 good afternoon everybody thank you for joining us for another condo insider edition I hope you guys are enjoying the new year we have some celebrations coming up pretty soon right for Chinese New Year coming up pretty soon so today we're going to be talking about annual meetings because we're in annual meeting season for the next seven months so in a bit I will introduce our guest yes nice to see you hi really nice to see you happy new year happy new year the year started off really busy already yes it has so we're in um annual meeting season which is the first part of the year for a lot of um managing agents so they're probably bombarded um so I wanted to do a refresher to everybody about what an annual meeting is and we're going to be talking more specifically about condos versus um HOAs because sometimes there's a little bit different um so why don't we start off with what exactly is an annual meeting well under hawaii law condominium associations have to meet once a year and they meet once a year in the form of an annual meeting an annual meeting is when the owners get together uh and they decide certain issues at the annual meeting that must be decided as a matter of law and we'll talk about what they are in just a minute but uh every condominium association in the state of Hawaii is statutorily required to have an annual meeting okay so it's required is there a procedure that everybody needs to follow yes there is and the base procedure is that a notice of annual meeting has to be sent to owners at least 14 days in advance normally the notice of annual meeting is also posted at the project but then it's mailed to all normally mailed to all of the owners at the project and the notice of annual meeting will normally include such things as uh the official association proxy if there is one and it will also include the agenda for the meeting and it may include proxy solicitation statements and we'll talk about those today uh for those individuals who are seeking proxies and or those individuals who are running for the board of director okay so um usually the board of directors they have staggered terms so like if a board is a board member is their term is ending um so that would end up with a possible vacancy because they may choose not to run so you could have other people that want to put their their take their opportunity to become a board member so we're going to start with um like what exactly is a proxy and what people do when they get that in the mail well let me move back to your example for just a minute that there's always going to be and i'm not going to say always but the vast 99% of the time there's going to be at least one vacancy per like as you correctly pointed out for the election of a director now simply because a director chooses whether to run or not does it necessarily mean that changes that there's going to be a vacancy because if a director's term is up whether they decide to run or not there's still going to be an election for that seat so what happens is if the director decides to run again obviously individuals could still run against that director or if there's no opposition then obviously the director will probably be uh re-elected with respect to the proxy process that we want to talk about first is a proxy is a document which you give to someone else to attend a meeting on your behalf only owners can give proxies but proxy holders do not need to be owners that's somewhat confusing for many people so if you want to give your brother who doesn't own a unit at the project your proxy to go to the annual meeting and vote on your behalf that proxy will allow that individual to do so a proxy can also be directed to the point that to this extent that it will limit what actions the proxy holder may take on your take on your behalf associations also typically but they're not required by law to send out an association proxy form an association proxy form is a form that is drafted by the board of directors and follows a specific format that is required by hawaii law it usually has the four magic boxes one of the boxes will designate that it can be the process can be assigned to the board one can designate can be assigned to any individual the owner wants and another box can say it's going to be assigned for core purposes only which means the proxy holder does not get to vote on anything at the meeting it simply says present they're only there and that's so that the board and we'll talk about this in a few minutes the association will have a sufficient number of individuals present in person or by proxy in order to conduct a business okay so um a little bit more about the proxy so usually they're due at a certain time before the actual date of the meeting that set yeah and let me stop you there that set statutorily and the statute says they have to be turned in either to the man received by the managing agent or the secretary of the association by 4 30 pm on the second business day before the annual meeting so i had this question posed to me it usually comes up every year because they you know we only do it once a year so something within that year you kind of forget right so um it's it's in state law where an employee cannot solicit for proxies correct that is correct and we're referring to a employee of the association so the resident manager can't be can't be out soliciting proxy and neither the managing agent cannot be soliciting proxies that is true so but what if the um employee is an an order hands an employee their proxy that's not a solicitation of a proxy you you brought up an interesting statement it says that the association employees may not solicit proxies if the