Governance of POAs

Request to AIP re Meeting Minutes

2009 August 20
Click on History for changes and updates.

    The continuation of this post is a request to the American Institute of Parliamentarians for a revision of the content in "What Minutes Should Contain" in their book, "The Standard Code of Parliamentary Procedure".  The request was made at the AIP website with a link to this post.  

Don Nordeen
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• Key Words:  • Fiduciary Duty;  • POA Governance;  • POA Resources;  American Institute of Parliamentarians;  communication;  fiduciary duty;  members;  meeting minutes;  Robert's Rules of Order Newly Revised;  RON

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Posts on HOA Talk

2009 May 05
See History for brief descriptions of changes and updates. 

    This writer has made a number of posts on HOA Discussions on HOA Talk which provide additional information on Governance or Property Owners Associations.  Click on HOA Discussions to access the discussions as a non-registered reader.  More privileges are provided if you sign up as a registered user. 

    The continuation of this post provides search information for the HOA Discussion Topics on which I have posted. 

Don Nordeen
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• History:  Changes are usually identified in the text with the date which facilitates searching by date.  Edits are usually noted by add and delete changes. 
  • 2009 May 05 — Initial Post
• Links:  Posts on HOA Talk at [http://swagman.typepad.com/poa_governance/2009/05/posts-on-hoa-talk.html]
• Key Words:  • Accounting Principles;  • Attorney Issues;  • Case Law, Michigan & Other;  • Common Interest Development;  • Community Associations Institute;  • Fiduciary Duty;  • Governing Documents;  • Legislation, CID & POA;  • Legislation, CID & POA Model & Content;  • Legislative Issues & Proposals;  • Nonprofit Corporation Acts;  • POA Board of Directors Issues;  • POA Governance;  • POA Members' Rights;  • POA Problems;  • POA Resources;  • POAs, General;  • Private Government;  • Reference Materials & Papers;  abuse; access; access to records; accountable; accounting; accounting principles; accounting standard; ADR; advocacy; AICPA; AICPA Audit & Accounting Guide; AICPA Audit & Accounting Guide for Common Interest Reality Associations; alternate dispute resolution; alternative dispute resolution; amendment; annual meeting; architectural committee; architectural control committee; architectural review committee; attorney; attorney client privilege; attorney general; attorney obligation; audit; bill of rights; board of directors; breach of fiduciary duty; business judgment rule; bylaws; CAI; case law; CC&R; CC&Rs; CID; CID/POA; CIDs/POAs; CIRA; client; client attorney privilege; client attorney privilege; client lawyer privilege; closed meeting; closed session; collection; common interest community; common interest development; common interest homeowners coalition; Common Interest Realty Association; community association; condo; condo ombudsman; condominium; Condominium Act; condominium association; condominium ombudsman; conflict; conflict resolution; consolidated financial statement; constitution; corrective action; Covenant; Covenants Conditions and Restrictions; CPA; declarant; democracy; democratic; depreciation; developer; developer control; development; director; directors’ obligation; disclosure; dispute; dispute resolution; due process; dues; duties; duty; duty of care; duty of loyalty; duty of obedience; duty to act; easement; election; enforcement; enforcing; engagement; engagement letter; excessive; executive; FASB; fiduciaries; fiduciary; fiduciary duties; fiduciary duty; financial statement; fine; foreclosure; freedom of information; GAAP; generic CC&Rs; glossary; governance; Governance of Not-for-Profit Organizations; governing; governing documents; grievance; harass; harassment; HOA; HOA abuse; HOA ombudsman; home owners associations; Homeowner Bill of Rights; homeowners associations; improvement; land development; law; laws; lawsuit; lawyer; lawyer client privilege; legislation; Legislation, CID & POA; Legislation, CID & POA Model & Content; legislative; legislative issues & proposals; legislature; limitations; lodging; meeting; members' meeting; members' rights; model act; model bylaws; model CC&Rs; model covenants conditions and restrictions; negligence; nonprofit; nonprofit corporation; non-profit corporation; Nonprofit Corporation Act; Non-profit Corporation Act; nonprofit GAAP; notice; obligation; oligarchy; ombudsman; open meetings; organization as client; owners' rights; planned communities; planned communityplanned unit development; POA; POA Act; POA Board of Directors issues; POA governance; POA members' rights; POA problems; POAs, general; preservation; preservation fund; Private Government; private government; problem solving; problems; property owners association; property rights; proxies; proxy; proxy vote; proxy voting; public policy; PUD; quorum; reference materials & papers; regulation; rental; reserve; reserve fund; restrictive covenantcommunity association; home owners association; homeowners association; property owners association; resources; restriction; restrictive covenant; roles and responsibilities; rule; rules and regulations; special meeting; statement of rights; subdivision; transparency; trustee; unreasonable; vacation rental; vote; voting

