did: 30 day notice is given, either go in person or proxy your vote otherwise you are one of the majority (whatever that should be), and the quorum is always achieved.

We have over 370 members, we had about 70 voters (in person or by proxy) at the meeting. A lot of apathy here.


I hear your frustration, but respectfully, I do not agree with your reasoning. I think your first loyalty, so to speak, here should be what the governing documents (bylaws, CC&Rs et cetera) say. All members were put on notice of these governing documents before buying (I presume). The Bylaws are what they are. If you do not like how the bylaws read, then I think your battle should be to amend the bylaws on this point. Or I guess you could go to court and argue that the Bylaw Art III is a violation of the law or property rights? But I am not buying the latter.

To shut down an attempt to amend the covenants, the nays have to get only 26% to show up in person or vote by explicit proxy.

To me your greatest weapon to stop all the amendments is the failure to properly notice the exact verbiage of the amendments. It is powerful.

The voting turnout of 19% (in person or by proxy submission) is appalling but in my experience, no surprise. After three HOAs, I am resigned to accepting "good enough" from a board, on account of member apathy and not wanting to serve on a board (at least these days).
GlenM4
(Tennessee)

Posts:138


11/28/2018 12:57 PM  
I believe your ccr is invalid. If correct the Law > CCRs


SECTION 33-31-724. Proxies.

(a) Unless the articles or bylaws prohibit or limit proxy voting, a member may appoint a proxy to vote or otherwise act for the member by signing an appointment form either personally or by an attorney-in-fact.



First it says MAY appoint a proxy, where as your CCR is saying it has to be done.

Second a proxy has to be signed.. Those unproxy votes are not signed.
GlenM4
(Tennessee)

Posts:138


11/28/2018 1:10 PM  
also there is this. .


(1) "Approved by the members" or "approval by the members" means approved or ratified by the members entitled to vote on the issue through either:

(a) the affirmative vote of a majority of the votes of the members represented and voting at a duly held meeting at which a quorum is present or the affirmative vote of the greater proportion including the votes of any required proportion of the members of any class as the articles, bylaws, or this chapter may provide for specified types of member action; or

(b) a written ballot or written consent in conformity with this chapter.


BillD15
(South Carolina)

Posts:9


11/28/2018 1:14 PM  
Posted By AugustinD on 11/28/2018 12:06 PM

To me your greatest weapon to stop all the amendments is the failure to properly notice the exact verbiage of the amendments. It is powerful.



One of the past presidents was at the meeting and not happy with the lack the exact wording. He didn't think there was anything we could due based on the vote results. Since they failed to properly notice the verbiage, how can that be used to stop the amendments until the wording is supplied?

I am actually for most of the amendments, at least their intent, but we need to see the final wording. The board said they will now work with an attorney to get the wording done.
AugustinD


Posts:1208


11/28/2018 2:40 PM  
Posted By BillD15 on 11/28/2018 1:14 PM
One of the past presidents was at the meeting and not happy with the lack the exact wording. He didn't think there was anything we could due based on the vote results. Since they failed to properly notice the verbiage, how can that be used to stop the amendments until the wording is supplied?

I am actually for most of the amendments, at least their intent, but we need to see the final wording. The board said they will now work with an attorney to get the wording done.


You would have to send a demand letter, preferably from an attorney. The letter would have three elements: (1) I think it would explain that "proper notice" of a meeting requires that all subjects up for a vote at the meeting must be on the notice. Since the vote is specifically on the amendment, and the amendment itself was not presented, then the notice was improper. (2) An instruction to refrain from implementing the amendments until a properly noticed meeting and vote is held; and (3) legal action will be taken if this is not done.

On municipal, county, and state elections where an amendment to the muni code, county code or state constitution is on the ballot, the exact wording is printed on the ballot and noticed to people as well far in advance of the election. This is common sense at this point.

The board may do as they wish with the HOA attorney. But they need to have another vote following proper notice.
AugustinD


Posts:1208


11/28/2018 2:53 PM  
GlenM4, first, I think that Bylaw Art III is not taking away a member's option to appoint a proxy. Second, if Section 33-31-724 said "may only appoint... ", or "shall appoint... " then I would be persuaded.

I am aware that the nationwide case law says that the Bylaws set the terms of what a valid proxy is. The courts prohibit any limitation on proxies that a board might dream up going beyond the Bylaws. E.g. requiring notarization when the Bylaws do not require notarization.

I could be wrong. Maybe a judge would see it as you do.
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