Thursday, January 30, 2014

Proxy Votes & Quorums for HOAs Explained

A Guide to the HOA Voting Process and Proxy Voting

The condo association voting process tends to be complicated for condo owners, board members, and property managers alike. This can cause apathy of the required parties for establishing quorum, and can stifle decisions for carrying out business necessities for the condo association.

In this article we will answer the following questions about the HOA Voting Process:

  • What is the condo association voting process?
  • What is a quorum?
  • What are proxy votes, and why do they exist to establish quorum?
  • What does the Massachusetts law state regarding proxy voting for HOAs?

Who is This Guide For?

This guide is designed to educate unit owners, HOA board members, and property managers about the HOA voting process, as well as outline best practices for establishing and managing a voting process for their HOA's bylaws. In the first half of this blog, we will explain the condo association voting process, and then we will go on to explain the challenges of reaching quorum, state laws on proxy voting, and our recommendations for your HOA that may face challenges for meeting a quorum.

What Is The Condo Association Voting Process?

All condominiums are required to be members of an association with an election process comprised of the condo unit owners, property managers, and board members. According to the New England Condominium article Getting Out The Vote,
As a guideline, these rules should address the qualifications of candidates; nominating procedures; campaign procedures; qualifications for voting; the voting time period; the authenticity, validity and effect of proxies; and the methods of selecting election inspectors to handle the ballots. 

What Is A Quorum?

A quorum is the minimum number of association members necessary to legally conduct the business of your HOA. Most, but not all, groups define a quorum as a simple majority of the members. However, the specific defintion for your HOA should be defined in your HOA's by-laws. Without a quorum, a vote cannot be taken, and the status-quo can't be changed.

What Are Proxy Votes, and Why They Exist To Establish Quorum?

The proxy vote is when a voter or unit owner designates another person to cast their vote, using a signed letter or form. “The proxy could be given to a fellow unit-owner or to a clerk for the board,” he states. The voter may indicate his or her choice of candidate or issue with a “directed” proxy – or leave the choice up to the person designated as proxy.

What does the Massachusetts law state regarding proxy voting for HOAs?

Low attendance at voting meetings is one of the main challenges that leads to harder chances of establishing quorum, which needs to be met according to the MA state by-laws for the HOAs to conduct business. Massachusetts state attorney Frank Flynn of the Boston law firm of Downing & Flynn stated in Getting Out The Vote that the election process is not something that is legislated by the state of Massachusetts. Instead, “elections are set forth in the condo docs (rules and regulations)” and that “serving on a condo board is voluntary…” causing the challenge of attendance.

Proxy Voting: For Better or For Worse?

Proxy voting can alleviate voter apathy and can be a valid solution to getting enough voters to show up at the annual meeting since most governing docs require a quorum of over 50 percent of beneficial interest be present at the meeting. If enough proxy votes are collected, the proxies may equal enough for a quorum and allow the annual meeting to proceed.

The disadvantage of proxy voting is that it is not a valid form of voting in all US states. For example, Illinois is a state that legislates proxy voting (or "secret-ballots") is a violation. The board and property management company must collect most of the proxies from the residents, and the board members vote for themselves. This system seems to prevent others from serving on the board.

Our Recommendations on Proxy Voting

Buildings should consider amending their by-laws' requirement for size of quorum, depending on the number of units in the association. If the building has 50 units or less, the typical 50.0001 - 51% should work sufficiently. If it gets higher than that rate, it becomes difficult to reach quorum at most annual HOA meetings.

For properties over 50 units, HOAs should consider decreasing the threshold for quorum. For example, if a property has 55 units, amending the Master Deed to drop the quorum to 37% can results in an increase of action items being improved.

Using Proxy ballots allows for voting on agenda items. HOAs should mail out Proxy Ballots instead of the usual proxy form for voting. These ballots are drafted to assign your proxy to vote on behalf of you for pre-approved agenda items. However, motions from the floor (followed by Second, Discussion, and Vote) could be possibly voted by Proxy Ballot if the ballot was drafted "to include, but not limited to..." This is all assuming that you have reached quorum.

For absentee ballot/mail voting, condo docs need to be referenced very specifically for how and where quorum needs to be established. If it states "at a meeting" in person, mail in/absentee cannot be used. This is when the proxy ballot can come into play. If the condo docs are not specific, and quorum is not met at a meeting, the HOA could explore the idea of following it up with a mail-in vote.

Electronic voting is not illegal in Massachusetts, but the Trust has to again be referenced specifically. New condominiums or associations looking for under-quorum reprieve may want to amend their Trust to allow for them. There is not much judicial precedence for challenging electronic voting known. Being that is a new form of voting, HOAs should tread carefully on this.

In conclusion, HOAs should always retain an attorney to clarify what is required by your property governing documents.

Your Thoughts on Proxy Voting

Do you believe that altering the threshold in your HOA's by-laws can allow for proxy voting could be advantageous for your HOA? How hard would it be for voting on amending your HOA by-laws for establishing quorum for your property?

Give us your feedback! We would love to discuss more about Proxy Votes & Quorums for HOAs with you in the comments.

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