I wanted to add my thoughts here because I too was recently abused where a board member came out and called me fat and then gave me the middle finger obscene gesture. I cannot speak without the board being rude to me. I’ve seen the President abuse other HO’s. I just don’t get why these personality challenged people run for the office. Same person won’t return phone calls or e’s of residents she does not like. The Community Manager is non-effective but has a great accommodating personality at the meetings and then immediately turns her back to HO’s and hides in her office. It’s a war zone. Don’t buy in an HOA.
It’s fairly easy to find information on what boards are not supposed to do – a little bit harder to find good information on the best practices boards and committees might use to conduct effective, efficient working meetings while still respecting open meeting laws.
Not very surprising that many sites in the web advise readers to rely on the management company and their vendors to conduct most of the business between meetings. And for routine, repetitive, cyclical stuff, that probably makes sense. But not for large projects and complex decisions.
Interestingly, a few sources of knowledge recommend a new sort or “radical openness”. As costs for video streaming and conferencing have plummeted – and cameras and go-pros everywhere – some sites are recommending televising or video streaming work sessions between meetings – at least for city council. Televised work sessions with video streaming *might* be a tool that allows directors (with or without quorum?) to discuss and study complex problems between regularly scheduled board meetings.
Found an article from 2006 on the Arizona Daily Sun titled “Council work sessions televised more often” stating that “Flagstaff City Council work sessions are now televised three times each week on Cable Channel 4” https://azdailysun.com/news/local/council-work-sessions-televised-more-often/article_e7ae3981-cd1b-5cea-916e-f80dc35c4a91.html}
Also some great information on the Michigan Municipal League’s website, www.mml.org. This one pager was particularly helpful “Work Sessions – Use by Legislative Bodies”.
From the MML one-pager:
“Work sessions are intended to provide opportunities for council/board members to study difficult issues,
gather and analyze information, and clarify problems. The public must be given an opportunity to address
the council/board. If council is going to have a meeting, and it is a posted public meeting, then people must
have an opportunity to speak under the Open Meetings Act. That is perfectly fine, but rules governing public participation ought to be enforced, and those in attendance should be made aware of the
purpose of the meeting—to study issues, not to take action.
Citizens often aren’t aware of or understand the differences between work sessions and regular sessions.
This often gives rise to the perception that the decision process in the regular meeting is rigged
beforehand. There are no easy answers to this problem. The best that can be done is to communicate, as
much as possible, the process by which council makes decisions. Make it clear that council holds work
sessions for difficult issues, that these sessions are open to the public, and that no decision is made except
in a regular session.”
The MML one-pager also mentions the importance of educating citizen on how Open Meeting Laws might be used to prevent boards from doing anything productive between regular board meetings – and how the televised or streaming processes might be used to allow board members to meet publicly in order to analyze and clarify problems while still allowing citizens and homeowners to watch the discussions.
If boards can webcast and support remote homeowner participation – committee meetings should also be allowed to webcast and support remote participation.
Dennis – any thoughts on how technology including video webcast might be used to support a new “radical openness” for HOAs in Arizona?
Great comments and post. I could not agree with you more. Current Arizona statutes are considerably out of date and are very limiting with the allowed options for a board or members to meet remotely. I’m actually trying to address that with my top priority bill this session. Amoungst other things i’m Looking to broaden the flexibility of boards to use technological means to conduct meeting and to allow both board members and community members to participate remotely. The variety of options are limitless and advances in technology will only make these options better and simpler to use. As you so well stated is the communities faith In the decision making process of their board of directors comes in transparency and openness inconducting its business. We do not seek to overly burden boards with the open meeting laws only to ensure that those boards, community managers or most importantly association lawyers do not circumvent or simply ignore the law because they can because only the homeowners will hold them accountable. Many board members have complained to me that the provisions in the law relative to informal meetings of a quorum is overly restrictive. What I tell them is i’m willingszzzzzz, to try and work on that language but I need to first get acknowledgement that both AACM and CAI understand and respect the open meeting laws and will hold their clients accountable to know and support those laws, before I do anything to change the current language in the law. That will allow social gatherings of board members where incidental discussion of their community may take place, or opportunities where a quorum of the board walks around their community to look for issues that they and fix or address to improve their community. These make sense for communities but unfortunately I cannot trust current community managers or community attorneys to use any common sense with what they advise their communities to do.
