July 30, 2010

This week's tip answers a reader's question on the HOAleader.com discussion board:

"As per the bylaws, the board must be three to five people. For the past two years, the board has operated as a two-man team… Currently, this board is making major decisions (costing thousands of dollars) without involving or, at the very least, notifying the community…Is any of this binding since they didn't have a quorum of board members to begin with?"

"I've seen this where associations ignore their bylaws and have a board of a different size; the governing documents say the board is five members, and the board has seven members," says Sharon Glenn Pratt, a principal at Pratt & Associates in Campbell, Calif., who advises many homeowners associations. "I think that's a dangerous practice because as soon as you get a homeowner who's unhappy with something the board has done, it gives that owner a good reason to challenge it by arguing that it's acting outside of what it's entitled to do as a corporation."

Our reader probably can't resolve this problem on his own. "The owner is going to need some help from the courts," says Pratt, "or at least an attorney to write letters setting out the problem and explaining what the owners are willing to do to resolve it."

If an attorney's letter doesn't work, our reader will likely need to head to court. "The aggrieved members of the community should promptly bring suit so that a court will order an annual meeting to be held," recommends Marc Andrew Landis, a partner at Phillips Nizer LLP in New York City who advises associations and co-ops and is a member of the executive board of the Council of New York Cooperatives and Condominiums. "Presumably, at such a meeting, the community—not the existing directors—will elect three to five directors and can move forward from there."

But what happens to all the decisions the board has made while this turmoil has been going on? Are they still valid? For that answer, see our new article: When Are Board Actions Invalid?

Best regards,
Matt Humphrey
President