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Subject: Board stifled by old bylaws and terminology.
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SueW6
(Michigan)

Posts:750


09/05/2020 10:40 AM  
Short question is : what is the difference between an association And a corporation HOA.?

We just had elections and the previous president and wife/secretary refused to run and so they withdrew their name from consideration. We now have a new president , vice president , and secretary. The treasurer agreed to stay on.

We had our first board meeting and opened it to the general membership if they wanted to attend. It turned into a fiasco because the ex president attended and was very rude - interrupting, talking Over people, refusing to even look at the agenda much less follow it. So much ivertalk, I could hardly take minutes. I really suspected if he was either high or had been drinking. Everyone was disgusted with him.

The real issue is that they claim that the general membership must vote any money at all. This ties the current boards hands to make any kind of improvements or to protect the HOA. Even when we wanted to get an additional umbrella insurance policy for $875 to give us an additional $1 million liability Coverage.

We have 3 acres on a very busy lake, plus a boat well with 29 boats, plus a beach. We have board liability insurance now, with $1 million Liability. The property is worth quite a bit of money. The bylaws seem to tie our hands and ignore the idea of even having a board to manage the fiscal responsibility.

By the way, this president never called a board meeting. I cannot find any minutes or any one who has been to a board meeting for at least eight years. The secretary has filed the annual reports since 2008 so they are current with the state’ office of corporations. The property was donated to the subdivision residence in 1911 but of course it was just very loosely run by the neighborhood guys. I think that’s where the idea of “association“ (I.e. membership run) got entrenched in how management was handled. The bylaws were written in 1950 when they incorporated. They are very old and they do say that any expenditure over $100 needs to be voted on by the membership. Can you believe that?

This conflicts, I believe , with any kind of corporation structure where the board runs the HOA and makes financial decisions in order to protect the members. I can understand general member approval for larger expenses but now we have to go in front of the general membership to even get $200 to spend for a fall fun festival.

Is it mass rule, or board run?

Comments?
SueW6
(Michigan)

Posts:750


09/05/2020 10:50 AM  
More info:
By virtue of our deeds, all 138 homes are members of the association. This land was donated by one woman who designated it “to the residents” of xyz subdivision - 1911.

Now, it is a voluntary membership, with beach membership dues and Boatwell fees being required in order to enter the beach area.
AugustinD


Posts:3900


09/05/2020 12:04 PM  
-- Just to confirm: This is a community of stand alone homes, and not a condominium, correct?

-- If this is not a condominium, then as I think you are aware, Michigan has no HOA statute. But as you are also aware, Michigan has a nonprofit corporation statute.

-- As needed below, please refer to this copy of the Michigan Nonprofit Corporation Act:
https://www.legislature.mi.gov/documents/mcl/pdf/mcl-Act-162-of-1982.pdf

-- What do your Articles of Incorporation say, if anything, about who can amend the Bylaws? If you quote the relevant sections, then this might be the most helpful to readers here.

-- Please read the Nonprofit Corporation Act's Section 450.2231 "Bylaws; adoption; amendment or repeal; contents." Based on the latter section of the statute and the Articles of Incorporation, can you tell if the Board has the right to amend the Bylaws all by itself?

-- In this instance, I think it is reasonable to call your community both an association and a corporation. It is an association, because it has covenants attached to all the homes and I presume, the common area. It is a corporation, because it has Articles of Incorporation (or the equivalent for Michigan) on file with the state.

-- To me, the "association" descriptor does not have the same legal meaning it does in those states that do have a HOA (non-condo) statute. Because there is no HOA statute, I would homing in on what Michigan's Nonprofit Corporation Act requires and possibly what Michigan case law on covenants requires.

-- A Michigan non-condominium corporate Board does not have to open its board meetings to owners. But given that this is a voluntary association, it might be prudent to do so. I think the following is a good discussion of this: https://micondolaw.com/2016/05/12/is-a-community-associations-board-of-directors-required-to-make-board-meetings-open-to-association-members/

-- Given that there is no open meeting requirement, I believe it is completely reasonable (and then some) to limit the time that owners can talk at board meetings. If this guy continues to be disruptive, hire a security guard for the next couple of meetings. Put all on alert that a failure to follow xyz rules at meetings will result in being escorted out of the meeting.

-- Anyone disgusted with the lack of a requirement for board meetings to be open to owners should consider that, under the Michigan Nonprofit Corporation statute, owners generally have the right to view the Minutes. (Exception: Executive Session Minutes should not be offered to owners, assuming the Exec Session truly discussed confidential subjects.)

-- Guidance on corporate Minutes is to record only which directors are present; the time started; any motions made; seconds to the motions; and any vote made on them; and the time adjourned. In my opinion and per Robert's Rules, putting discussion, by either owners or directors, is inappropriate. Never record owners' remarks.




JohnC46
(South Carolina)

Posts:9877


09/05/2020 1:21 PM  
Sue

You are going to have to read your docs closer and become familiar enough with them to challenge anyone that might say otherwise.