owner wishes to assign their proxy to a resident agent i mean i'm sorry a resident manager that's not permitted by hawaii law it simply says that the resident manager cannot an association employee including their resident manager cannot solicit proxy so there's a fine line between a resident manager saying hey did you turn in your proxy and then they go here here it is you know so it's kind of like well did i solicit yeah that's not a solicitation of proxies and reileen that's a great question because we often if we're getting close that we need a minimum number of persons to attend the meeting and the association doesn't have enough proxies it is not improper upon the resident manager to collect proxies on behalf of the association to turn them in but the resident manager cannot knock on people's door and i would like you to give your proxy to so-and-so or please assign your proxy to so-and-so that's the solicitation of a proxy and that's not permitted under hawaii law if the resident manager is only collecting proxies to turn them into the managing agent or the secretary that is proper so to be safe they should probably give it to um the secretary and hopefully they live on site because there's a lot of people that don't live on site which would make it it just takes the resident manager onto that equation you want to take the resident manager out of the equation to the extent that if someone would later say the resident manager come and took my proxy and said i should assign to so-and-so that's an improper solicitation right yeah so just kind of like cut to the chase get her out of get them out of there out of that equation and reileen you already know the good part today is many people many managing agents allow you to solicit your proxy by email and that is extremely convenient for many people right right um and we talked about the proxy can be given to practically um almost anybody so they don't have to be an owner of the condo it can be correct that's correct you can assign it to any person you desire the only exception is and this i've never had this happen the person has to be mentally competent and they can't be a minor they have to be an adult that can act legally on behalf of another person so you couldn't give it to your 12-year-old daughter uh to come to your end of meeting and vote on your behalf that would not be legal okay so now let's move to the day of the meeting because i always have people get confused with a proxy and a ballot i had to kind of explain that to someone the differences between the two and i go the proxy is the first step the ballots are at the meeting right so the day of the meeting so what happens we're going to have a check-in the magic agent set up with some of their admin people with the little laptops and check in everybody then they're usually given a packet of information um in there will include some ballots um but when they vote on certain issues you're exactly correct and the difference between a proxy and a ballot is very confusing for many owners so let's talk about what it is and let's talk about the procedure as you point out Raylene normally if it's a property that's professionally managed you'll have employees of the managing agent at a check-in table at the meeting site you will go and you will sign in they will take your name and if it's not you they will have your proxy will have been turned into the managing agent or the or the secretary and they once you check in they will see that you are the proxy holder for that unit number that unit individual and they'll check you in as the proxy holder as the proxy holder if you receive a proxy that has no direction on it or is an open proxy then you will have the right to vote that proxy as you see fit in that owner's place you will also receive ballots the ballots are actually the the instruments that will be used to vote on matters that come up at the meeting now the matter that will definitely come up at the meeting will be the election of directors that will normally come up at every single annual meeting other issues can come up for a vote so there will also be blank ballots provided to you they will usually even say motion ballots or resolution ballots something like that and they are typically a yes no type of vote for any type of those issues that do come up also there may be more than one ballot a more election ballot handed to you at check-in because there could be more than one election let's say we have individuals who don't get enough votes to be elected or we have a tie which could happen at smaller associations therefore it may be necessary to have more than one ballot to elect directors and as you know Raylene that can be very common particularly at associations who have minimum vote requirements in order to be elected right after the after the check-in procedure uh oh by the way let me stop me let's state proxies let's say you're an owner and you turned in your proxies turned in your proxy because you didn't know whether or not you were going to be able to attend you can claim your proxy when you check in and your proxy will no longer be valid and you will be able to vote at the annual meeting again if you've turned in your proxy because you didn't know whether you're going to be able to attend you can claim it at the end at check-in and you will have all your rights to vote and your proxy will no longer be valid yeah we encourage a lot of people if they're not sure that they're going to be able to attend we say assign it to someone but you could always if you do decide to attend then you can get you can still get your proxy back but we need to get the proxies in um so that we can