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Subject: legalities about election
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AndreaW
(North Carolina)

Posts:57


08/20/2006 9:39 AM  
I need some clarification, and would appreciate your help!
We had our annual HOA meeting on Tuesday night. We are in NC and we are an HOA of approx 360 existing & occupied homes with approx another 65-70 to still be built. Prior to Tuesday, we only had 2 seats on the Board out of 5. The purpose of the meeting was to vote 4 new Homeowners to the Board and the developer still holds 1 seat. However in reading through our by-laws, I am not quite clear how to interpret:
They read: "During the class "B" control period. Subject to the provisions of section 4.3 below, the directors shall be selected by the Class "B" Member acting in its sole discretion and shall serve at the pleasure of the Class "B" Member until the first to occur of the following, which occurence shall signify the end of the Class "B" control period.
i. when 75% of the total number of units proposed by the site plan for the property described on Exhibits "A" and "B" of the declaration have certificates of occupancy issued thereon and have been conveyed to Persons other than Builders; The Class "B" membership shall terminate upon the termination of the Class "b" control period. Such amendments are made so that the VA and FHA are able to insure or guaranty any Mortgages on the units. or
ii. when in its discretion, the Class "B" Member so determines.
So my questions are:
1) Does this translate to the end of the Class "B" control period?
2) Some of the candidiates had a much higher vote counts than the person actually making it on the Board, if you do not include the builders votes. Is is still OK for the builder to cast his votes for the unbuilt lots even if this means that the class "B" membership and and control period has ended?
3) The builders had supposedly 94 votes cast out of 203 eligible votes that night. One of the candidates is a real estate agent in our area,who used our email list to send out a campaign letter and added in his personal advertising all over the header and bottom of the email, he had the least amount of homeowner votes, about 39 votes, however due to the fact that the builder voted, he made it on the board and the other 2 candidiates with much more votes from the homeowners (57 & 65) did not get on the Board.
Please see if you can clarify for me so i have a full understanding of how this all panned out? I find this very confusing and upsetting, because either of the other 2 candidiates with higher vote counts have done so much more for the community all around, have been on committeess and show up to all events and are always there to help. It just does not seem like justice to our neighborhood. Please answer soon!!
JamesC
(Maryland)

Posts:282


08/20/2006 10:48 AM  
Why do you have such a small BOD (5) with an HOA as large as yours? We have only 167 units in our HOA and nine (9) BOD members. Can't you folks increase the number so more of your homeowners can serve on the board?
AndreaW
(North Carolina)

Posts:57


08/20/2006 10:53 AM  
Our Bylaws whcih were written by the builder allows for only 5 members of the BOD, however we have considered changing that to a higher number once the Builder is out. However I also need to know based on my above post, since the Class "B" membership ends with the 75% as well as the Class "B" control period, was the builder even allowed to vote in this election. Please someone help with answers, this is a critical situation, affecting the whole community and the existing board members are looking to the builders MC for answers whcih i do not think they are being advised correctly.
BrianB
(California)

Posts:2820


08/20/2006 10:58 AM  
it sounds as if you are 6/7 "owner owned", and thus, no longer under the provisions of the Class B rules. To me, that means the developer turns over control, no longer chooses members, or even votes anymore. Developer control stops at 75% occupancy, and with 360 out of 420 homes in owner's hands, you are well past the 75% needed to take control.
GeraldT1


Posts:0


08/20/2006 2:54 PM  
AndreaW,

I agree with BrianB, Class B and therefore developer "control" is over. However, there may be a clause somewhere in your by-laws that the developer has the right of veto as long as he retains a seat on the board.

Explain to me how there are not six board members if you had 2 seats out of 5, and 4 were elected. Six could mean a tie, that can't be, but your numbers are throwing me off. What have I missed?

Additionally, why did the builder have 94 votes rather than 65-70, one vote for each unclosed unit?

Seems to me the realtor is a plant, and the builder/developer is not honoring the wish of the owners, suprise, suprise.

