 Well for condos. Oh, it's really starting. I got to start thinking now. Oh my God, smell the burning. I quit. Aloha and welcome to another edition of Condo Insider, a wise show about association living. Whether you're a board member or owner, you should find interest in many of the topics we have to help make your experience in your association better. Anyway, one thing that I would tell you about is that tomorrow is an important day. It's called first decking in our legislature. What that means is the bill hasn't gotten through all of the committees, it's dead. So of the 4,000 to 5,000 bills that were introduced this year, probably 200 or 300 remain as of tomorrow, making my job a lot easier. But it's also annual meeting season for associations, particularly condos. And so I'm invited as our guest today, Scott Shirley, director of training of associate, to talk about annual meetings and kind of the things we don't really ever talk about annual meeting, the most common questions. But Scott, welcome back to the show. Well, thank you for cornering me again onto the show. Tell me what you've been up to, and I understand you have a new job since I see a new title. Yeah, I've been appointed director of training for Associate Hawaii, helped the community managers and such, understand the statutes, the rules, the laws. We've hit the ground running already talking about emotional support animals, which seems to be still an issue for some reason. But looking forward to doing a lot of training, good people over there. Well, I have an emotional support wife, and I'm not sure that's quite the same thing. She's the same emotional support wife that wouldn't let you have your emotional support miniature elephant. So she's good. All right, all kidding aside. It is time for annual meetings for condo associations. Where does an annual meeting come from? Why do they have an annual meeting? Well, actually by statute you are supposed to have an annual meeting. In this, we call it an annual meeting, but in my opinion, the real name is it's the owner's meeting. Because it's a meeting of all the owners with the board and going over everything that happened good or bad over the last year and voting on issues and things like that. It's my opinion, one of the most important meetings of the association. And I know we're going to talk about some technical aspects of it, but I want to tell everybody that the things we talk about for the annual meeting also would apply to a special meeting of homeowners. Yes. So we talk about some technical laws and requirements. It also applies to special meetings of the homeowners because sometime during the years, boards will call a special meeting of the homeowners for a special purpose. And so what we're talking about will apply to that as well. So you go into the meeting and they give you an agenda. Where does the agenda come from? Oh, it's just made up. The agenda, well you would indicate in the bylaws or the governing documents the way the meeting is supposed to be run. If it's not a new project, then you're also going to have old business and new business, whatever was carried over from the last annual meeting. And of course, very important to vote on everything that the board did over the last year, approving of everything that they had done. Well, I know that just for clarification that the bylaws do require the order of business. So when you see the says call the meeting order, proof of notice, quorum, that's specified in the bylaws. So boards really don't have a choice. That's the order of business. Although Robert Schultz does provide for ways to amend the agenda, but without an amendment, proper amendment from the floor, the order of business will always be done in that order that's specified in the bylaws. And what would you say the major reasons you have annual meetings? Well, annual meetings are very important so that the owners can know what was going on during the course of the year. They may be reading the minutes or not, but it's for also their involvement in what's going on in the association. It is the owner's meeting. It is their meeting. They can actually make motions from the floor. That's not even on the agenda at that particular time. But you have certain things that have to be done. You might have an IRS rollover to do or appointing the auditor, voting on certain things that require a percentage of the ownership to vote on. That's beyond what the board could normally vote on. And it's a very important meeting to have that. Let's talk about some of the misunderstood things. And I think we'll do this in kind of a logical order from my perspective. So the board knows that it has to have an annual meeting, both by statute and by their governing documents. And so they want to call the annual meeting. And of course they need to have a quorum of 50% of the owners by person or by proxy. So the first step, as I understand it, is they're going to want to have proxies because absentee owners, people can't make it. And certainly proxies are a valid tool they're used in corporations to make sure that owners can be represented whether they can be there in person or not. The first notice is the notice solicit proxies, is that right? Yes. And you remember what that's about? Well, the notice to solicit proxies, if the board itself is going to solicit proxies, they have to follow a certain rule. You probably know it better than I even know it, that it has to be on 8.5 by 11 paper and why you're soliciting the proxies, what do you want to use it for and things like that. And that has to go out in advance. And because I probably ask it in a confusing way, I'm going to kind of read address this issue. The proxy form itself is established by law. Yes. If the board wants to use a proxy, it's established by law. You must have the four boxes. And we'll go back to the four boxes later in our discussion. And because the board has decided to solicit proxies, they must give the owners the right to include in the proxy solicitation an 8.5 by 11 sheet of paper that would say why maybe they should get the proxy instead of the board. Exactly. And so that has to be included in the same mailing as the proxy. And that's on the statute. And that has to be done 30 days before the notice of the annual meeting. So when you think about this and you back that up, the statute requires a minimum 14 days notice of an annual meeting. Yes. So if you have to give 30 days notice in the proxies, you're at 45 days. When you assume mailing time and everything else, most annual meetings, the solicitation begins about 75 days before the annual meeting, beginning with a notice at the property saying the board is going to solicit proxies. They have to use that form with the four boxes ultimately when the proxies go out. And saying to owners that if you want to solicit proxies or you want to say something, it doesn't have to be for the board. You may solicit it because you don't want to have a bylaw amendment. You have a right to include at no cost in the annual association mailing an eight and a half by 11 sheet of paper. That's right. Because I remember the old days where before the statute was changed two or three years ago, it used to say 100 words. 