 Aloha, another edition of Kondo Insider. It's now the beginning of 2019. We just finished 2018, an exciting year. And that's a new situation because now we're in a new year. And that means it's the season of annual meetings for condominiums and other associations like homeowner associations. So I thought we might have a little primer on associations, the do's and don'ts. So I invited my very good friend, Steve Van Steen, professional registered parliamentarian to join me again. Happy New Year, Steve, and welcome. Thank you, Richard. Happy New Year. And just remind everybody, I know you're a professional registered parliamentarian. Kind of what organization governs or teaches or manages this and what is a PRP, as we say? Well, a PRP stands for professional registered parliamentarian. And I'm nationally certified as a professional registered parliamentarian by the National Association of Parliamentarians. It's the largest group of parliamentarians in the country. They were formed about 1930. They've been around for quite some time. And do you do meetings other than associations? Yes, I do churches. I've done union meetings. I've done dog club meetings. I've done various types of other meetings. But the majority of my practice is condominiums community associations. But we've been now, I think this is around 130 episodes of condo and cider we've done, trying to educate owners and board members. So we haven't pushed you out of business yet? No, actually, you gave me a lot of business. I had about 32 different meetings in March. Each one has a separate set of documents, totally up to 100 pages. And I've got to keep them all together and try not to get too many people angry at me during that month. Well, let's talk about the dos and don'ts of annual meetings. So what does the first do? The first do is have your annual meeting. You've got to have an annual meeting. If you're a condominium community association, you've got statutory requirements and you generally have requirements in your bylaws. Have that meeting. And to have the meeting, what are the basic things you should be cautious about to do in preparation and organizing the annual meeting? Well, one of the most important parts of the annual meeting is to have proper notice, proper legal requirements. Make sure you comply with the statutes as well as your bylaws to actually have the notice of the meeting. And try to make the meeting in a place that exists, because these things have happened where they've made mistakes on notices. They put meetings in the wrong time, the wrong location. So you need to make sure that preparation is adequately done and then have your meeting at the appropriate venue. So you're supposed to give a proper notice, the time, date, place, location, a real location to hold the meeting. So what happens if you screw it up? Fix it. What other ways to fix it? There are some ways to fix it. If it's a notice posting, you can amend it. If you're outside of the general notice period, you can have an amended notice, do something like that. In the real worst case scenario where you've actually violated the law when it comes to notice of the meeting, you may have to actually reschedule a completely different annual meeting. So let's just say you have an annual meeting, properly notice at a proper location and you get there to room 101 where you're gonna hold the meeting. And for some reason there's a water leak in that room and they've asked you to go into room 102. Can they do that? Yes, they can. So what you do is you call the meeting to order in 101. I would joke while treading water, call the meeting to order and then continue the meeting to 102. Now, you're not required in the parliamentary world to post a notice, but it's a good operating practice to post some kind of notice to your owners. And if they show up later, we're in 102, not in 101. Right. So it's a good idea to deal with it through a parliamentary system. Through a parliamentary system. Well, to me, one of the most important dues for an annual meeting is do have a quorum. Tell us about quarms and what's all about. Yeah, a quorum is the minimum amount of representation at a meeting in order to constitute an official act of the organization. So for example, if an organization has, just to keep it really simple, 100 units totaling 100%, everybody has a 1% interest. The quorum usually is a little bit more than 50, just over 50. And that's so that you don't have an unrepresentative group taking action in the name of the entire organization. And I hear oftentimes in the conducting meetings, the terms majority of the association and majority of those present. Can you define for our audience the difference between that technical argument? Yeah, well, when you look for those technical arguments, it's important to look in your documents, but the general explanation of a majority of the ownership or majority of unit owners is more than half of all owners regardless of how many are at a meeting. And that's usually done through a percentage of common interest or the case of condominiums through lots or individual ownership in the case of a home owners association, planning community association. That's a majority of all now or majority of unit owners. Majority present means you look at what is represented at that meeting regardless of whether it can vote or not. And that majority present would be more than half of it. One follow-up, the word majority is really simple. It doesn't mean one more than half. It means more than half. So when you hear the word majority, you can just think more than half. So I think the most common thing in associations