GeraldT1
NNJ

AndreaW
(North Carolina)

Posts:57


08/20/2006 3:39 PM  
Gerald, Thanks for your post, I will continue what the rest of the provisions say in the bylaws so there is no confusion. Please try to bear with me and help to interpret because i am confused. I have typed sect 3.3 from the bylaws which states that they are "subject to provisions in sect 4.3 so here is sect 4.3:

Election and terms of office. Notwithstanding any provisions of these bylaws:
4.3.1 Within (30)thirty calendar days after the time that Class "A" Members other than builders own 50% of the units proposed by the site plan for the property described in Exhibits "A" & "B" of the declaration, or whenever Class "B" Member earlier determines, the Board shall be increased to five directors. The president shall call for an election by which the Class "A" Members shall be entitled to elect two of the five directors. The remaining three directors shall be appointees of the Class "B" member. The directors elected by the Class "A" members shall not be subject to removal by the Class "B" members and shall be elected for a term of two years or until the happening of the event described in subsection (b), whichever is shorter. If such directors terms expire prior to the happening of the event described in subsection (b), sucessors shall be elected for a like term.
4.3.2 Within ninety calendar days after termination of the class "b" Control Period, The president shall call for an election by whihc the Class "A" Members shall be entitled to elect three of the five directors. The remaining two directors shall be appointees of the Class "B' member and shall serve until the first annual meeting following the termination of the Class "B" Control Period. If such annual meeting is scheduled to occur within ninety days after termination of the Control "B" period, this subsection shall not aplly and directors shall be elected in accordance with subsection (c) below.
4.3.3 Not later than the first annual meeting after termination of the Class "B" control Period, an election shall be held at whcih four directors shall be elected by the Class "A" Members with two directors receiving the largest number of votes being elected for a term of (2) two years and the remaining two directors being elected for a term of (1)one year.
4.3.4 Until termination of the class "B" membership, the Class "B" Member shall be entitled to appoint one (1) director. Upon termination of the Class "B" membership, the director elected by Class "B" shall resign and the remaining directors shall be entitled to appoint a director to serve until the next annual meeting, at which the class "A" Memebrs shall be entitled to elect a director to fill such position. Such director shall be elected for a term of two (2) years.
4.3.5 Upon expiration of the term of office of each director elected by the Class "A" Memebers, a successor shall be elected to serve a term of (2) two years. The directors elected by the class "A" Members shall hold office until their respective successors have been elected.

So after reading the above, I will clarify further. As of june 17 our neighborhood turned to 75% homeowner occupancy, our last HOA meeting was last July 2005. At that point we elected 2 resident Board members, the builder still held 3 seats. Now they sent out notification for a meeting to take place Aug 15 2006 and that we were to elect 4 residents for the Board and the builder only had the 1 remaining seat. Question, if the builder terminated membership and control effective as of june 17 then why did we not elect 5 Board members? Our bylaws state that " the mnumber of directors shall consist of three to five directors as provided in Sect 4.1 & 4.3. The initial board consists of three directors." Further if the membership of the Class "B" terminated then how can the Class "B" member cast votes? There is from what i can see no provision made for the Class "b' to still be able to exercise the right to vote. I even checked the CCR's under the assessment section and there is nothing stated about voting. Please Help and advise.
On another note, One of the candidiates is a real estate broker who has sold properties for the builder, is it not unethical or illegal for the builder to have cast votes for this individual to get him on the board? Without the builder votes the whole result of the election changes from what we have been led to believe were the results.
RogerB
(Colorado)

Posts:5067


08/20/2006 6:41 PM  
Posted By AndreaW on 08/20/2006 3:39 PM
Question, if the builder terminated membership and control effective as of june 17 then why did we not elect 5 Board members? ........

Further if the membership of the Class "B" terminated then how can the Class "B" member cast votes?

On another note, One of the candidiates is a real estate broker who has sold properties for the builder, is it not unethical or illegal for the builder to have cast votes for this individual to get him on the board?


If the Developer still owns units (lots) he is still a class B member even if control of the Board was turned over to the homeowners.
It is not illegal for the Developer to cast valid votes for a real estate broker and it is no more unethical than the Developer appointing all of the members when they controlled the Board.

I think it is much more important to do a transition audit. Do a financial audit to make sure the Developer has paid all of their assessments and has not used association funds to pay for expenses which should have been paid by the Developer; and a physical audit as I have previously discussed.
AndreaW
(North Carolina)

Posts:57


08/20/2006 7:57 PM  
I understand that yousay the builder is still a class B member if they still own lots, however the bylaws read that the class B membership terminates at the 75% as well as the class B control. So are they entitled to vote? There is no provision for their voting on the lots they still own after this point (75%).
RogerB
(Colorado)

Posts:5067


08/20/2006 9:36 PM  
Andrea, I believe you may be interpreting incorrectly. Most certainly the right to representation can not be taken away from a class B member. And I do not interpret that the class B control terminates at 75% ownership by class A members.
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