100 words. And I remember often owners because they made this political fight. They'd say, well, does the date February 9th count as one word or two words? And does the telephone number, does the area code count as a word plus the number of a word? Because it gets so menini on this whole thing on the 100 words. That's really 102 words. You can't mail it out. But the industry went and had the law change to read one side of eight and a half by 11 sheet of paper. And now the print type can be two-point print in order to fit everything on there. You can't read it, but it can be. You can have cartoons or photographs or whatever you want on an eight and a half by 11 sheet of paper. Political cartoons, yes. The interesting, the dynamic history for this is that why is it an eight and a half by 11 sheet of paper? Well, do you want to have an owner submitting 3,000 sheets of paper with their legal interpretation and all these documents that go off the internet as a major expense to the association? Yes. So they pretty much drew a line that said that an eight and a half by 11 sheet of paper as of two or three years ago. Once they do that, then the annual meeting goes out minimum 14 days, but usually around 30 days in advance because you have people going to the mainland or the addresses to the mainland and when they get the official proxy and then they get to submit that and choose who they want to have it. So anyway, let's talk about the proxy for a second. I've already said that the four boxes is mandated by law. Yep. And so if an owner takes a piece of toilet paper and writes a proxy, is it valid? If all the material that needs to be on that piece of toilet paper, if we're supposing that, is there and signed, I would imagine it's still be, it's like many, many years back when I took my real estate exam through John Stapleton, he used to wave his arm around and say you could write a contract on a napkin on the hood of a car, which is true. You didn't have to use a standardized form. Yeah, that's an important point because if an owner put the minimum information, that is the date, their name and their signature and their unit number, and saying I'm given, Scott Shirley, my proxy for the annual meeting of ABC Association on March 10th, 2017 and signed it, the board would have to accept it because it's not their right to prohibit a person's free will to choose who they want to represent them. But when the board's list of proxies, because you have the quorum only, the board majority, the board equal, these other options, if the board proxy, the one that association mails, must include those four items. Yes. And those four items are? For quorum purposes only, to be given to an individual, which they would write their name into that individual, to be given to the board as a whole. And my least favorite is to be given to the board equally. Explain the four differences. Well, of course, quorum is, and I always recommend people, even if they're going to attend the meeting, send that proxy form in for quorum purposes only. You don't know if you're going to get sick, have an accident, and then suddenly not be able to make it to the meeting, and then because you didn't make it, there wasn't a quorum. At least they have a proxy that says for quorum purposes only, so that they can at least use that to establish a quorum. Then the other box is, and I probably don't even have these in order, but the other box is I give my proxy two, and then you would indicate who you're giving your proxy to. And you can give it to anybody. A friend, relative, a guy on the corner that you just met standing, waiting for the walk sign and all that kind of stuff. Then you can give it to the board where the board uses it equally, or as a whole, they all decide together, this is where we're going to put the votes, let's say, on the proxy. And then the last one is to be divided equally among the board members. So if you have a 1% ownership and seven board members, it's going to be split between those seven board members. So you're breaking that percentage down to even a smaller percentage for each board member. And to drill down on that, what people have to understand, if you had a seven-member board in your example, and only five board members were present, then you would take that percentage of ownership, the 1% hypothetically that you owned, and divide it by five, and each owner would be voting 0.2%, or one-fifth of your percentage of ownership. The board majority is that it's also common, with being of those five board members there, three of the two or the majority would then say, I want that whole 1% voted this way. Yeah, exactly. And that's those that afford choices, afford choices that are mandated by law, again recognizing that an owner could write on a piece of toilet paper with all the necessary information, I give my proxy to the board majority, or I give it to Scott Shirley, or I give my proxy for quorum only, and that would still be an acceptable and valid proxy. I think the other important thing to remember, too, say I gave my proxy to you, that doesn't mean I can't go to the annual meeting. Right. You can still vote my proxy, and I can just be sitting in the audience watching to make sure you vote the way I wanted you to vote, or something to that effect. As an owner, you have a right to attend a meeting, but you can still give someone your authority to vote and do a proxy at the annual meeting. Okay, this is quite interesting. Probably more than others on UNI who've done this many times. Too many times. We're going to take a short break from Condo Insider, and we'll be right back. Hello, I'm Marianne Sasaki. Welcome to Think Tech Hawaii, where some of the most interesting conversations in Honolulu go on. I have a show on Wednesdays from one to two called Life in the Law, where we discuss legal