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Should a Legal Opinion be Believed?

2009 April 18
Last edit:  2009 May 12.  See History for brief descriptions of changes and updates. 

    The title asks a very important and difficult question for members and board members of owners associations.  Contrary to a common perception, legal opinions are not unique.  A wide range of legal opinions can typically be written on a legal question depending upon the facts and documents provided and the direction from the agent of the client.

    The title is not a criticism of attorneys.  Rather, the post is an analysis of what attorneys do for clients and what that means for board members and individual members of owners associations.  A principal conclusion is that members should be very skeptical of advocacy legal opinions by attorneys for owners associations. 

     The continuation of this post discusses the issues involved and provides recommendations. 

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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• Key Words:  Attorney Issues;  Fiduciary Duty;  Governing Documents;  POA Members' Rights; abuse; access; access to records; advocacy; agent; case law; client; engagement letter; model act

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Definition of "Full and Accurate"

2007 February 03
Last edit:  2009 Jan 05.  See History for brief descriptions of changes and updates. 

    The term "full and accurate" is in widespread use with suffixes such as record, disclosure, statement, accounting and the like.  However, an assertion that its meaning is in the "eye of the beholder" is not uncommon suggesting that the term does not have an objective definition. 

    The continuation of this post is my research regarding the definition and use of the term.  My findings are that the term is in widespread use without any additional definition indicating that the common and ordinary meaning of the words provides an objective definition. 

Don Nordeen
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• History:  Changes are usually identified in the text with the date which facilitates searching by date.
  • 2009 Jan 05 — link to definition of "full and accurate record" added
    
  • 2007 Feb 03 — Initial Post
    
• Links:  Definition of "Full and Accurate" at [http://swagman.typepad.com/poa_governance/2007/02/definition_of_f.html]
  
• Key Words:  • Fiduciary Duty; • Governing Documents; • POA Governance; • POA Members' Rights; democratic; duties; duty; governance; members' meeting; POA governance; POA members' rights; transparency

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Meetings, Information, Proxies and Voting

2007 January 10
Last edit:  2009 Jan 23.  See History for brief descriptions of changes and updates. 

    Election laws in most states are comprehensive, and are undergoing change as problems and abuses are discovered.  No part of democratic principles is more fundamental than guaranteeing the right the vote. 

    The voting and election laws for property owners associations are minimal.  In most states, they probably have evolved from corporation law to nonprofit corporation law to laws specific to property owners associations (POAs) in some states.  In Michigan, the voting and election provisions are in the Michigan Nonprofit Corporation Act, and are minimal.

    The continuation of this post discusses the various considerations, the potentials for abuse, the need for a fair method for informed absentee voting, and a recommendation for a "two-meeting" process (similar to the concept of three readings) to ensure fair and informed voting. 