determine whether we have a meeting or not and let's talk about that issue for just a minute before we leave there the governing documents in our association will say what percentage of owners have to be present in order to conduct business now Raylene you and i know that's normally a majority but that's not always the case many associations say that you have to have 40 percent 30 percent and yes Raylene even some say only 20 percent of the owners present in order to conduct a meeting so it's very important as you point out that you advise owners look if you don't know whether you're going to be able to attend if you're not absolutely certain you're going to be there turn in your proxy that way the association will still be able to have a meeting and conduct business and if you are able to attend there is no penalty imposed upon you from just claiming your proxy at check-in and participating at the annual meeting as you normally would yeah because we tell people sometimes i go if you're on if you have issues and we're on the same page you know if you're not sure we want to make sure your vote counts so we really want your proxy to be turned in um and again if you're not sure give it to someone that has your same mindsets or agreements on the same issues so that your vote can be counted so um so let's talk about what happens after you check in at the meeting because let's go into a little meat and potatoes at that point so the chair will call the meeting to order and normally that would be the president or the vice president if the president's unable to chair uh at the annual meeting they will call the meeting order and they will announce reileen which is what we're talking about right now whether or not a quorum is present they will say the chair has recognized or has been advised there is a quorum present and then the meeting will get to take place if a quorum is not present then the meeting will either be adjourned and nothing will take place again the future and the annual meeting will be over which that is not recommended or the meeting will be adjourned to a future date and time that is the more common practice and here's why because what you're doing is you're getting a second chance the proxies that were submitted for the original annual meeting are still valid so they'll still be counted but it will give the board the opportunity and the association the opportunity to solicit more proxies so that you will have the sufficient number of people present in person and or by proxy so that the association can conduct business so if the chair announces we have a quorum business will proceed if the chair announces we don't have a quorum the typical procedure is there will be a motion approved to adjourn the annual meeting to be reconvened at a later date and time when you do have hopefully enough proxies and people in attendance to conduct business so who can see um who turned into proxies and who have not turned into proxies so we can go chasing after the ones that need to turn them in the managing agent will advise uh those those owners who have not turned in their proxies and typically we recommend that the board instruct the managing agent to contact those individuals who have not turned in their proxies to request that they do so the purpose of these calls really is not to solicit proxies against the listening proxies is the purpose of the call and it should not be any part of the call please turn in your proxy and please assign it to so-and-so that is not a proper phone call the the proper rebinding phone call is to please turn in your proxy so that we can conduct business when the annual meeting reconvenes that's the end if you don't have a preference on your proxy please check it as quorum only that's okay that's non solicitation and then that will ensure that the association conduct business and it will not allow the proxy holder to vote anything on your behalf so the packets are provided so now let's move on to um the ballots okay so the order of business at the annual meeting will be set forth in the bylaws and the election of directors will of course be one of the of the uh matters to be uh uh taken up or action business that matters to be taken up and vote upon at the annual meeting the ballots will be typically pre printed with the names of those individuals who have expressed an interest to run for the board of directors that may be people who have solicited uh candidate statements uh that were included with the packet with a meeting no savannah meeting packet and or board members who are up for reelection and said i agree to stand for reelection there's nothing improper about that ray laden here's why even though there's names pre printed on the ballot that will not generally prohibit anyone from being nominated from the floor as long as the bylaws allow it allowing uh a candidate from the floor to also be nominated to serve on the board of directors and when they're nominated the owners at the meeting will be able to write their names on the ballot because the ballot will have plenty of blank so they're collected they usually have um their point of auditor to collect the ballots uh two tellers normally two tellers and they're usually volunteer owners or volunteer attendees they don't have to be owners who are not running for the board of directors ray lean obviously it can look pretty bad if the person running is collecting the votes yeah yeah um yeah um and then usually the admin team will have in front of their laptops they'll have their little counting that they use um it gets complicated in counting because you have especially in some buildings where you have a different