issues, politics, governmental topics, and a whole host of issues. I hope you'll join me. Hello, this is Martin Despeng. I want to get you excited about my new show, which is Humane Architecture for Hawaii and Beyond. We're going to broadcast on Tuesdays, 5 p.m. here on Think Tech Hawaii. Aloha, Kako. I'm Marcia Joyner, inviting you to navigate the journey with us. We are here every Wednesday morning at 11 a.m., and we really want you to be with us where we look at the options and choices of End of Life Care. Aloha. Welcome back to Condo Insider. We're going through annual meeting tips of some of the most misunderstood issues at annual meetings. We've already discussed the fact to have an annual meeting, you have to give notice, and certain owners have rights to have and sheet of paper with their request for your proxy by statute to balance the playing field. And once the call of the meeting is made, people go and it can be represented by person or by proxy, and Scott has told us that you can still give your proxy and go to the annual meeting. So now you're in the annual meeting and we're going to go through this order of business which is prescribed into bylaws, but probably the number one thing is that you're going to elect directors. Yes. And often they're usually elected by what we call percentage of common interest. So every unit has a different value based on maybe its size or whatever the developer chose its rationale, but you might have a 1% ownership interest or a 1.2% ownership. You're voting that number, you're not voting like one for your unit. You're voting this percentage of common interest. And bylaws will have differences. What's the difference? Well, straight voting is let's just say for example you have two positions coming open that are going to be elected on and you have three people running. That means on the ballot whoever has the proxy or whoever is voting will mark one to one name and one to another name and then of course one name is going to be left blank because they only have two votes because there's only two positions available. So straight regular voting. Cumulative voting however which I don't personally particularly care for because it's open for abuse in my opinion is you have two positions open three people running and instead of taking one vote to one name one vote to another name you can apply all your votes to just one name and that's what they mean by cumulative voting and that sometimes can cause some problems. Even the National Association of Parliamentarians doesn't recommend cumulative voting but the idea behind it is to give minority interests a way to stack their votes to get representation. Although I can tell you from experience I've been to meetings where an owner wanted to vote one and a half votes for one person and a half votes you have to use whole numbers when you do this. It gets really complicated particularly when you have an association with a percentage of audiences it can really be a bear to do that. So you go into the voting and certainly the people who either are there in person to vote or have a proxy get the vote and for the election of directors this can be the majority basically wins and if there's a tie somehow then there's going to be another ballot to maybe it's a limited one of the people not just in your example but in the whole thing. What meetings to vote on at the end of the week? There could be simple things let's say you had money left over from your budget at the end of the year you would normally do what is called an IRS rollover to roll that money into the next fiscal or calendar year that the association operates under so that they don't have to pay taxes on it. You are a non-profit organization might be voting on who to hire as the auditor for the association or maybe there's a bylaw amendment that's going to be put forth that would be taken as a vote as well. Because in general terms the IRS tax rollover resolution comes back from a situation I think it goes back in the 50s where you collected money and certainly some of the money you collect is reserves for like a future roof that back in the late 50s IRS filed a lawsuit trying to claim that was excess cash it was taxable and what was ruled at the end of the day or however that turned out in the end is that if the assembly meaning the owners votes to roll that over for a future year of use it becomes non-taxable and I've never seen that resolution defeated I don't think you've ever seen a no vote on it except for maybe somebody who didn't understand it but that's kind of almost every condominium year does the tax rollover and some bylaws will provide a position where you have to either prove the managing agents contract or select the auditor and those types of things but then comes up the issue of amending well let me give you before I go to this let's just say I'm an owner and I'm sending a meeting I make a motion I move that the board of directors be prohibited from raising the maintenance fees this year and if that motion comes up everyone's going to vote in favor of it probably is that legal it's not legal in the fact that you cannot make a motion that restricts the board or the association from doing what it is required to do both under statute and the bylaws right most people look at it as an amendment to the bylaws because the bylaws say the board has this authority and by you saying I'm limiting your authority that it's an amendment to the bylaws and therefore it's out of order let me reverse the motion a little bit I move that the board be advised by the owners present this meeting we would like you to try everything in your power not to raise the maintenance fees this year is that legal what it is is sort of like a resolution that this is what you're going to try your best to do over the next year is not raise maintenance fees but it doesn't tell you you can't it's advisory and non-biasing is what it is I think that's an important thing because I see you all the time at meetings not that example because everybody knows that's far fetched the owners want to make a motion to force the board to do something where in fact it either is a board decision or may even be contrary to the law so you couldn't vote on it you have to understand what's in the statute and what's in your own governing documents as well other motions which are usually the appointment of managing agents contract and the auditor doesn't appear in all bylaws it appears in some but whatever it is you would need to do and now we get to my favorite which is amending the