Back to the original question, business applications like go to meeting and basic conference lines or video conferencing like face time or Skype are all means that could allow both board and members to participate remotely. While my current proposal stops short of a totally virtual meeting, I still require that at least some board members participate in a physical meeting so that homeowners not comfortable with technology can still participate in person. Some day that is not out of the question.
Thank you for your comments and site references.
So… with respect to non-emergency business discussions and decisions.
Our committees and boards are almost helpless to do anything until there is a meeting. Open meetings requirements is a crushingly slow and inefficient way to conduct trivial non-emergency business. Meanwhile, the CM makes all decisions without us. If we try to alter his decisions via e-mail or have any discussion via email he shuts down the email discussion with the phrase “HALT – open meeting violation”
If directors and committee members should not use email to discuss non-emergency issues – and if they should also not use unanimous consent via email to make decisions without a meeting, pursuant to ARS 10-3821 or the Bylaws, how are committees and boards supposed to accomplish anything?
There must be something we’re missing.
Thank you for sharing this experience. It is something that happens all too often in communities across this state. Unfortunately their are no laws to protect from this type of abuse. Regulating human behavior is not something that the legislature will address other than when it crosses the line to become criminal. My best advice if you witness this again is to record the event on your cell phone and share it with your community. Any board member that treats homeowners has to be removed from office, and taken away from a position of power over other other homeowners. I’ve made sure that every homeowner has the right to record any meeting of he board and that includes interactions of the board with members.
The greatest power of the homeowners is to elect and remove board members that do not display the values and expectations of the community. Exercise that power and your community will be better for it.
Having said this as home owners you also have a responsibility to act as this homeowner did and deal with the board with calm and respect for their responsibilities. You may not like their decisions on issues but if they made that decision based on what they truly believed was in the best interest of the entire community, that is why you put them in that position to make the hard decisions.
As for the community manager his or her behavior is typical of what I’ve experienced. While the HOA trade organizations continue to advertise that professional community help boards run better communities, from my experience they seldom do anything to correct or help mitigate bad behavior of board members and thereby add no value to the community in this area. As I’ve said in many of my responses if the HOA industry really wanted to make these communities better places to live and to improve property value they would train their community managers and attorneys to help advise these board members on what they should do and behave rather than to focus on what they can get away with.
As for the homeowner involved thank her for me for not being intimidated by the boards behavior. You would be appalled how many times I hear from single or elderly women who have been treated in the same way by boards and community managers. You can all be assured that that behavior would not have happened if a man raised the same question. All the more reason to remove these people from a position of power in the community.
Write me at the email@example.com relative to your record request and I’ll help you out. You will most probably get a response that the association does not keep e-mails as official records of the community, but that is hog wash. If they discussed community business or conducted community actions in written form (which the e-mails are ) they are records of the associations and required by ARS 33-1805 to be made available to any member so requesting. In fact in some cases if the board does not conduct it’s communication on a separate e-mail accounts, the board members have been required to provide their entire e-mail history from their personal e-mail accounts in response to subpoena’s from the courts. This is not a small deal, and boards should be must more cautious in not conducting community business via e-mail.
This was a great question and I’m glad you posted it so everyone can see.
You are absolutely correct.
Your community manager is correct in what he said, but wrong in his application of that fact to HOA’s. The non-profit corporation act Title 10 of the Arizona statutes section 3821 allows a board of a non-profit corporation to take action without a meeting with unanimous consent. In fact based on that long standing statute most HOA bylaws include the exact same provision.
But Title 33 Chapters 9 and 16 apply open meeting laws to Condominiums (33-1248) and Planned Communities (33-1804). There are no open meeting laws for non-profit corporations. And what the courts have long held , is that when general statutes conflict with more specific statutes the more specific statutes prevail. Any aspect of Title 33 Chapter 9 or 16 that conflicts with statutes in Title 10 the provisions in Title 33 chapter 9 or 16 prevail.