Don Nordeen
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• History: 
  • 2009 Jan 23 — Text from Proxies and Proxy Voting added as new section
  • 2007 Jan 10 — Initial Post
• Links:  Meetings, Information, Proxies and Voting at [http://swagman.typepad.com/poa_governance/2007/01/meetings_inform.html]
• Key Words:  • Fiduciary Duty; • Governing Documents; • Legislative Issues & Proposals; • Michigan; • Nonprofit Corporation Act; • POA Governance; • POA Members' Rights; • Private Government; democracy; democratic; meeting; members' meeting; members' rights; Michigan; proxies; proxy; proxy vote; proxy voting; vote; voting

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Outline of Dispute Resolution Recommendations

2006 August 13
Last edit:  2008 Dec 27.  See History for brief descriptions of changes and updates. 

    This post provides an outline of dispute resolution recommendations for common interest developments (CIDs) and property owners associations (POAs).  The recommendations provide practical, effective, certain, timely and low-cost means of enforcement and dispute resolution for individual POA members. 

    This is work in progress.  It is being posted at this time for comment and suggestions.  Most of the background is well developed and shows the need for reform.  The concepts of Enforcement Considerations and Dispute Resolution Considerations are closely linked.  Various alternatives for reform for listed with a few notes regarding each.  Previously, the outline in this post was included in the post on Dispute Resolution Considerations. 

Don Nordeen
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• History: 
  • 2006 Aug 13 —Initial Post
    
  • 2006 Aug 17 —added alternative of ordinance to use the municipal court for dispute resolution concerning alleged violations of CC&Rs
  • 2006 Aug 26 —added information concerning pattern of litigation involving POAs
  • 2008 Sep 29 — internet links checked and updated
  • 2008 Dec 27 — addition recommendation for ombudsman office in Office of Attorney General and recommendation on allocation of total legal costs
    
• Links:  Outline of Dispute Resolution Recommendations at <http://swagman.typepad.com/poa_governance/2006/08/outline_of_disp.html>
  
• Key Words:  • Attorney Issues; • Common Interest Development; • Fiduciary Duty; • Governing Documents; • Legislation, CID & POA Model & Content; • Legislative Issues & Proposals; • Michigan; • POA Board of Directors Issues; • POA Governance; • POA Members' Rights; • Private Government; abuse; ADR; alternate dispute resolution; alternative dispute resolution; attorney; common interest community; common interest development; community association; complaint; democracy; democratic; dispute; dispute resolution; enforcement; governance; home owners association; homeowners association; Legislation, CID & POA Model & Content; legislative issues & proposals; ombudsman; planned communities; planned development; planned unit development; private government; problem solving; property owners association; public policy; statement of rights

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New Jersey Twin Rivers Ruling

2006 February 10
Last update:  2007 Aug 11.  See History for brief descriptions of changes and updates. 

• Use your browser's search command to search for the date in the above form, or just the year and month to search more broadly, to locate text that has been added or updated. 

    A ruling by the New Jersey Court of Appeals in the Twin Rivers case was issued on 2006 Feb 7.  (added 2007 Aug 05)  The NJ Supreme Court (full opinion at Committee for a Better Twin Rivers v. Twin Rivers Homeowners' Association (A-118-122-05)) overturned the Court of Appeals, or maybe only part, and added a number of general considerations/requirements concerning owners associations.  This may well be a landmark case in that it is a first to rule that certain constitutional rights, namely free speech and expression, extend to common interest developments and to property owners associations (POAs). 

    The case was brought by a few members of the Twin Rivers Association against the Twin Rivers Association.  The plaintiffs were assisted by the Rutgers University Law Center and the New Jersey chapter of the ACLU.  Based on information available on the internet, the combined legal costs (plaintiffs and defendants) may well be in excess of $500,000.  Along with the five-year court battle, the high cost illustrates why many of the fairness and justice issues for POA members are not litigated.  Individual members of property owners associations just don't have that kind of money, and consequently actions of boards of directors remain unchecked.

    The continuation of this post provides further discussion and links to various articles and other information on the case. 

