By Curtis G. Kimble.
You and the rest of the board have worked hard to communicate the importance of a renovation project to the members and a special assessment is desperately needed to fund the project. But, the approval of the members is needed to pass the special assessment. You know your CC&Rs require a majority of members to vote yes to approve a special assessment. But, you’re not sure if it’s a majority of all of the members, or a majority of those that actually vote, or of those that show up at the meeting.
The language in CC&Rs and bylaws specifying how many votes are needed to pass a proposed action by the members, such as a special assessment or amendment to the CC&Rs, can be difficult for even experienced homeowner association professionals to understand. CC&Rs usually require that at least one of the following three thresholds be met for a vote to pass: (1) a percentage of the total outstanding voting rights of the association, (2) a percentage of those votes that are actually cast at a meeting, or (3) a percentage of those members present at a meeting. Here are examples of what those provisions may look like in CC&Rs. See if you know what they mean.
1. “This declaration may be amended if members holding at least two-thirds of the total votes of the Association approve the amendment.”
This one should be easy. But, it can be easy to forget that this is requiring two-thirds of the total votes of the association, and not just two-thirds of the members that show up at a meeting. So, if an HOA has 100 members with one vote each and a meeting is held to vote on a proposed amendment to the CC&Rs where 50 members attend, how many votes are needed for the amendment to pass? If you said 67, you’re right (if you said “more than they’ll be able to get at that meeting, you’re also right).
How about the same example as above, except in a condominium association where half the members have a .75% undivided ownership interest in the common area, and the other half have 1.25%? How many members need to vote yes for the amendment to pass? If you said it doesn’t matter how many members vote yes, what matters is whether two-thirds of the total voting rights of the association vote yes, then you’re correct.
In a condominium, the law requires voting rights of a member to be directly tied to the undivided ownership interest of the member (Utah Code Section 57-8-24). This means that if a member has a .75% undivided interest in the common area, that member has a .75% vote in any matter put before the association membership. In this situation, the association needs the yes votes to add up to 66.66…% of the total voting power of the association for the vote to pass.
2. “A special assessment shall require the approval of a majority of the members voting in person or by proxy.”
Taking the example above where the HOA has 100 members with one vote each and a meeting is held to vote on a proposed special assessment where 50 members are represented (39 in person and 11 by proxy), how many votes are needed for the special assessment to pass? If you said “Well Curtis, we can’t tell until you tell us how many members actually voted,” then you’d be correct. This provision requires approval from a majority of the members that actually cast a vote. If 45 votes are actually cast, how many votes are needed to pass the assessment? 23 (more than half of the 45 votes cast).
What about this same situation but in the condominium association mentioned above where the members have percentage interests that aren’t equal? Do you need a majority of the percentage-votes that are cast, or a majority of the actual members that cast a vote? You need a majority of the percentage-votes that are cast, regardless of how many actual people (members) vote. Remember, by law, membership voting rights shall be available to the unit owners according to their respective percentage interests (regardless of what the CC&Rs say).
3. “A special assessment shall require the approval of a majority of the members represented in person or by proxy.”
Did you spot the difference between this and number 2? This one requires approval of a majority of the members represented at the meeting, rather than a majority of just those that actually cast a vote. So, in the example above with 100 members where 50 members are represented at a meeting (39 in person and 11 by proxy) and 45 votes are actually cast, how many yes votes are needed? If you said 26, you’re correct (a majority, or more than half, of 50).
If the voting language in your CC&Rs or bylaws isn’t clear, be sure the board contacts the association attorney for clarification before the association relies on a misunderstood requirement.