when it comes to plays and people get a who-who with their directors and they want to remove them. That's the statute's clear. That's the majority of the home owners. So they may have a well-attended meeting, but they may not get a majority of all of the owners present or not present to remove a board. Is that a simple way to describe it? For condominiums, community associations may be different, but for condominiums, that's correct. You need to have the affirmative vote of a majority of all unit owners in order to remove one or more board members at an owner's meeting. And the home owners association, different than a condo, would be different because their governing documents specify a different standard. Is that right? Yeah, that's partially right. It's not just the governing documents. You've got two different chapters of the state law that have to be balanced with their documents and their association attorney gets involved. It's not that simple with plan community associations. No, I'm an expert on a case right now, and the issue is you look at an approximate 2,500 units in a home owner association and quorum for the meeting is odd. It says 50 owners plus five directors. So in theory, I would think that if none of the directors showed up, you couldn't have a quorum based on the way that literal reading of that. I'm not sure what the state law says, but 50 people out of 2,500 is a very small percentage of the total membership. Well, it may be a small percentage of membership, but by adding those directors to this part of the quorum, that association is essentially handicapped themselves if they have a contentious issue between the board of directors and the rest of the association. Yeah, I can see that being the issue. So anyway, proxies, they count for establishing quorum. Yeah, proxies can count for establishing quorum. They have to be properly executed. They have to comply with the statute. They can be used. They have to be turned in in a timely manner, and they can be used for establishing quorum. So if I'm an owner, the association always sends out this official proxy, and the statute requires these four boxes. Board majority, board equals, we say, designated to an individual or quorum only. But let's just say I'm an owner, I lost that. I take a paper towel, and I write down all the statutory required information. I, Richard Emory, owner of Unit 207, do hereby appoint Steve Glanstein as my proxy holder for the annual meeting being conducted on July 1, 2019 at eight o'clock in the rec center, and had all the statutory information in there. And it got delivered to the secretary in advance. It was 48 hours as the requirement into the current statute for condo. Would you be advising them to accept that proxy? Well, advising on acceptance of a proxy is really a legal matter, but it's gotta be 430 p.m. the second business day, which is not always 48 hours. Right. And of course, it's gotta have the name of the association, but if it complies with the statute and it's turned in in conjunction with the statute, statutory requirements, it's valid proxy. Now, that's one advantage of the statute that we've gotten changed is to have that 20, that two day period because management is able to check those proxies and make sure that they comply rather than have somebody bring a stack of proxies in 20 minutes before the meeting and say, I'm here, now you gotta accept all my proxies. So we do have some deadlines on that to help management companies to make sure they can sift through these proxies. Well, I've seen that as a problem where people have walked in the door of proxies and they didn't submit them by 430 the two business days prior and management companies doesn't say, I'm sorry, but pursuant to the statute, we can't accept this. Yeah, and there's very few exceptions that actually cooperatives, they can still come walking on it if their documents allow it, but for most of our practice for condominium associations, plan community associations, it's 430 p.m. second business day prior and keep in mind business day, what about Coheo day? What about Ham day? Some management companies work on those days. Some don't. So you have to make sure you're following that statute with respect to the deadlines. And so are those proxies, can owners look at them? Like other people's proxies? Well, if they want to inspect the proxies or see who gave what proxy to who, those are inspection rights start after the meeting's adjourned and not prior. So let's just say I'm an owner of a meeting and this happens. And I say, you know, I've been told that people are giving me proxies and I call the management company and I say, can I ask you who gave me proxies? Not the whole thing, but just those, can the management company tell me? Well, it's really truly a legal question with respect to interpreting the statute when it comes to whether they can tell you the general practice from my experience is they're very restrictive as far as letting people know even who gave them proxies. Because if you know who gave proxies, that gives you the opportunity to go and bang on everybody else's door for those who didn't give you proxies and say, how come I didn't have a proxy? And one of the reasons that we pushed through that statute to make the proxy information available after the meeting was to protect owners from being harassed or constantly turned proxies in to one group or another. You know, I think that's the issue. People, owners don't always like to say, they'll say yes, but they really aren't going to give you the proxy. And meanwhile, that person's calling trying to figure out his voting