2009 July 28
Last edit: 2008 Aug 08. See History for brief descriptions of changes and updates.
The question concerning the content and detail to be included in meeting minutes has been the subject of numerous posts on HOA Talk. It is an important question. There are many considerations.
The continuation of this post is a discussion of that question with references to papers by other writers. My recommendation is for sufficient detail so that the reasons for each action are described for all potential users of the minutes. Members have a right to know how they are being represented in board decisions, and that includes how each member voted on each motion.
Don Nordeen
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Please be advised that the writer is not an attorney, and this is not legal advice. The information is based on research on information available in the public domain.
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Discussion Concern Meeting Minutes (continued)
Introduction
There are at least two schools of thought on the content of meeting minutes of board meetings for property owners associations (POAs). The first, and traditional, view is that only a minimum of information should be included in the minutes, specifically only the motions and votes often without voting by name (no accountability). The driving factor seems to be that the minutes cannot be used against the board or the association if the content in the minutes is limited.
The second and evolving view is that the minutes and supporting materials also provide the documentation that the fiduciary duties of the board members were met in the decision process. (added 2009 Aug 08)>>> This is true even though there might be a claim that the wrong decision was made.<<< Without such documentation, the minutes cannot refute a claim that the board acted in an arbitrary and capricious manner without proper exercise of fiduciary duty. Voting records by name are important to define and limit accountability. A board member is not accountable for an action of the board that the board member voted against.
The issues are interrelated with fiduciary duty, communication to members, members' access to records and open/closed meetings, the relevant aspects of those other issues are discussed in this post.
Open and Closed Board Meetings
Meeting minutes should reflect what happened at the board meetings. What is open or closed to members is important to members and to good governance. (added 2009 Aug 08)>>> Better decisions are usually made in the open rather than behind closed doors.<<<
Closed meetings are often a contentious issue between members and their boards. "If the members need to know, we will tell them." is often the stated or unstated policy or preference of the board.
Open meetings are part of good governance. My interpretation of the state laws that have addressed the open meetings issue for POAs (see Florida and Virginia) is that meetings should be open unless there would be material harm to a third party or the association.
For good governance, use your state's Open Meetings Act as a guide. It likely requires a 2/3 vote on each agenda item to be discussed in closed session with documentation of the reason for the closed session. Moreover, it likely requires the motions on actions resulting from the closed session to be made in an open meeting. The reasons are that better decisions are made in the open and that the decisions should be available to members.
If matters escalated to litigation, the court proceedings would be open, (added 2009 Aug 08)>>> and the minutes of closed sessions would become public record.<<<
As a practical matter, the members involved with the situations described might be more likely to correct their problems if they understood their actions would be discussed in open meetings.
Finally, without clear standards, who decides whether a specific agenda item should be open or closed? Addressing this
question inevitably results in conclusion to almost always use open meetings.
Communication to Members, Records and Member's Access to Records
If your POA is organized as a nonprofit corporation, the nonprofit act in your state may require that minutes and other books and records be made available to members for inspection and copying. For example, the Michigan Nonprofit Corporation Act requires in §487 that minutes and other records be available to members "for proper purpose". "Proper purpose" could be as simple as for the member to be informed about the stewardship by the board.
Your governing documents may also require that specified records including minutes be available to members. The "golden thread" in public policy is reflected in the Freedom of Information and Open Meetings Acts which require that almost all records be available to members. Some states have adopted similar requirements for POAs. Those principles are good policy for POAs. Legislation is this area is evolving.
(added 2009 Aug 08)>>> Many owners associations publish draft minutes on their websites. This is a way to quickly communicate board meeting decisions and explanations to members. When the minutes are approved, the approved minutes replace the draft minutes on the website. However, based on posts on HOA Talk, some seem to be concerned about liability in publishing draft minutes. It should be obvious that any errors in the draft minutes are corrected in the approved minutes.
To estimate the use of draft minutes, I did a Google search with the search string in [ ]: ["draft minutes" "property owners association" OR "homeowners association" OR "community association" -"intellectual property owners"]. The "OR" terms in the search string limit the search to owners associations of the various types, and the "-" eliminates the many intellectual property owners associations. My result was 17,900 hits. Apparently, these owners associations appreciate the value of publishing draft minutes, and don't get into trouble by publishing draft minutes. I am sure that many owners appreciate being promptly informed of the actions at the board meetings.<<<
One attorney's view concerning meeting minutes is discussed in a recent paper, "Minutes - The Legal Document of the Association, published in Association Times at
[http://associationtimes.com/articles2008/minuteslegaldocument0208.htm].
It clearly describes more than just documenting the actions taken, motions and votes. However, this article has no discussion of fiduciary duty of each board member.
This article generally reflects the view of Community Association
Institute and CAI attorneys.
As a matter of both policy and practice, hiding and destroying records is poor policy. They both breed distrust and imply a cover up. If an error is made, take an action that introduces a new record that explains the error and the action taken to correct. A newspaper provides the analogy. If an error is made, a correction is made if the original article is incorrect. If the board has acted properly and the minutes document proper exercise of fiduciary duty, the minutes are each board member's "friend".
The users of the minutes should also be considered. If the minutes are intended for the current board members, then the minutes can be brief because board members can recall the meetings and "fill in the blanks". On the other hand, if the minutes are intended to be the record that may be referred to by future board members and are intended to be a communication tool to members, then the minutes should be written for those not in attendance. Where the board minutes are used to communicate to members, the added explanations are essential.