Arizona open meeting laws for Condo’s and Planned Communities’ require that any meeting of the board must be noticed and must allow the members of the community to attend and participate in those meetings. The only time action by a board can be taken outside of a noticed and open meeting is for emergency meetings, that cannot wait for the 48 hour prior notice. Many attorneys and community managers also confuse the issue further by saying that executive session meetings can occur by e-mail. While again technically accurate because the members are excluded from attending and participating in executive meetings of the board. they forget that even executive sessions must be noticed 48 hours in advance of the meeting, unless it is an emergency and the action or subject of that meeting cannot wait the 48 hours for the notice to occur.
The open meeting laws go on to describe what must be done after an emergency meeting of the board.
I’ve heard many arguments that e-mails are not meetings so therefore the open meeting laws do not apply. To that I simply answer that in 1997 the Attorney General of Arizona cited in an official opinion that in the absence of definition of what constitutes a “meeting” in Title 33, you can go to the only other definition of the word “meeting” in statutes and that is in Title 38 for public bodies. The definition in that Title (38-431 (3)) is clear and in detail discuss types of e-mails that constitute a meeting. That particular statute was modified last year to incorporate another Attorney General opinion directly related to the use of e-mails.
The most powerful aspect of the open meeting laws for HOA and Condominiums is the public policy statement contained in those statutes. In 2017 I initiated a bill that include language into that policy that specifically held the board and the community managers responsible to ensure that if there was any doubt in whether the open meeting laws applied to clear that doubt in favor of open meetings. That was the first time where a so called community manager was held responsible for anything in statutes.
Clearly they (the community managers) have not gotten that message. It is about time that AACM and CAI start including in their so called training programs the development of community managers ability to read the law, and the governing documents.
I’ll provide my perspective on this issue not for Joan’s benefit we have had this discussion all day, but rather for all of you. While the association has the authority to raise whatever funds they need to pay the expenses they have no authority to abuse that power and repeatedly overcharge homeowners in assessments. Associations Budgets have to have some contingency considerations to address unexpected needs and often result in excess income at the end of the year. In my opinion not as an attorney of CPA that the associations fiduciary responsibility to the members is to do one of three things with those excess funds. Refund it back to the homeowners, pay it forward to defray assessment in the subsequent year, to transfer that money to the reserve fund the defray the need for additional assessments for long term capital maintenance. Doing nothing with the money and letting it sit in a non-designated slush fund is nothing short of simple theft.
What the association does with that money depends on the tax method they chose and how they pay taxes on those funds. HOA and Condominiums have a very rare luxury. They get to chose between two tax reporting methods.
The first and most frequently used is as a special HOA treatment using form 1120-H. The Association gets to choose this every year but must meet three specific qualification requirement to use this method. With that process they get to pay no taxes on exempted income and only pay taxes on non-exempt income , but at 30% for the first $50K. What is included in exempted income is Capital contributions , but they also have very specific rules and controls over what qualifies as a Capital Contribution. If the association sets up and manages the reserve funds properly and provides proper notice to the membership in advance that they intend to move any excess funds at the end of the year to the reserve account , then and only then can they legitimately move that money into the reserve account. In my humble non legal opinion Joan’s association in doing nothing with the money and filing a 1120- H, without reporting profit and paying taxes on that profit (excess exempt income) violated the IRS tax code, and they could be subject to an audit and substantial tax liability, fines and penalties, as well as a breach of the association’s fiduciary responsibility to the homeowners.
The association can also chose to file their taxes as a normal corporation and pay 15% tax on any non-exempt income and any excess exempt income. This is a much more complicated process but provides substantial tax savings if used properly. With this process comes a specific tax ruling issued in 1970 identified as 70-604. What that ruling says is that to exempt excess funds for the fiscal year they must have a vote of the members decide if the association should return the excess money to the members or roll it forward to the next fiscal year to defer assessments. Ruling 70-604 only applies to association filing a 1120 tax form and provides no option for the reserve fund roll over. With this process the part of the annual assessment that is dedicated to the reserve fund must also satisfy the “Capital Contributions” test and criteria.
With all this said the association can still ignore all of this and simply pay the tax on the excess funds and illegitimate capital improvements, the IRS will be fine with that but the board will have breached their fiduciary duties to both the association and the members and could be individually held liable for those actions. The indemnification clauses in the governing documents do not protect the board members from criminal acts or intentional acts that were not accomplished in good faith.