Don Nordeen
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• History:  Changes are usually identified in the text with the date which facilitates searching by date.
  • 2006 Feb 10 — Initial Post
  • 2006 Mar 3, 16, 25, and 26
  • 2006 Apr 6 — updated URL for opinion updated. Added text concerning expressive rights from opinion.
  • 2006 May 5 — link to discussion forum on this lawsuit added.
  • 2006 May 8 — link to law review article on this lawsuit added.
  • 2006 Jun 12 & 13 — added brief discussion and links to articles concerning appeal to the NJ Supreme Court and related legislative activity
  • 2006 Nov 04 — link to Mr. Staropoli's post on the AARP Amicus Brief added
  • 2006 Dec 30 — added discussion of the case that was submitted to a law weblog, and and a link to the related news article
  • 2007 Jan 14 — added recent news articles and link to Mr. Staropoli's post summarizing the case
  • 2007 Feb 10 — added link to New Jersey law blog post
  • 2007 Aug 05 — added several links concerning the decision by the NJ Supreme Court
  • 2007 Aug 11 — added comments re need to address legislatively
• Links:  New Jersey Twin Rivers Ruling at [http://swagman.typepad.com/poa_governance/2006/02/new_jersey_twin.html]
• Key Words:  KeyWords

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Obligations and Authorities for the Board of Directors

2006 January 08
Last update: 2007 Feb 08. See History for brief descriptions of changes and updates. 

    Typically, the nonprofit corporation law and the governing documents in common interest development (CID) managed by a property owners association (POA) concentrate the powers and authorities with the board of directors.  When "things go wrong", an inevitable and predictable division and distrust develop between the board and the members.  The problems the POA then has are the direct result of the actions of the boards of directors.  The decisions and actions are those of the board or recommendations of the board approved by the members.  One can argue that members are not given full and accurate information, but regardless the actions taken were those recommended by the board. 

    There are many principles for democratic organizations which include:  rule of law, separation of powers, limited powers in any single group, independent judiciary, due process, independent press, fair and disciplined processes for elections and votes by members, freedom of information, open meetings, ... . 

    Part of a philosophy of "Building Community into the Community" is for the members to limit the powers of the board of directors (stewards is a better name) with more involvement and decisions by the members.  Rather than a broad authority for the board "to manage the affairs" of the associations (which attorneys at the board's request will gladly interpret to mean the board has virtual total power), the bylaws and other governing documents should define specific and enumerated Obligations and Authorities. 

    The continuation of this post is a straw man for defining limited Obligations and Authorities for the board.  The limitations also make the task of being a board member easier, which may create a willingness on the part of more members of the POA to serve the community. 

    Please provide your thoughts and ideas. 

Don Nordeen
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• History: 
  • 2006 Jan 08  — Initial Post
    
  • 2007 Feb 08 — general description of the limited authorities for the board added
• Links:  Obligations and Authorities for the Board of Directors at <http://swagman.typepad.com/poa_governance/2006/01/obligations_and.html>
  
• Key Words:  KeyWords

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Fiduciary Duty

2005 November 30
Last update: 2006 Mar 01. See History for brief descriptions of changes and updates. 

     This post is work in progress, and may be nearly completed.  The continuation now contains excerpts from the Michigan Nonprofit Corporation Act, excerpts from the ABA Model Nonprofit Corporation Act of 1987, excerpts from case law, one paper on the subject, and numerous references available on the internet.  At this time, I believe that most of the concepts are in the continuation. 

    Your questions and comments are welcome. 

Don Nordeen
   
P. S.  Please be advised that I am not an attorney.  This post is concerned with governance and management issues arising out of attorney-POA relationships.  Any analyses or opinions expressed or inferred are those of a lay person and are not legal advice.
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• History: 
  • 2005 Nov 31 — Initial Post/li>
  • 2006 Jan 10 — added discussion and reference that courts tend to apply fiduciary duty for business corporations to nonprofit corporations
    