As a practical matter, the minutes including those for closed sessions would likely have to be produced by court order in discovery in any litigation. Providing easy access to the minutes to each member may help persuade a member that the board has acted properly and prevent this member from joining in any litigation. In this day of ubiquitous copying machines and electronic communications, records that were thought to have been destroyed may turn up and are damaging in any litigation. A records retention policy based on sound operational and legal principles — and endorsed by a legal opinion — should be the basis for any records that are destroyed. Destroying records according to an established policy is good practice. Destroying records according to the retention policy would then be acting on the advice of an attorney which should limit any personal liability of individual board members.
Many board members seem to be very sensitive to any kind of documentation regarding their actions. If the board members are doing everything right, what is there to hide? As others have written, transparency is essential to good governance. There are numerous posts on HOA Talk about board meetings not being open to members, about closed (executive) sessions being abused, and unwillingness of board members to listen to members' concerns. With regard to all of these issues, the evolving standard is that information can be withheld only if there would be material harm to the owners association. My reading is that the Virginia POA law incorporates this standard.
The same "closed" mindset carries into the meeting minutes. Many attorneys advise boards to keep the content in the minutes to a bare minimum. Lack of substance with regard to the reasons for the actions taken can create legal problems for the board and individual members who then have no documentation or record of having properly exercised their fiduciary duties.
The board meeting minutes also provide the opportunity to keep members informed of actions and reasons, particularly by posting on the internet. Sterile minutes do a poor job of communicating to members. If other means of communications are used, then explanations are typically provided which become part of the association record. So, why not include the explanations in the minutes? The explanations are also a resource for future boards to understand the reasoning in prior decisions.
One of the leadership principles I consider very important is "Beware of what people want and do, but will not say and will not explain." That is exactly what sterile minutes do. Combine that with abuse of closed sessions and no recorded votes (by name). But even then, some board members can't seem to understand why the members don't trust them.
I suggest a search of HOA Talk posts on this subject (You will have to log in to access the search engine.) to better understand the many views and lack of consensus on this important issue. No wonder POAs have problems.
Fiduciary Duty
Boards have the obligation to act in the interests of the association which includes acting in the common interests of the members. The simple description of fiduciary duty is that a board member should take only the actions that a prudent person would take in a like situation. See my post, Fiduciary Duty at [http://swagman.typepad.com/poa_governance/2005/11/fiduciary_duty.html], for a discussion. Also click on "Fiduciary Duty" under CATEGORIES" in the left column for all posts that include some aspect of fiduciary duty.
Evolving legal theory on fiduciary duty identifies three aspects: duty of care (due diligence); duty of loyalty (act only for the association and no conflict of interest); and duty of obedience (adherence to the law, governing documents and contracts). My post on Fiduciary Duty provides a nice discussion of these three aspects by an attorney.
If a breach of fiduciary duty is alleged against the board or an individual board member, the records should document that the board and/or board member acted properly. Sterile board minutes are not likely to be helpful.
The evolving view of more comprehensive minutes is discussed in a recent paper, Fiduciary Responsibility of Association Directors: Practical Application of Legal Theory at [http://www.hoa-law.com/publications/fiduciary-responsibility-of-association-directors.shtml]. That discussion by Mr. Jeffrey A. Barnett, Esq. argues that the board minutes should contain sufficient documentation to show that each board member properly exercised his/her fiduciary duty. Mr. Barnett's paper is consistent with the concepts in the Open Meetings and Freedom of Information Acts which have been public policy for 40 years or more.
Summary and Recommendations
There indeed are two schools of thought on the content of meeting minutes of board meetings. The first, and traditional, view is that only a minimum of information is included in the minutes, specifically the motions and votes often without voting by name (no accountability). The driving factor seems to be that the minutes cannot be used against the board or the association if the content in the minutes is limited.
The second and evolving view is that the minutes and supporting materials also provide the documentation that the fiduciary duties of the board members were met in the decision process. Without such documentation, the minutes cannot refute an allegation that the board acted in an arbitrary and capricious manner without proper exercise of fiduciary duty. Voting records by name are important. A board member is not accountable for an action of the board that the board member voted against. The second and evolving view of comprehensive minutes is discussed in the previously-referenced paper, Fiduciary Responsibility of Association Directors: Practical Application of Legal Theory at [http://www.hoa-law.com/publications/fiduciary-responsibility-of-association-directors.shtml].
I support this second view. Board members are elected by the members. Members have a right to know how they are being represented in board decisions, and that includes how each member voted on each motion. It is called accountability of those elected. Roll call votes are commonplace at all levels of government. If a board member wants to abstain from voting because he/she might be held accountable, then he/she should resign.
This post concerns good practice and accountability of board members to the members, not liability under the law. It is poor policy to use only the minimum requirements under the law for governance, management, administration and operation of a POA. Clearly, a board member should be accountable for any action the board member voted for and not be accountable for an action of the board which the board member voted against.
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Copyright 2009 © Donald L. Nordeen. All Rights Reserved. See Copying Posts on This Weblog.
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2008 Jul 28
I find Don's discussion to be of tremendous help. If you are talking about this subject with a group of different minded folks that take a varied slant on the subject, you find the waters get muddied by some many different viewpoints. That was exactly the case on HoaTalk and this article really give a good overview of the subject and pulls the conversation back to the main subject. The measures that may need to be taken to get each association on target is still dependent on who is pulling the strings at the moment. But if those concerned would take time to read this they would maybe have a more comprehensive understanding of the problem and some of the difficulties that can arise if you don't mind the store. Excellent job.
Robert Robertson
Posted by: Robert Robertson | 2009.07.28 at 19:28