Minutes Can Make The Difference – Taking Proper HOA Meeting Minutes

October 22, 2011

To know where you’re going, you have to know where you’ve been.  This famous saying is all too applicable to HOAs where institutional memory can be as short as the terms of board members and boards can unwittingly address the same issues over and over again.  This is one reason why minutes are so valuable.  Unfortunately, a common problem we lawyers see is improperly prepared minutes, or worse, no minutes at all.

Perhaps the most important thing to understand about keeping proper minutes is that minutes are the record of the official actions taken by the board or the members and that an official action requires a vote.

What should minutes look like?

Anyone reading the minutes should be able to easily understand, at a minimum, what actions were taken and how they were approved. There is no hard and fast rule regarding the level of detail to be included in minutes, but minutes should reflect what was done, not what was said.  Minutes should not record every detail or statement said at the meeting and they should not reflect conversations. However, there should be enough information to make the minutes useful when they are used for reference or offered as evidence that an action was properly taken or that directors fulfilled their fiduciary duties.  Boards and secretaries tasked with recording or approving the minutes must understand the purpose and eventual use of minutes, and then use their best judgment about the degree of specificity provided in the minutes.

Boards should also be mindful of how they handle confidential or sensitive information. For example, if the board holds an executive session to discuss confidential or sensitive matters, the minutes of the meeting should indicate that the board met in executive session and the topic of the discussion, but the specifics would likely be confidential and appear only in a set of confidential-to-the-board minutes or other notes.  A separate recordkeeping system should be established for such confidential information to easily distinguish it from records that a member would otherwise be entitled to view.

What should minutes not look like?

Minutes should not record discussions or contain owner comments and should never be a transcript of every statement made by directors and others. Doing so creates potential defamation claims, becomes evidence for other claims against the board and the association, and can dissuade potential purchasers and lenders who may believe that a negative issue is much more serious than it really is.  Minutes should reflect decisions and reasons for those decisions, not discussions or specific conversations.

 At a minimum, board meeting minutes should include:

  1. Name of the association (always use the exact legal name).
  2. Date, time, location and type of meeting (regular, special, emergency, executive session).
  3. Names of directors in attendance and directors not in attendance, including the office they hold, if any (president, secretary, etc.), and names of guests in attendance who were invited to speak to the Board (contractors, attorney, accountant, etc.).  Members in attendance should not be listed.
  4. Whether a quorum was established.
  5. Any board actions (e.g., approvals, delegations of authority, directives).  It’s not necessary to show the names of those voting in favor, abstaining and in opposition to a motion, but it’s sometimes not a bad idea, especially to show those dissenting, in order to limit personal liability for the consequences of an action they disagree with.  Also include any actions (decisions, votes) taken between meetings and include details documenting that proper procedure was followed.
  6. General description of matters discussed in executive session.
  7. Once the minutes are approved by the board, they should include the signature of the secretary signifying that the minutes constitute the official record and minutes of the meeting

Once approved by the board, the minutes should be signed by the secretary or other person responsible for authenticating records of the association (See Utah Code 16-6a-818(3)). By signing the minutes, the secretary is signifying that the minutes constitute the official record and minutes of the meeting and the votes by the board occurred as recorded in the minutes.  Minutes then become proof that a vote occurred as recorded.

The official minutes should be included in the minutes book and should also be scanned and kept as electronic files, as a form of backup, among other reasons.

Additional Suggestions:

  • Include alternatives considered for important decisions to show diligence and reasonable care.
  • Consider attaching reports given to the board (so long as they may not be misconstrued to be prejudicial to the organization or to the board).
  • Record recusals from discussions and abstentions from voting;
  • Prepare a list of action items separate from the minutes, what people commit to do.
  • Include whether notice was given and/or attach the notice of the meeting or waivers of notice to the minutes.  That way all the documents relevant to noticing the meeting are also in the minute book.
  • Use a format that clearly indicates when a board action has been taken (e.g., “Resolved,” “Action”).

It’s crucial that minutes are prepared so as to document actions of the board now but without creating problems in the future.  Additionally, with the turnover experienced in association boards, it is critical to have good, complete but concise minutes so that future boards do not find themselves “reinventing the wheel” on issues that have already been addressed.

You can find sample minutes here and a sample list of action items here.

