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Subject: Conflict of interest?
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DS8
(North Carolina)

Posts:1


11/12/2020 4:34 AM  
I live in North Carolina. We elect the board of our HOA in February. In January the management company sends out a notice which includes the following:

Even if you are planning on attending this meeting, we ask that you complete the enclosed proxy and return it to us, so that if a last minute change prevents you from attending the meeting, we can still obtain the quorum requirements to conduct business. If you have sent your proxy in and do attend the meeting, the proxy will be returned to you at the time you sign in. The proxy enables a Board of Directors member or another homeowner of your choice to vote in your absence.

I see several problems with this.

First, the Board should not be allowed to solicit blank ballots from homeowners! The Board should not be allowed to use this process to vote themselves into office. From what I can learn, this meets the definition of a conflict of interest. Even if it dosen’t meet the letter of the law, it violates the spirit of the law, it has the appearance of a conflict of interest.

Second, the management company, who we hire for their expertise in HOA management and legal matters, should never have permitted that language to be used in the annual meeting notice. It sure looks like this too is a conflict of interest. After all, it is the Board who hires and pays the management company. Again, even if it dosen’t meet the letter of the law, it violates the spirit of the law, it has the appearance of a conflict of interest.

What do you think? Thank you.

ChrisE8
(New York)

Posts:225


11/12/2020 5:16 AM  
Posted By DS8 on 11/12/2020 4:34 AM
I live in North Carolina. We elect the board of our HOA in February. In January the management company sends out a notice which includes the following:

Even if you are planning on attending this meeting, we ask that you complete the enclosed proxy and return it to us, so that if a last minute change prevents you from attending the meeting, we can still obtain the quorum requirements to conduct business. If you have sent your proxy in and do attend the meeting, the proxy will be returned to you at the time you sign in. The proxy enables a Board of Directors member or another homeowner of your choice to vote in your absence.

I see several problems with this.

First, the Board should not be allowed to solicit blank ballots from homeowners! The Board should not be allowed to use this process to vote themselves into office. From what I can learn, this meets the definition of a conflict of interest. Even if it dosen’t meet the letter of the law, it violates the spirit of the law, it has the appearance of a conflict of interest.

Second, the management company, who we hire for their expertise in HOA management and legal matters, should never have permitted that language to be used in the annual meeting notice. It sure looks like this too is a conflict of interest. After all, it is the Board who hires and pays the management company. Again, even if it dosen’t meet the letter of the law, it violates the spirit of the law, it has the appearance of a conflict of interest.

What do you think? Thank you.





I think it's a common thing in HOAs, and the design of the paperwork will help the board get re-elected, and at least it apparently lets you fill in another person to represent you.

It's not as bad as a HOA where I own a property- the proxy was given to the property manager, with the property manager listed as the proxy; no information about directors would be shared so you had no idea who the proxy would be used to vote for; and there was no blank where you could write in a proxy.

Your points are valid and if you wish to raise them to your neighbors, go for it and I'd support you, but it's not as bad as some HOAs.
CathyA3
(Ohio)

Posts:1368


11/12/2020 5:19 AM  
Posted By DS8 on 11/12/2020 4:34 AM
I live in North Carolina. We elect the board of our HOA in February. In January the management company sends out a notice which includes the following:

Even if you are planning on attending this meeting, we ask that you complete the enclosed proxy and return it to us, so that if a last minute change prevents you from attending the meeting, we can still obtain the quorum requirements to conduct business. If you have sent your proxy in and do attend the meeting, the proxy will be returned to you at the time you sign in. The proxy enables a Board of Directors member or another homeowner of your choice to vote in your absence.

I see several problems with this.

First, the Board should not be allowed to solicit blank ballots from homeowners! The Board should not be allowed to use this process to vote themselves into office. From what I can learn, this meets the definition of a conflict of interest. Even if it dosen’t meet the letter of the law, it violates the spirit of the law, it has the appearance of a conflict of interest.

Second, the management company, who we hire for their expertise in HOA management and legal matters, should never have permitted that language to be used in the annual meeting notice. It sure looks like this too is a conflict of interest. After all, it is the Board who hires and pays the management company. Again, even if it dosen’t meet the letter of the law, it violates the spirit of the law, it has the appearance of a conflict of interest.

What do you think? Thank you.





Sounds perfectly fine if proxies are allowed in your state.

It's common to include the proxy form along with other election materials in the annual meeting notice, which is typically sent out a month ahead of the annual meeting. The property manager usually sends out these mailings as part of their duties. They are not acting on their own behalf but on behalf of the association as a whole.

It's also common to ask homeowners to complete these proxy forms for exactly the reason stated: so that they have a quorum at the meeting. Without quorum, the meeting has to be adjourned with no business conducted.

People who complete a proxy form designate someone to act as their agent at the meeting and to cast their vote. If you have directed proxies, the person completing the form can specify who they want their agent to vote for. Associations that allow nominations from the floor often use undirected proxies (in which the agent votes as they choose) because directed proxies put the floor nomineees at a disadvantage.