power and if he doesn't get the information, if he did get the information, he'd be calling you in the phone saying, I thought you told me I was giving you my proxy, you know, which is part of the problem, so. Well, the way proxies solicitors solve that problem, people soliciting proxies, they solve that by getting the proxy themselves from the owner, the executor, and then they turn them all into the management company prior to the meeting, two or three days before the meeting. That's the way they handle that. However, as far as many of the management companies, the larger ones, they do not make that information available to individual owners to laugh to the meeting. I went to a meeting, I was a very bad boy, I have to tell you, because I had enough proxies to put myself on the board, cumulative voting. And for the day before the meeting, between all of the in-fighting and out-fighting for this, we all made an agreement the night before the meeting how we get equal, I shouldn't say equal, but representation from all the factions on the board, we've all worked together to solve an association problem. And I went to bed that night. And by the time I got the next day, I had text, emails, phone messages, all saying, I've changed my mind, I'm re-nigging on the agreement. And what happened was, when I voted with all my proxies, I voted with all my proxies for the people they didn't want on the board. So I didn't elect myself. Because the reality of it was, if people go back in their word, I just didn't want to be involved in it. And so I took my moment, I've been doing this for 25 years, to basically say, well, I knew how the proxies were set. At least based on what they told me. And so I just made it a very diverse group. Sure. And these are political issues that organizations go through. Where one group decides to support another or they change their support. It's not entirely unusual. It's a little bit more unusual to see someone who's got a huge amount of proxies and they're able to control the entire board. So briefly, what is the purpose of an anime? Why do we have them? Well, there's just a few purposes. First of all, it's electing directors. There's also a purpose with respect to presenting certain reports. And there's another purpose that's come down in the last 30 years, called the tax resolution. There's an IRS tax resolution that many associations, condominiums, actually adopt in order to help minimize the risk of having to pay taxes. And then that's the basic purpose. Well, I know some condo documents also may have a requirement that the ownership approve the auditor or the ownership approve the managing agents contract. And so there's a bunch of purposes that are just part of the normal annual business that's important to do because if you didn't file your tax resolution through the meeting and have the rollover of those funds, those excess funds, you'd have to pay taxes. So not having a meeting could push your association at risk. Well, it's even worse than that. Having a meeting that doesn't have a quorum that can't adopt a tax resolution has the same sort of effect you have not adopted the tax resolution. So you want to make sure, as an association, that you have the tax resolution blessed by your CPA, get your annual meeting and make sure that that tax resolution is properly adopted. Okay, well, we're going to take a short break for one minute. We'll be right back with Steve Glanstein talking about annual meetings, you know, and a very interesting, but we have more questions. We've got one minute, two minutes. Yeah, I couldn't tell whether you were talking to me or you didn't have your mic off because I had after you, so I had you chattering right. Wait, how do you guys know about that? I was paying such close attention to Steve, I ignored everything he said. This is cool. Where's Jay? How did you guys know about this fall prevention I've been doing? I must tell you about fall prevention. Every 11 seconds somebody falls. Those are to an emergency room because of a fall. Okay, so we got this, we got quorum, we got rollover res. Oh yeah, good, you got that insurance requirement. They'll collect your rent. Those are one-time deals. We got that. You want to make sure you get E, yes? Right what? Item 4E about interfering. What about other motions that come up? They want the board of directors to... Oh, I've got one for you. Welcome back to Condo Insider with Steve Lansing talking about annual meetings and we were talking about the purpose of the annual meeting and I guess one of the questions is can owners make motions at annual meetings and are they binding on the board? Well, it depends on the bylaws, Richard. Most bylaws that in my practice with condominiums, with community associations, they require that the board manage the property. They vest in the board that authority. With some exceptions, for example, a design committee might actually manage approval of design plans construction. Now, when the bylaws say that this is the group that's responsible for managing the property or managing design requests, you can't interfere with that. That means an owner's meeting that says, I move that the board members go out and raise the maintenance fees or reduce the maintenance fees to zero. Motions like that are generally gonna be ruled out of order. Yeah, I've seen that happen where people said I move to reduce the maintenance fees 20%. And more times than not, it's ruled out of order because the bylaws give the board that authority. But I've seen that as a workaround on that is I moved that the board is requested to review the maintenance fees to determine