  • 2006 Mar 01 — Added excerpts concerning fiduciary duty from Michigan Nonprofit Corporation Act and the Revised ABA Model Nonprofit Corporation Act of 1987, and revised other discussion. Use your browser's search on the date to identify the added/revised text.
• Links:  Fiduciary Duty at <http://swagman.typepad.com/poa_governance/2005/11/fiduciary_duty.html>
  
• Key Words:  fiduciary duty KeyWords

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Analysis of POA Problems

2005 September 14
See History for brief descriptions of changes and updates. 

    Work in progress (posted for your interest and comments)

Don Nordeen
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• History: 
  • 2005 Sep 14 — Initial Post
• Links:  Analysis of POA Problems at [http://swagman.typepad.com/poa_governance/2005/09/analysis_of_poa.html]
• Key Words:  KeyWords

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Attorney Obligations to Third Parties

2005 September 10
See History for brief descriptions of changes and updates. 

Derivative Liabilities a Danger
Eye on Ethics
Arizona Attorney
2005 June

Introduction

    The above title is from the Arizona Attorney, a publication of the Arizona Bar Association.  The article follows this introduction. 

    Have you ever thought that your POA’s attorney should be responsive to your interests since you are affected by the attorney’s advice and recommendations?  Are you a client since you, as a member of your POA, are paying your part of the attorney’s fees through your dues?  Since you are paying for the advice and recommendations, shouldn’t you be able to read the advice and recommendations?  Shouldn’t the advice and recommendations include a description of the facts and circumstances on which the advice was developed? 

    A partial answer to the above questions is that the board could act immediately to make all board/attorney communications available for inspection/copying to the members, with one important temporary exception.  Is it in the interest of the Association to do so?  Yes.  The temporary exception is for communications on any matter concerning negotiation or litigation while that matter is in progress.  Once the matter has been completed, then there is no reason for the information to be privileged. 

    Is the attorney obligated obligated to so advise the board?

Don Nordeen
   
P. S.  Please be advised that I am not an attorney.  This post is concerned with governance and management issues arising out of attorney-POA relationships.  Any analyses or opinions expressed or inferred are those of a lay person and are not legal advice.
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• History: 
  • 2005 Sep 10 — Initial Post
• Links:  Attorney Obligations to Third Parties at [http://swagman.typepad.com/poa_governance/2005/09/attorney_obliga.html]
• Key Words:  KeyWords

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Organization is the Client

2005 July 02
Last update:  2009 Jan 12.  See History for brief descriptions of changes and updates. 

• Search with updated date as shown to identify added/revised text. 

    This is "Work in Progress."  Your comments and questions are invited for consideration in drafting this post.  If there are any errors, please advise.

    Who is the client?  the board?  the property owners association (POA)?  each and every member?  members collectively?  Important questions.  

    (Added 2005 Sep 09)  My tentative conclusion is that the retainer for an attorney for a POA should include a "letter of engagement" that defines how all of the attorney-client issues will be handled for the POA, the POA board, and the POA members.  This requirement should be a provision in the appropriate governing document, since the POA should speak through its governing documents on such policy matters.

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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• History: 
  • 2009 Jan 12 — added discussion concerning difficulties for ensuring that attorney represents the Association as client
  • 2008 Oct 04 — revised discussion of applicable Michigan case law
  • 2008 Jan 24 — added paragraph citing a Michigan Court of Appeals case
  • 2006 Sep 24  — added discussion of standard for legal advice from POA's attorney  to represent all the interests inherently involved
  • 2005 Nov 12 — added reference to paper, "Attorneys should represent entire  association, not just the board"
  • 2005 Oct 23 — added discussion re attorney relationships for POAs
  • 2005 Sep 21 — added discussion that Florida and Virginia laws in effect require  attorney-client privilege to be waived
  • 2005 Sep 09 — Post date changed with addition of paragraphs concerning highest authority, attorney-client  privilege and other subjects
  • 2005 Jul 02 — Initial Post
• Links:  Organization is the Client at [http://swagman.typepad.com/poa_governance/2005/09/organization_is.html]
• Key Words:  KeyWords

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