governing documents so at a meeting of the owners you could amend the governing documents yes you could and if the board had a bylaw amendment to proffer to the owners can they do that or do they have to give notice if they're going to make a change to the bylaw and they'd probably go out with the proxy notice and everything explaining what the bylaw change is so that everybody understands it when they come to vote on it either by ballot or raising hands at the meeting or yay or nay whatever the case may be as long as it's the proper percentage right and so let's just say an owner who's not on the board says I want to make a motion and they have a very clever written out and when I've actually seen I'd like to amend the bylaws and strike the authority to vote for criminal voting is that a legal motion made by an owner it is because it is the owner's meeting and motions can come from the floor just like even in the voting for directors three people have volunteered to run for a director you could still have somebody nominated from the floor to be added to that list an owner making a motion to amend allows a certain way at the meeting does not require notice but with the board doing it it does require notice the statute says the board has to give notice to the owners that are proposed by a law and the reason why they're recommending it but doesn't prohibit an owner at a meeting for making their own motion he'll either have the 65 67% yeah for 514B it's 65 for 514A but they will either have the requisite percentage of the people one of the things that people have to understand owners have to understand is that this meeting of the owners is a lawful meeting and things can happen and when you get someone in their proxy you're trusting in their judgment to either vote for or against whatever comes up at the meeting and frankly it very rarely comes up bylaw and declaration amendments that the board hasn't noticed they haven't gone through something but to tell you I haven't seen it would not be true because I know an association that hated cumulative voting and they knew all the owners hated cumulative voting except for the one guy who got elected every time from cumulative voting and so they planned on their own to go to the meeting and an owner on his own to plan this motion to do away with cumulative voting which was adopted like 10 or whatever it was and it got adopted and went through I don't want to say litigation but some kind of mediation whatever which resolved that yes the owners can do that and which is again another you know the statute says you'll run your meetings by parliamentary procedure and that's why I think especially when you're having a large group maybe you have 100, 200 or more at that annual meeting to have a parliamentarian or somebody with parliamentary procedures helping and assisting that meeting run because they know how the motions are supposed to be made and what to do and a lot of time in this proxy solicitation process owners will call the management company and say I want to see all the proxies before the meeting who's giving who what can they see that that's a good question can they no they can't because I've actually had people call me before and say I want to see who has that proxy what they can do is see the proxies that are given to them so four or five people gave them a proxy they can say these four or five people gave you a proxy so if they were looking for others they could be calling that person say did you send it realizing that some people just brush them off and say okay they have no intention of giving them a proxy but the statute does provide that after the meeting owners for 30 days have the right to inspect the proxies and inspect the tabulation which would mean the calculation of who won or lost and inspect the actual ballots which still maintains the secret ballot provision because most of these ballots don't have any identifying factor on the whole thing another question so at the meeting I should give you a test I should have done a test here for some kind of prize or something on this that's right so owners at the meeting say I want to know how many proxies the board has before the meeting and before the voting do they have an obligation to disclose that I think it would be up to the board whether they wanted to disclose that or not well it's up to the board but factually speaking no because the ballot is the secret ballot provision that the board has the right to vote its representation just like the owners with proxies don't have to disclose it in theory the board doesn't have to say what percentage of proxies they have before the vote and the vote is secret so like you mentioned most people don't have their name on it but it could be based on a percentage ownership of course that's what your vote is going to be and actually somebody would have to do a hell of a lot of work to figure out how many owned in this percentage ownership how many sent in proxies to try to figure out who those proxies belong to in the long run it's not worth it because we only have one minute left I just want to add one thing so I'm not going to ask the question I'm going to give you the answer oh good tell me that say what is the answer sometimes people miscalculate the votes and they're afterwards they find out the vote wasn't added correctly the board can't change the vote that was announced at the annual meeting if in fact they have found an error people will have to notice a special meeting for the purposes of having a recount it has to be done within I think it's don't hold me to this but I think it's within 90 days of the meeting I believe you're correct and with respect to that so the board just can't change it they would actually have to call a meeting of the homeowners and they would have to have the homeowners vote to have a recount and I've been in meetings where they voted not to have the recount which means you're stuck with the original amount of the who was elected and I think in the long run even if they did a recount it probably wouldn't affect a change well there's a lot of stories but we're down to our last minute on a very exciting topic you and I can spend days discussing this but they only give me 28 minutes for a show so I'm going to thank Scott Shirley for being here today thanks for having me again thank all of you for watching Condo Insider we'll be back with more annual meeting special meeting tips in the future we just got on the surface of this topic but thank you for watching Condo Insider welcome