other ways that we can reduce them by 20%. Kind of an advisory motion, not telling them to do something but saying we as the ownership would like the board to look at this issue. Is that legal? Yeah, well, legal is for lawyers, but in the parliamentary world, the practice that we have is we will actually meet with somebody during a recess or the meeting, say, look, that motion's gonna be out of order. If you make a motion recommending that the board take a look at the budget, the maintenance fees and reconsider their action, it's a recommendation, it's not binding. But it also saves that person the embarrassment of having their motion ruled out of order. And generally, motions that recommend things like that usually pass. There's a lot of experience with that because it takes about 20 minutes to count a lot of the votes on motions like that. So usually boards are okay if it's a non-binding recommendation. And they will take a look at it in my experience. And I've seen in the 25 years these non-binding recommendations fail. Yeah, yes, some cases they have actually been forced to vote and failed. Yes, so one of the interesting things that you can do in an annual meeting is amend the bylaws and the declaration, for example. But I believe there's a difference between the board making the recommendation and an owner making the recommendation at a meeting. That the, if I remember correctly, that the board has to announce in advance of the meeting that's recommended by law or declaration amendment. Or in actuality, the owner of the meeting is not bound by that, is that? That's substantially correct. The board has to put it in the notice, including a rationale, if they're gonna amend the documents and if they're gonna do it in the condos or community associations. Whereas an owner can stand up and make that motion right then and there at an annual meeting. The one I've seen most prevalent on that and prevalent means in my 25 years, maybe three times where the owner has got up and said, I move to eliminate Kim with a voting. There was an owner proffered suggestion because some people like it and some people don't like Kim with a voting. And they had to vote and meanwhile, now the owner, the board has a whole bunch of proxies. They can vote one way or the other on it. And that happens occasionally. Right. Well, and if it's in a condominium world, any amendment to the documents has to be recorded before it's effective. So even if they had the required percentage to adopt it in the condominium world, it would not take effect that night. They'd have to record it. In the community association world, you have to look at your documents. It might be different. But they do, usually bylaw amendments have a pretty high vote requirement. So it's gonna need some higher percentage of owners who are in favor of it. How about the elections when the bylaws say something not less than five, not more than nine directors. And so you have seven. And so you're getting ready to elect the vacancies of the seven. Can an owner make a motion? I move to expand the board to nine or would that be binding at that meeting? Yeah, if the bylaws allow for the ownership, you have to look at the wording real carefully. The bylaws allow for the ownership to select the size of the board and they sure could do it right there. And some boards have done that. In fact, they've done that because it's been so apathetic that when they get a couple of board members who want to be on, they'll expand the board in line with the bylaws in order to get those people on. They're just happy to have people on the board. Yeah, we're getting people on the board as a difficult challenge. Well, how about this issue? So you have cumulative voting and so they do cumulative voting and John gets on the board by cumulative voting. But all the other people there represent more than 51% of the ownership, oh, total ownership. Can they make a motion to remove that person right after he was elected? If you're talking about condominiums, yes. And that has also happened. Just so your readers, people who are watching know, cumulative voting means that you can stack your votes. So if you have five positions on a board that are open, you can vote five times for one person or four times for one person, one's for another, or distribute them in an integral way in that way. So with cumulative voting, even though one person may get on with one sixth of the vote, they could conceivably be removed under new business with a majority of the common interest in the condominium world, yes. So in essence, because I know the statute just for clarification for our audience, says that a majority of the homeowners, meaning all the 50.1 of everybody, not just those at the meeting, could remove someone. In fact, that person just got elected. They're not on safe ground if everybody doesn't like them. If everybody else doesn't like them, I should say. And this has happened. And it's been a trade-off with the statute, but the statute was pretty clear to make a majority of the common interest can remove. And then the subsequent replacement has the same requirement. And if I remember correctly, let's just pretend that two people got elected by cumulative voting. Let's pretend that everybody else has enough votes to legally under the statute remove them. So they made a motion to remove John and Fred. And would their election be on cumulative voting or reelection? Well, no, it would not. And that has actually been litigated. But the removal, and you think about it, imagine a removal of two people where they can stack their votes up and vote twice to remove one person