Governance of POAs

Discussion Concerning Meeting Minutes

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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• Key Words:  • Attorney Issues;  • Fiduciary Duty;  • Governing Documents;  • Nonprofit Corporation Acts;  • POA Board of Directors Issues;  • POA Governance;  • POA Members' Rights;  access to records;  access;  accountable;  arbitrary and capricious;  arbitrary;  board of directors;  breach of fiduciary duty;  business judgment rule;  capricious;  closed meeting;  closed session;  duties;  duty of care;  duty of loyalty;  duty of obedience;  duty to act;  duty;  election;  executive session;  fiduciary;  fiduciaries;  fiduciary duties;  fiduciary duty;  Governance of Not-for-Profit Organizations;  governance;  governing documents;  governing;  grievance;  handbook;  harass;  harassment;  HOA abuse;  HOA ombudsman;  HOA;  home owners association;  home owners associations;  homeowners association;  meeting;  members' rights;  Michigan;  Non-profit Corporation Act;  non-profit corporation;  Nonprofit Corporation Act;  nonprofit corporation;  open meeting;  POA members' rights;  property owners association;  property owners associations;  prudent person;  public policy;  trustee; 

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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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Statement of Rights

2006 October 15
Last update:  2009 Jan 22.  See History for brief descriptions of changes and updates. 

    The most important concept in legislation concerning Common Interest Developments (CIDs) and Property Owners Associations (POAs) is the definition of the rights of owners of property in a CID who are also members of the governing POA.  It is the owners who provide all of the money through their purchase of property and ongoing payment of annual and special assessments for the CIDs and the function of the POAs. 

    The term, Statement of Rights, is used rather than Bill of Rights [footnote 1] to give deference to the federal Bill of Rights.  The definition of rights in the state constitutions is typically called a Declaration of Rights.  Much of the literature on this subject refers to Homeowners Bill of Rights. 

    The continuation of this post is a Statement of Rights for owners/members in a CID/POA.  Combined with the notes and comments, this Statement of Rights basically defines the content for CID/POA law for mature CIDs/POAs.  Your suggestions, recommendations and concerns are requested and are welcome.  Just add a comment.  Thanks. 

Don Nordeen
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Footnote 1 — Bill of rights is over-used, apparently to claim increased importance.  Consider a few examples of claimed bills of rights:  Library Bill of Rights, DigitalConsumer.org Bill of Rights, Academic Bill of Rights, Bill of Rights for Scientists and Engineers, Donor Bill of Rights, Patients' Bill of Rights, another Academic Bill of Rights,  Consumer Bill of Rights and Responsibilities in the Health Care Industry, another Consumer's Bill of Rights, Mortgage Consumer Bill of Rights, Cable Consumer Bill of Rights, ... .  There are literally thousands and thousands.  <Use your browser's back button/arrow to return to previous location>

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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 Jan 23 — Added more information on and references to democratic principles
  • 2009 Jan 17 — Additional information about an office of ombudsman and/or equivalent and use of specific courts for resolution of various issues
  • 2009 Jan 16 — Further editing on prohibiting fines by the POA and use of courts. 
  • 2009 Jan 15 — General editing
  • 2009 Jan 14 — Edited language concerning the meaning of "amend" and included reference to NC Supreme Court opinion in Armstrong v. Ledges which limits the scope of amendments to the CC&Rs in Rights #5, #7 and #9. 
  • 2009 Jan 13 — added new Right #3 on limitations of CC&Rs and associated notes and justification
  • 2009 Jan 12 — added text to Right #1 to allow exceptions to preservations of rights under the federal and state constitutions and to extend rights to federal and state laws
  • 2008 Sep 28 — added note that TUPCA is no longer active
  • 2007 Mar 09 — The explanation for Right #1 edited to include more discussion on the balance that must be struck between strict application of individual rights and common interests.
  • 2006 Oct 21 — Right #10 edited by add and delete language to show right with and without fines that may or may not be constitutional.
  • 2006 Oct 15 — Initial Post
• Links:  Statement of Rights at [http://swagman.typepad.com/poa_governance/2006/10/statement_of_ri.html]
• Key Words:  • Legislation, CID & POA Model & Content; • Legislative Issues & Proposals; • POA Governance; • POA Board of Directors Issues; • POA Members' Rights; • Private Government; access to records; ADR; alternate dispute resolution; alternative dispute resolution; annual meeting; arbitrary; arbitrary and capricious; Armand Arabian; attorney; attorney client privilege; attorney general; attorney obligation; audit; bill of rights; board of directors; board of trustees; board of stewards; CC&R; CC&Rs; closed meeting; closed session; common interest community; common interest development; community association; Covenants Conditions and Restrictions; democracy; democratic; dispute; dispute resolution; executive session; fair election; freedom of information; GAAP; governance; governing documents; Homeowner Bill of Rights; homeowners associations; land development; Legislation, CID & POA Model & Content; legislative issues & proposals; meeting; members' meeting; members' rights; model act; nonprofit corporation; non-profit corporation; obligation; ombudsman; open meetings; planned communities; planned unit development; POA governance; POA members' rights; POA problems; POAs, general; preservation; preservation fund; private government; property owners association; property rights; proxies; proxy; proxy vote; proxy voting; public policy; reference materials & papers; reserve; reserve fund; special meeting; statement of rights; transparency; trustee; 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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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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Ombudsman for Florida Condominiums