It's common for a proxy form to allow the board of directors to cast the vote, but that's not the only choice and the person completing the form may name whomever they choose.

People also get upset if a board member who is running for re-election actually solicits proxies and asks people for their vote. It may look a bit odd but it's perfectly legal. They should do this on their own time, though, and outside of the annual meeting announcement mailing.

Finally, a conflict of interest arises when a board member stands to benefit financially from a decision that the board makes, in which case that person must recuse himself from discussion and voting. It has a specific legal meaning, and it doesn't arise in this case. A board member doesn't lose their rights as a homeowner simply because they're on the board. They may campaign and solicit proxies. They may vote for themselves at the annual meeting. They may act as other homeowners' agents as indicated on completed proxy forms.

In short, I don't see any real problems with what you said. I may have a quibble or two, but this looks like business as usual.

ChrisE8
(New York)

Posts:225


11/12/2020 5:28 AM  
DS8, to add:

1. The proxy forms should have box that you can check "For Quorum Only", without designating a proxy.
2. If the board and property manager don't solicit proxies, then the alternative would be for the HOA to hire an independent company that runs the elections. That costs a few thousand dollars. Yes, that's the fairest way to do it, but HOAs often don't want to spend the money for that.

My suggestion: raise your concerns to your neighbors and get them to give proxies to you or someone else.
JohnC46
(South Carolina)

Posts:10130


11/12/2020 12:53 PM  
DS8

That is standard and legally proper procedure. If there is not a Quorum at the Annual Meeting, no business including BOD Elections can take place so the same BOD stays in place.
JeffS31
(Virginia)

Posts:38


11/19/2020 11:10 AM  
This is a fairly standard procedure, and my HOA does this as well. They are not soliciting blank proxies. They are soliciting participation. Our mailings include:

1. A proxy form. The proxy designates another member or the board president as proxy. The proxy form also indicates that the proxy may cast the member's ballot only as written, or if no selection is made then the proxy may vote at their discretion. I have seen a lot of proxies but I have never seen one come in with a blank ballot.

2. A ballot. The ballot shows all candidates running for available board seats, and the member may cast a number of votes equal to the number of open seats. The management company rep validates the proxies and ballots then counts the ballots and provides results to the board, so as to keep ballots confidential.
JohnC46
(South Carolina)

Posts:10130


11/19/2020 11:51 AM  
A Proxy assigned to the BOD is proper. It is not a Blank Proxy. Several things people fAil to understand about Proxies:

1. The latest dated Proxy is the final one. It overrides any prior Proxies.

2. There is no such thing as a standard proxy form. One can be scribbled on the back of a cocktail napkin using any language one wants to use as long at it is understood, it is valid.

3. Many Quorums could not be met without Proxies counting to establish a Quorum.

4. A proxy can be Directed such as directing the Proxy holder to vote for So and So.

5. A proxy can be non-Directed such as allowing the Proxy holder to vote as they wish.

6. A proxy can be a hybrid meaning both Directed and non-Directed.

7. Some Bylaws do not allow Proxies.
BillH10
(Texas)

Posts:582


11/19/2020 12:48 PM  
John, you left one off--

In Texas (and some other states) it is common for the blank proxy form included in the annual meeting package to be broken into 2 sections:

Section 1: A proxy for the purpose of ensuring the meeting quorum requirement is met. This proxy does not confer voting rights on any person, such as the President.

Section II:

Section II A: A proxy in which someone, generally the President, is named as the proxy holder and may vote the proxy as he or she desires
Section II B: A proxy in which another person (need not be a member of the Association) is named as the proxy holder and may vote as he or she desires.

I've paraphrased the exact language for the sake of brevity.
AugustinD


Posts:4421


11/19/2020 1:31 PM  
DS8, do you understand that a proxy form is not the same as a ballot?

Else ditto what the others said.
DavidF22
(New York)

Posts:73


11/20/2020 8:12 AM  
At least you still have elections. Where I live, we either have apathetic homeowners or former board members who would absolutely never serve again. Thus, we're lucky to get five people to fill the spots, but unlucky in terms of their competence.

If you do some research, you can find that the proxies and ballots can be numbered with an embossed seal added, so only the original pieces of paper -- and not copies -- are accepted. You can have the Association's law firm run the election and not the property manager, whose firm may be too closely connected with the current board or entrenched, overpriced contractors. You can specify that individual homeowners must return their proxies/ballots only to the person(s) running the election and not to an intermediary. There are also third-party services that will conduct an HOA election for a few hundred bucks.

We have none of these safeguards. Several years ago, the board on which I served lost an election because the opposition went around the community spreading false claims about our honesty and collecting blank proxies/ballots, especially from elderly homeowners. The opposition then filled the proxies/ballots out themselves before turning them in to the property manager, who was running the election. We had independent homeowner observers to the ballot count and one of my neighbors, who served in this capacity and is an attorney with handwriting expertise, noticed the same handwriting on a number of ballots. With our loss in this phony contest, the new Board went on the next year to turn our $40,000 budget surplus into a $125,000 deficit, but that's a story for another day.
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