percent share right versus like there's some buildings that they're all the same but that's an easy count but when you have the ones that have like a three-year bedroom unit versus a one that has a studio i'm like i would not want to count that you know hey ray lean you and i know that since we've been doing this there's been a lot of changes in technology throughout the years too many bouts today are bar coded and the bar code uh indicates what the percentage of common interest is for each unit that's not used by all management companies as you know but for the larger properties it can really speed up the count time as you are aware right uh but but but but there's also a possibility of error because if you don't scan them then they're not counted so that's also that's also a potential problem uh the two tellers that collect the ballots part of their job duties is also to watch the count of the ballots for any irregularities but it's not their job to count the count the ballot that's very important yeah because what i think we sometimes will have them like say there's 20 people there we kind of tell them make sure you collect 20 ballots for each you know each thing that we're voting on so we make sure that we have everybody alter alter okay so the ballots are folding but don't they also do um a tax resolution or something yeah let's so so as you pointed out ray lean it takes time to count the ballot so the recess will take place while the ballots are being picked up and while people are being voted well while the ballots are being voted but after the voting is done the ballots have been turned in for counting the meeting can be called back to order and one of the common uh uh types of business that are conducted when the meeting's called back to order is adoption of the tax resolution what's that mean well most non-profit organizations for tax purposes can't make a profit you can't have excess income but even though you're you do have money that's left over you took in more than you paid out you have to do something with that money as a non-profit so you're not taxed on it so the internal revenue service said in 1972 that the members of the non-profit organization must adopt a resolution rolling that money over to the next fiscal year so they don't have to pay taxes on it so thus we have the tax rollover resolution it is a resolution that has been promulgated by the internal revenue service pursuant to a certain letter ruling the resolution is read and owners adopt it if owners do not adopt it and this is very important there is a risk that they would be taxed on that excess income that excess money that they collected and or lose their non-profit status with the internal revenue service which would be very devastating for many condominium associations so even though that is one of those boring admittedly boring parts of the annual meeting it is legally required and the association cpa will always make sure that resolution appears in the minute worry but it's also important and it could be costly it's not it could be costly the other one that i remember being done is kind of like the rollover of the managing agent contract is that now that's unlike the irs tax rollover resolution which is required by law for most non not all the most non-profit organizations the approval of the managing agent agreement is normally a requirement set forth in the association's bylaws it's not required by hawaii law and what it will say is this typically that the approval of the managing agent and or the approval of the managing agent's contract shall be done at each annual meeting each annual meeting it may require a majority of all owners i mean that whatever it says in the bylaws but typically it's just like a normal resolution adopted at the meeting whereby a majority of those present need to need to adopt it it is a it's it's an interesting thing reileen because if the bylaws require the managing agents agreement to be approved and it's not the board will usually have a duty to solicit for a new managing agent contract if owners don't approve it and the current managing agent will serve month to month until the board selects a new managing agent that can be quite tricky associations will have to consult their AOAO attorney in the event that that does take place but if the bylaws require the managing agents contract or the approval of the managing agent and it does not occur for whatever reason at the annual meeting that will trigger some type of change or at least solicitation for a change in the managing agent yeah it could be tricky too if it's if it's um you know there's like okay we didn't get rolled over so i kind of see some tension of business moving forward you know some yeah sometimes reileen it can be a it can be a a group of of owners who are upset at the board for whatever reason and or they're upset the managing agent for whatever reason and as a result they want the managing agent off or they want the board to change the managing agent so they use this this approval requirement to hold up the approval of the managing agent or perhaps defeat the approval of the managing agent to force the board to go out and solicit proposals for another managing agent now important important thing to keep in mind even though the managing agents agreement it is not approved at the annual meeting the board can still allow the current annual meet and managing agents submit proposals and again at the next annual meeting it's possible that that managing agent will be up for approval you can get you can see you can get to a very vicious cycle but if the board determines that this managing agent offers the best services for