Typically if money has been allocated/budgeted to "something" it does not need approval to spend. If not allocated, many docs have a spending limit that the BOD can spend for an unallocated item, ala the party, before the expenditure has to be approved by the membership. Usually in the $500 to $1K range.

As far as going "off agenda", that is up to the Pres. to control. Sounds like your Pres. does not have the whatevers to control the meeting.

Many states that allow owners to speak, also allow the BOD to set parameters on when they can speak and for how long. The BOD can make Rules & Regulations to control this. Few states allow owners to speak on an item during a meeting, though some allow such. Most will give owners the ability to talk for 2 minutes before or after the meeting, but never during the meeting unless called upon by the BOD.

Minutes are not word for word what was said at a meeting. At a minimum all that has to be in them is:

When and Where the meeting was held.

Who on the BOD was in attendance.

Motion(s) Made, Motion(s) Seconded, Motions(s) Voted on and, the Result of the vote. There does not have to be Minutes on the discussions held about said Motions. Just the Vote.

There does not have to be Minutes on any discussions at all. They are just chit chat unless Motion(s) are made. Many will add not required information to keep all informed but keep it brief/simple: A discussion was held concerning conditions of the boat ramps. No decisions were made. Does not matter if the discussion was long, heated, shouting, cussing, etc.

Be sure Minutes do not reflect the positions/beliefs of the person writing them. That is not what they are for.

Motion to end the Meeting was made. Meeting adjourned at 8:15PM.
KerryL1
(California)

Posts:7502


09/05/2020 3:28 PM  
Do your CC&Rs, Sue, say anything about the Board's spending authority?

Augustin gives you good advice about what to do research on.

Note John's comment on minutes are good. The President must not let owners blab any ol time. Set an agenda and allow for an Open Forum either before or after the business portion of the meting. In your state attendees, who are observers of board meetings, NOT participants can be told that if they do not adhere to the guidelines for comportment, the board meetings with be closed in the future.
AugustinD


Posts:3900


09/05/2020 3:32 PM  
Posted By KerryL1 on 09/05/2020 3:28 PM
In your state attendees, who are observers of board meetings, NOT participants can be told that if they do not adhere to the guidelines for comportment, the board meetings with be closed in the future.
Ha. Now we are talking (in Michigan, anyway). I agree with this advice.
JohnC46
(South Carolina)

Posts:9877


09/05/2020 3:44 PM  
Closing BOD meetings to owners, and we here in SC can, is a Nuclear Option which is a very, very dangerous option and should be the last possible option.

In the case of Sue, the OP, her BOD has not tried to get control of the meetings. That should be the first option. Do not be scared of ending a meeting should it get out of hand especially as a result of a vocal person. If other attend and it is shut down, they will soon get on that person and maybe even shame them into not attending.

The more I think about it, if the person gets out of hand call a 20 minute recess and state the reason so. The BOD believes so and so has gotten out of hand and calls a 20 minute recess. Keep doing it until others get on him.
KerryL1
(California)

Posts:7502


09/05/2020 4:52 PM  
In a closed meeting state like Michigan, I don't see threatening to closing the meeting as a "nuclear option." Calling a recess might be a first goo step. I've also heard of boards adjourning the board meeting to a director's home to finish business when Owners get rude & surly.

I was presiding a few years back and during a hearing (no audience, just the owner who'd been charge with violating the rules), the owner just wouldn't shut up after I'd thanked him for his account of the situation, that the Board would discuss, blah, blah. He didn't budge and kept talking. I, a fairly tall person, arose and started walking towards him repeating, "you must leave the meeting now." He did.

I can see, depending on the situation, the meeting chair or a burly director standing and saying to the ex-o prez that he is out of line and must stop speaking. A few steps towers the ex-prez might help.

These days, in our Zoom meetings, our PM could mute the violator (of our meeting rules).
SueW6
(Michigan)

Posts:750


09/06/2020 6:46 PM  
Thanks to everyone who replied.

As a board member on four different boards I am well aware how and what should be in the minutes. The meeting got out of control because the ex president cannot Accept the fact that he is no longer president and had to stick his nose into every comment made. That will be corrected.

My main question was the difference between a corporation and an association run HOA. We know we have to redo the bylaws .

Bylaws written in the 1950s for an association- run HOA don’t fly in 2020.
GeorgeS21
(Florida)

Posts:3112


09/06/2020 8:08 PM  
Sue,

I am still confused by your use of terms ... a Home Owner Association is the broad term used in most CCRs to describe the group that is a not for profit corporation.

I would be interested in your perspectives wrt what should be included in the minutes. It is always an interesting topic in this forum.
SueW6
(Michigan)

Posts:750


09/07/2020 5:03 AM  
Here’s a portion:


Discussion on boat well Maintenance. No action taken.

Discussion on possible “doggy day” at the park . No action taken.

Motion to spend $850 for additional liability insurance policy. Former secretary pointed out that all expenditures must be approved by entire membership at a general meeting, according to the bylaws. Motion withdrawn.

KerryL1
(California)

Posts:7502


09/07/2020 9:10 AM  
A "corporation" hs a specific legal definition?

The word "association" does not?

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