if two of them are up for removal. So it doesn't make a lot of sense. So the removal is a majority of the common interest that's a yes or no vote on either one director, two directors, or the whole board, whichever, but you need to have a majority of the common interest in the condominium world. And the reelection, though, would not be under cumulative voting. That's correct, under the condominium world. That's right. It's in the statute. Yeah, the statute doesn't specifically say that the cumulative voting, but the interpretation, the legal interpretation has been removal and replacement does not have cumulative voting because it requires a majority of the common interest. So the statute also requires Robert's rules of order and doesn't allow for Richard's rules of disorder. And that's from Henry Robert, I guess, back in a long time ago. And I don't have the skill level you do as a parliamentarian, but I did take the entry-level tests and joined the National Association of Parliamentarian. I was quite curious about this process. So when you're at a meeting and you're an owner, they don't understand this. I mean, they don't know, they don't have the skills. What are the ways they can get information at meetings? There's things called point of order and point of information. Can I briefly share with us what that is? Sure, point of order is not for information. A point of order is bringing to the attention the chair that there's a violation of a rule, a rule is being broken, and it's calling upon the chair to enforce that rule to make what's called a ruling. So a point of order is not because I want to ask a question about something. Now if I want to ask a question about something, there's two types of questions. One relates to parliamentary procedure. How do I make this motion? Is it in order at this time? Another, that's called a parliamentary inquiry. The other one is request for information. Was this report sent to all owners? That's called request for information, formerly known as a point of information. And the chair is not obligated to respond to these. Obviously, if a chair refuses to respond to too many of them, we could end up with a different chair for the rest of the meeting. It's kind of important that chairs be fair. And when it comes to requests for information, it's not considered debatable. Parliamentary inquiries are not debatable. A member makes a statement, a question, and then the chair would respond or ask another member of the audience to respond through the chair. Well you get hired a lot of times for potentially bad meetings. They're disruptive meetings or challenging meetings or controversy, whatever word you want to use. From your experience, you find most of the boards really want to do this right. They just don't maybe have the skill level to deal with all of this motions and things that are going on, or you feel that the industry does have a dark side and the people do this willfully and intentionally to prevent democracy from being conducted. In my experience, and I do about 100 meetings a year, in my experience, most boards are honorable people. They consist of honorable people. They may be passionate. They may get on a board for different reasons, maybe to watch their investment, maybe because they want to see certain issues happen. But they really do, in my opinion, mostly are honorable people. They do have their exceptions. They're out there, but most of them are just trying to do what's best for their association. So anyway, what's your final words since we're in our last minute of what do you recommend for annual meetings? What kind of, what do you recommend for the boards and the owners out there? Well, in the last 30 plus years, one of the biggest hangups in annual meetings has been taking a long time to count the vote, especially ballot votes. If you got a ballot vote requirement for election and your bylaws require it, do a ballot vote. Otherwise, your election can be challenged. Don't wave it, even if three people want three positions, don't wave the ballot unless the bylaws allow you to wave it or the bylaws are silent on the ballot issue. Now, given that, when they do a ballot vote, sometimes it can take 20 minutes up to an hour. So we are looking to get legislation through that will allow the use of electronic voting with adequate security so we can get results within one to two minutes at most. The owners will have the results of an election very quickly. So if our new law gets passed allowing electronic voting and someone loses by 22 votes, could they appeal it to the Supreme Court? Well, anybody can go down to the courthouse and file paperwork of what have you that avails of an illegal system in some way, shape or form. However, part of the law that we're proposing or the bill that we've got that we're hoping they present is gonna provide for an audit trail that will say who votes when and how at what time. And then there's some issues associated with making sure that's kept confidential with respect to the name of the voter. So it seems like we'll have a little bit more accurate result instead of papers which could easily be Xerox copied and then fraudulently changed. I wanna thank you for being here. I wanna tell our audience that my last comments about annual meetings is be respectful with everyone. You may have disagreements, but if you're respectful with everybody, give everybody a right to be heard within the rules of the meeting, you're gonna be better off of having a meeting that's successful at the end of the day. Thank you for coming, Steve. And we look forward to seeing you next week on Kondo Insider.