HOA Board Recalls, Part II: If You M . . .
HOA Board Recalls, Part II: If You Must Do a Recall Vote, Read This First
In November 2008, a California appellate court held invalid an association's requirement that director recalls required a 60 percent supermajority of the association's total voting power. Here's what you need to know about that case even if your association isn't in located in California, along with tips on how to properly conduct a recall vote. If you're a board member who has gotten wind of a potential recall effort in your community, you'll find advice for you too.
Just the Facts
Autry v Villa Riviera Condominium Association involved a dispute over whether a California association had successfully recalled one of its directors. The Villa Riviera Condo Association's bylaws required a 60 percent supermajority vote to remove an officer from its board. California law governing corporations—which, of course, associations are—requires only a majority of a quorum for a recall to be successful.
In Villa Riviera's recall vote, more than 50 percent of a quorum of owners voted to recall the director, but the 60 percent threshold in the bylaws wasn't met. The association declared the director recalled. The director sued, arguing the bylaws trumped California statutes.
The court held that the recall election was proper for two reasons. First, it noted that the bylaws included a clause stating that provisions in conflict with California law were void. In addition, the court noted that homeowners associations can't enforce covenants, codes, and restrictions that violate statutory or common law. Therefore, the court held, the recall vote had been properly conducted even though it violated the association's own bylaws.
The lesson from Autry, even if your association isn't located in California, is simple. Your bylaws can't violate your state's law. If they do, you'll need to amend your bylaws before holding a recall vote, or you'll likely face a challenge. You may need an attorney to help you sort out your state's requirements, but it's better to get an attorney's advice on the front end of a recall vote rather than hiring one to defend your association after the vote has taken place.
"In my experience, recalls are rare," says Robert Galvin, a partner at Davis, Malm & D'Agostine PC in Boston who specializes in representing condos and co-ops. "But when they happen, usually the board knows it's necessary to dot the Is and cross the Ts, and they'll ask their lawyer to get involved."
Do Your Homework
If there's talk of a recall vote at your association, do your homework first. "Your bylaws may provide a basis to determine whether the recall is proper and how it must be conducted," says Amy H. Bray, a partner at Andersen, Tate & Carr PC in Lawrenceville, Ga., who represents condo and homeowners associations. "Then look at the law. If I were dealing with a condo, I'd look at look at the condo's documents, the Georgia condominium act, and then the Georgia corporations act because, after all, the association is a corporation. You need to make sure you provide the proper notice and understand the voting requirements you must meet for a valid recall."
As with many other problems that arise at associations, communication is critical when dealing with a potential recall vote. "When people start talking about recall, open, clear, and honest communication is a must," says Duane McPherson, division president at RealManage, a San Rafael, Calif., association management firm that oversees properties in Arizona, California, Colorado, Florida, Louisiana, Nevada, and Texas. "Usually a recall will start with allegations made against a board member, and the board member will take a stance like, 'I don't have to answer that.' The best thing to do is to say, 'Here's the truth, and here's the information to back it up.' If you present facts to people, you can usually head off a recall action. That's not always true. There can also be personal agendas."
When to Recall?
McPherson is correct that personal agendas can sometimes drive recalls. That's why it's important to remember that just because directors are difficult, it doesn't mean they should be the subject of a recall vote.
"People need to be careful they're not seeking to remove a director based on personal conflict or a feeling of animus," says Matthew A. Drewes, a partner at Thomsen & Nybeck PA in Edina, Minn., who represents associations. "The standard of conduct for directors is that they act in what they may believe is in the best interest of the association. You have to be sure what they're doing is some kind of self-dealing or something that's clearly in the interest of others and not the association. They really have to be breaching their fiduciary duties, and it has to be clear. If you're going forward based on theory or speculation or a genuine or sincerely held belief that what that person is doing is not right for the association, it may not be enough unless you can show some level of wrongdoing."
Let's be clear. Drewes isn't saying you can't recall directors for minor offenses. He's saying that it's probably not wise to recall directors unless there's serious mismanagement or a breach of fiduciary duties. "You may be able to garner the political will to get the vote to carry a recall," he says. "But to avoid having a situation where there's nothing but gamesmanship and somebody going after somebody else's head based on animus, you should use recalls judiciously. They cost money because they often require the involvement of lawyers, so people should be attuned to those things."
McPherson agrees and states that associations should avoid a recall at all costs. "All it does is disrupt the community," he says. "There should be some other way to work out the problem."
So if you're on a board, or if you manage a community where a recall is being discussed, we encourage you to share this information with all parties. The more the players think the recall through, and proceed based on reason and the best interest of the community at large, the better off your association will be.