I do hope as Joan asked that any other informed member weigh in on this subject because it has ramification for all homeowners in HOA’s and Condo’s across the country.
While these are all good questions there are no simple answers. In Arizona in Condos or HOA of 50 units or less the seller is required to provide the disclosure information to the buyer. If the community has greater than 50 units or homes the association is required to provide the disclosure information. The buyer is required to sign a document at closing that he/she has received and read the community documents. I’ve never know of any board ever being concerned about the member/ buyer getting any of the information required in state law. The disclosure fee is a very sour subject for me. In 2010 the current state law on this subject was enacted, in an attempt to curtail the totally out of control and unreasonable fees being charged for this service by management companies. That law set a limit at $400, but did nothing to base that fee on actual and direct cost to provide that service. In fact if the home seller provides the disclosure information the association management company is entitled to charge the seller for the service that they did not provide. This is what happens to state law when left in the hands of the self serving trade groups and why I build this organization and directly lobby for the homeowners interest with the legislators. What my research has determined is that Arizona’s fee at $400 is the highest fee allowed in the country, and it is also the only fee that is not based in any way on the actual cost of providing that service. The state laws are essentially subsidizing these community management companies out of the pocket of every home seller in the state. This absolutely has to change and I will attempt to do that with one of my proposal this coming legislative session.
As for the transfer fees or operating capital fee, most CC&R’s provide and describe many types of fees some of which are triggered by a transfer of title on the units or homes in these associations. The names of those fees is limited only by the imagine of the attorney that drafted the CC&R’s. The real issue here is they are all schemes to get more money from either the buyer or the seller, to augment the already unlimited power of the association to raise whatever money they need to pay the expenses of the association. When a home is sold a lot of money changes hand as part of that transaction and the HOA and Condominium simply wants a piece of that pie, because they can. In 2010 plus or minus a year or two, 44 of the 50 states declared all private covenants transfer fees by any name void and unenforceable. However thru the influence of CAI the HOA Industry Trade group managed to get an exception to all these state laws enacted in every state that allow HOA’s and Condominium to continue to charge transfer fee.
While not an attorney it is my contention that any working capital fee is illegal under servitudes law because they require either the buyer or the seller to make a contribution to the operating fund so that they have more working capital. Remember the association develops its budget for the year based on what it will need to operate and then charges each homeowner their appropriate share of that cost in assessments. The timing of payments is what generates working capital to pay the bills until the next installment is due. The only condition affecting these assessments is that they must be applied to everyone equally. So when they charge either the buyer or the seller this working capital fee they are unfairly asking those individual to pay more than their fair share of the associations cost. While the fundamental case law in this area is called Servitudes Law allows transfer fees they have 4 qualifiers, they must be paid to the association only, they must be reasonable, rational and fair. Anyone that does not meets that test is invalid and unenforceable.
Once again I have provisions in my legislative proposals for this year to attempt to fix and clarify these issues.
I apologize on the length of this response I’ve been trying to fix these laws for three years now and this hits very close to home for me.
I hope I’ve answered your questions. As to who get these fees and what are they used for that will truly vary for each association, because once they have your money they can and often do whatever they want with the money irrespective of the stated purpose of the fees.
While this was posted by one of our members it is unfortunately so true for so many communities. Boards need to understand that they are responsible for running the community not the community manager. That manager works for them not the other way around. If that manager violates the law it will be the board that is held accountable not the community manager or the management company. When these untrained and unlicensed individuals are allowed to get total control over a community without oversight chaos ensues, to the detriment of all homeowners. That property manager does not work for you but does work for the board, so hold them accountable for that managers actions and approach to dealing with the community.
Pay very close attention to what specifically is authorized in the CC&R’s relative to rules for the association. While the board can create and establish rules on their own without any approval from the community they can only create rules specifically authorized in the CC&R’s. They cannot create a restriction on the use or the behaviors on and within your property that does not exist in the original CC&R’s without amending the CC&R’s and that amendment would require 100% approval from the members. This is common law for the country compiled in the Restatement of Servitudes Law published in 2000.
Please if the board is trying to do something that just does not feel right it is probably not. Contact us and if necessary we will provide you contact information for qualified attorneys, to help you stop the board.
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