2005 October 03
Last update:  2005 Jun 07.  See History for brief descriptions of changes and updates.  

    In 2004 in response to numerous complaints from individual property owners in property owners association, the Florida legislature enacted a series of reforms to the Florida HOA law.  One of these reforms was the establishment of the Office of Ombudsman to handle complaints from individual condo owners. 

    The Ombudsman for Condominiums was appointed in 2004 December.  The continuation of this post highlights a few of the findings in the Condominiums Ombudsman's Report for 2005 Second Quarter.  Also included are internet links to other quarterly reports. 

Don Nordeen
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• History: 
  • 2005 Oct 03 — Initial Post
  • 2006 Jun 06-07 — added information that then-current ombudsman was terminated and replaced
• Links:  Ombudsman for Florida Condominiums at [http://swagman.typepad.com/poa_governance/2005/10/ombudsman_for_f.html]
• Key Words:  KeyWords

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Letter of Engagement by Attorney

2005 September 10
Last edit:  2008 Nov 15.  See History for brief descriptions of changes and updates. 

    Do you understand the role of a POA's attorney(s)?  Who is the client?  What information between the attorney and the POA should be privileged?  To whom?  Who should decide?

    What should you do if there is a disagreement with an interpretation of the governing documents?  You believe the plain language in the governing document is clear?  The board has a different interpretation and claims that their interpretation is made by the POA's attorney.  (added 2008 Sep 28)  But the board as agent provided the instructions to the attorney and provided the documents and other information to be used in the attorney's opinion.  How should this be resolved?  Should you have access to the attorney's letter containing the interpretation and the analysis on which the opinion is based?  Should you have access to the instructions from the POA to the attorney that resulted in the opinion?

    Suppose a proposed amendment to the bylaws is represented as having the approval of the POA's attorney.  Should you be able to question the expertise of the attorney to recommend such an amendment?  Many of the same questions as in the above paragraph are also applicable. 

    The continuation of this post discusses these considerations and proposes that a letter of engagement be written by the attorney (added 2008 Sep 28)  But the board as agent provided the instructions to the attorney and provided the documents and other based on the above and other considerations defined by the POA and approved by members to address these and other issues in the attorney-client relationship and that the letter be available to members. 

    Your comments and questions on this important matter are encouraged.  Members should not assume that attorney-client relationship will serve their interests. 

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:  Changes are usually identified in the text with the date which facilitates searching by date.
  • 2008 Nov 15 — added/edited discussion that legal opinions are not singular or unique, and that some uncertainty is inherent but can be reduced by good procedures
  • 2008 Sep 28 — added discussion to better ensure that legal opinions are in the interests of the POA
  • 2008 Apr 20 — added discussion of standards for legal advice
  • 2007 Oct 18 — added introduction for the standard for legal advice from POA's attorney to represent all the interests inherently involved
  • 2007 Oct 13 — added further discussion of the standard for legal advice from POA's attorney to represent all the interests inherently involved
  • 2006 Sep 24 — added discussion of the standard for legal advice from POA's attorney to represent all the interests inherently involved
  • 2006 Sep 10 — Initial Post
• Links:  Letter of Engagement by Attorney at [http://swagman.typepad.com/poa_governance/2005/09/letter_of_engag.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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