As Condominium and HOA attorneys, we often receive questions from our clients dealing with all the issues that can get in the way of conducting a successful annual meeting. Most often, it is the issue of not being able to achieve a quorum of owners in attendance—which stymies the Association’s ability to hold Board member elections, approve the budget, and take other important actions to further the HOA’s business for the coming year. So what happens if an Association’s Bylaws calls for annual board elections, but the Association does not hold elections for a number of years? Is there a Board? Does the Board have any authority? A recent case addressed these issues, and the court’s findings might surprise you.
In a 2019 case, a Condominium Association sued an owner for violating the governing documents. The owner claimed that the Association’s Board, who initiated the lawsuit against him, lacked the authority to sue (and lacked the authority to do anything for the Association) because the Association had not held board elections in recent history. Instead, the same directors had been in place for many years, despite the mandate in the Bylaws that board elections should be held each year at the annual meeting. The Association had not held annual meetings, and as a result, no Board elections had taken place.
The trial court agreed with the homeowner defendant that the Association Board did not have any authority to act on behalf of the Association because they did not follow the Bylaws and hold annual elections. The Association appealed, and the Court of Appeals reversed the trial court’s decision, finding in favor of the Association, holding that the Board members did have authority because they were still “in power.” Why? The secret was held within the language of the Bylaws, which stated that Board members serve until the earlier of (1) the next annual meeting of the Association or (2) such time as the Board members are replaced. As the Association never held an annual meeting, and the Board members were not replaced, the Board members still legally served as the Board.
Board members, beware—or at least, take care! If your Association does not or cannot hold its annual meeting due to quorum problems (for example) it is likely that you will remain on the Board until your successor is elected. Unless you have formally resigned your Board position as set forth in your Bylaws, you are still a director, with all of the duties, obligations, and authority that come along with your position.
Channel View East Condominium Association, Inc. v. Ferguson, 2019 WL 2865987 (Ct. App. Michigan).
If you have any questions, please feel free to contact Husch Blackwell LLP Condominium and HOA Law Team.