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The Annual Meeting - The Problem of No-Shows

Apathy seems to run wild in many homeowners associations as, year after year, home owners fail to attend their association's annual meetings. The problem of no-shows is that the association is unable to obtain a quorum at its annual meeting. By-laws typically provide that a quorum is obtained when so many home owners as shall represent at least 51% of the total authorized votes of all home owners present in person or represented by written proxy attend the meeting. By-laws also typically provide that when a quorum is present at any meeting, the vote of a majority of the home owners present in person or represented by written proxy shall decide any question brought before the meeting. It follows that, absent the presence of a quorum at a meeting, no vote can be held and no action can be taken by the home owners.

One important action which cannot be taken due to the lack of a quorum is the election of directors. By-laws typically provide that directors will serve for a term of one year until the next annual meeting of the members and, thereafter, until their successors have been duly elected and qualified. Based upon this provision, a director elected by the home owners for a one-year term may serve year after year inasmuch as, in the absence of a quorum, his or her successor cannot be duly elected. What is an association to do to address the problem of no-shows which permits directors to serve in what seems like perpetuity?

Some associations simply ignore the quorum requirement set forth in their by-laws and permit the meeting to proceed, including the election of directors. This action is not legal and any action taken by the home owners without a quorum being present is not valid. Some associations fail even to call the annual meeting. This action is also not legal. By-laws typically require that the association hold an annual meeting each year within a stated period of time. The by-laws should not be ignored as they represent the basic agreement among the home owners as to the manner in which the association will operate and they set forth the respective rights and obligations of the home owners. The board of directors has a legal obligation, and a fiduciary duty, to follow and enforce the by-laws as they are written.

Moreover, the board, by ignoring the quorum requirement thereby reducing it to the number of home owners who are actually present at the meeting, in essence, is amending the by-laws. Such action violates the amendment provision of the by-laws which typically provides that the by-laws can only be amended by vote of 66 2/3 of the home owners present in person or by proxy at a meeting of the home owners. We advise our homeowner association clients, which have a difficult time meeting the quorum requirement, to properly amend their by-laws at a meeting to reduce the quorum requirement to a level which can be achieved.

If a quorum is not present, the meeting should be adjourned. The by-laws typically provide that if a quorum shall not be present the home owners entitled to vote thereat, present in person or represented by written proxy, shall have the power to adjourn the meeting until a quorum shall be present or represented and any business may be transacted at such meeting which might have been transacted at the meeting originally called.

Some associations, in order to obtain a quorum, permit voting outside of the meeting by absentee ballot or electronic voting. Such voting is not valid unless specifically authorized by the association's by-laws. Even if so authorized, this practice may not be legal in New York as New York does not recognize such practices and requires that homeowners be present in person or by proxy at the meeting in order to cast their votes.

We counsel our homeowner association clients in order to obtain a quorum to go door to door prior to the meeting to actively solicit proxies. The proxy can be given by a home owner for the sole purpose of obtaining a quorum. Some managing agents request in the materials accompanying the notice of meeting that all homeowners return their proxies to the managing agent even if they intend to attend the meeting. It is good practice to obtain proxies beforehand just in case a home owner fails to attend the meeting. Proxies are automatically revoked if the home owner attends the meeting.

Some of our clients have tried to entice home owners to attend an annual meeting by serving food and refreshments, providing entertainment or offering door prizes or other enticements. Some of our clients have moved the location of the annual meeting from an off-site location to an on-site location so as to make attendance more convenient. Some of our clients require that a home owner give the board his or her proxy as a condition to the board approving a lease of a unit. These actions have been met with limited success.

Under circumstances where an annual meeting has not been called, or a quorum has not been obtained, in many years so that the directors have served for many years beyond their stated terms (and may, in fact, themselves not have been duly elected for lack of a quorum), we recommend that the board call a special meeting of the home owners to elect an entirely new board. The community should be made aware that all home owners (including the incumbents) may submit their names to be considered for the open directorships. However, we caution our clients that the election can only proceed if there is a quorum present. All candidates are encouraged to actively campaign and solicit proxies, and to generate real interest amongst the home owners by informing home owners of the real issues facing the community which may affect their property values. Keeping your home owners informed and involved is truly the only sure way to overcome the problem of no shows.

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