the most competitive price it would not be a breach of the board's fiduciary duty to vote to again award the contract to this managing agent and submit to owners again for approval but until it's approved it can only go month to month it cannot be an annual contract okay so they've had their annual meeting they had their election they made their announcements so it's going to be they're going to announce the candidates and their percent of votes for each board member and then so they pretty much conclude the meeting they're going to celebrate or maybe not celebrate whichever the case may be and what happens after the board will have an organizational meeting briefly briefly immediately after the annual meeting and the owners may stay and generally there's only two types of business that are conducted the organizational meeting the organizational meeting will be number one to elect the officers the president the vice president the secretary and the treasurer and those are elected by the board not by owners Raylene and the the next course of business will be to set the next annual the next board meeting for the new board so in other words they're going to set their inaugural board meeting for the new board that will be the the two the two items of business normally conducted at the organizational meeting and owners get to sit and watch Raylene you and I both know owners usually get out of there unless there's food unless there's food but but if you want to know if you want to know who the officers are going to be for the next board and you want to know when the next annual meeting is going to be before it's announced and posted you can stay for that and they'll announce that there and that's not a secret meeting that's not executive session owners get to be present okay so after everything's done is there um in the statute it says that um an older can review the proxies and ballots after the annual meeting they certainly may they have to be made available and they have to be made available to any owner upon request they don't get copies of all of the documents Raylene but they do get copies of some of them they're specified in the statute but they may examine the ballots they may examine the proxies they may examine the check-in sheets at the office of the managing agent or at another location usually the project that the board agrees to make them available for inspection by owners like I said certain documents the owners are entitled to actually get copies of them but other documents for example the ballots they can only be made available they're only made available for inspection right yeah that would be too hard to take copies of all those ballots right but you can come look and see how you can look at each ballot we all remember pictures of the Florida hanging chads where people were inspecting ballots and holding them up to light or whatever you can certainly go inspect the ballots as an instant owner if you if you wish to do so and you can see the tally sheets and see how they were calculated and one other point that just came to my head came to my memory about the proxies so sometimes you have to remember that the proxy has the name of that has to have the name of the owner and the unit number so if you're someone that is trying to get onto the board um and you know they're trying to solicit like some of us will just make copies but we kind of take off white out the you know the names but we've got to make sure we put in that person's name and the unit number before we turn them in uh four things four things alien uh a railing uh printed name of the owner owner signature owner unit number and date eight those four things must be on the proxy okay cool the people are doing we did a great job getting it all in the nutshell you know getting it in that 20 minutes well we got a lot of information out in 20 minutes and obviously if you have any questions i recommend owners contact their managing agent for additional information regarding this very important topic so um this is going to get we're going to email it last because it's going to it's a good refresher a good reminder of the annual meetings and the ballots and the proxies and letting that procedure um chris i really want to thank you um for taking time out of your day um i know it's been in january has just been busy just crazy busy um taking time on your busy schedule to participate in our condo insider and don't forget everyone we're doing our next in-person seminar at oahu country club on february 16th it's a thursday it is a um hufei and it's going to be on benchmarking that it became effective into law um january and the first reporting is june 2023 so it's kind of really important um setting up the the software is a little a little complicated so um we're going to have the resilient oahu team on site to do the demo on how to set it up and they're actually making out some tutorials little um tutorial guides to also help with that and we also want to make sure that everybody comes early because some of our condo attorneys will be present so you guys can come out and meet and greet your your attorneys and talk story with them and maybe ask them any questions that you have that um that you need to so chris again thank you so much i really appreciate this thank you raley have a wonderful rest of your day and thank you everyone yeah have a nice friday everybody thank you thank you so much for watching think tech hawaii if you like what we do please like us and click the subscribe button on youtube and the follow button on vimeo you can also follow us on facebook instagram and linkedin and donate to us at think tech hawaii dot com mahalo