Curtis G. Kimble

Making Effective HOA Board Decisions

September 19, 2011

Is your board being pulled in many different directions by competing needs and demands?  They key is determining where the board’s focus is most needed and deserved.  A nine-step process was developed by two community managers to help condo and HOA boards make effective decisions.  It can be found in this article (link) and it is a great process from a practical point of view, but since this is a legal blog, I’ll go ahead and give a legal take on the first step of the process.

The first step is to determine whether the immediate issue is really a problem that the association needs to be involved with in the first place.  The board will need to examine the issue and the facts, make inquiries if necessary, review their authority (remember, a homeowners association only has the authority to act given by law or its governing documents) and review their obligations (remember your fiduciary duties and the obligations imposed by the law and the governing documents).

There are many instances where deciding to do nothing at all is a valid, and sometimes the best, decision because of any of a variety of reasons.  While a board has a duty to use ordinary care to manage the property and financial affairs of the community, if a board conducts a reasonable inquiry, considers the relevant factors, and makes an informed decision in what they believe to be the best interests of the association, then even deciding to take no action at all can be a proper decision.

Let’s look at two hypothetical instances where a board failed to act:

1.     The governing documents of the Oceanview Condominium Association provide that the association and any unit owner may enforce the covenants.  Owner A complains to the board that Owner B constantly plays his music too loud, yet other adjacent unit owners are questioned and none of them have noticed such a problem, and when talking with Owner A and Owner B, it is clear there is a long history between the two.  The board decides to take no further action.

Alleged violations are often brought to a board’s attention through a complaining resident effectively seeking to have the board intercede in what is, in realty, a personal dispute between the complainer and another resident.  In such cases, a board, rather than becoming a tool of the disgruntled resident, should refrain from involving the HOA in the issue.

2.  Five members of the Oceanview Condominium Association fail to pay assessments for common expenses.  The board does not take action to enforce their obligation to pay assessments.

In the absence of other facts or circumstances, the conclusion would be justified that the board has breached its duty to use ordinary care and prudence in managing the financial affairs of the association.

The decision not to take any action is still a decision nonetheless and as such it should be noted in the minutes of a board meeting.  I recommend also including a brief statement of the inquiry, factors and/or analysis undertaken by the board in reaching its decision.  Such a step can help the board in the future in ways too numerous to explain here.

The range of power a board holds over its community’s well being and the range of decisions a board is called on to make can be significant.  Every board should have a process for making effective, well-considered and well-documented decisions.

Curtis G. Kimble

New Utah Law Versus Fiduciary Duty

March 28, 2011

Because association reserves perhaps play a more important role than any other issue, with the exception of insurance, in the long term viability of a homeowners association, I’m hard pressed to find an issue that triggers the concept of fiduciary duty more than the decision of whether or not to fund an association reserve account and in what amount to fund it.

Every board member is legally bound by a fiduciary duty to his or her association.  It is the duty to act in good faith and in the best interests of the association.  This means a board member cannot put his or her own interests before those of the association.  This duty imposed by law is a very powerful tool.  It is not taken lightly by the courts and breaching this duty subjects a board member to personal liability.

A new law was passed in Utah that is a little disconcerting to me.  It completely circumvents the tool and safeguard of fiduciary duty when it comes to association reserves.  It requires the board to present a reserve study to the homeowners at the annual meeting each year and that a simple majority of those homeowners that show up at the meeting will determine whether to fund a reserve account and the amount of the reserve account, thereby taking the decision completely out of the hands of the board.

If there’s one thing I’ve learned in my years of practice in HOA law, it’s that the individual owners don’t always have the best interests of the association in mind. It’s usually the other way around, they are concerned with their own best interests.  There’s nothing wrong with that, it’s human nature – something the folks on Capitol Hill don’t get, apparently.

As an owner of a home within an HOA myself, I personally have no interest in what the other homeowners in my HOA think about whether to fund a reserve account and in what amount to fund it.  The only individuals who are legally obligated to put the association’s best interests before their own are the members of the board.  The individual homeowners are free to put their own interests first, to be selfish and short sighted, to take the attitude that they may not live here in a few years, so why should they fund expenses ten or fifteen years down the road.  Board members are not.  They are bound by fiduciary duties to the association as a whole.  If board members breach this duty, that’s a different issue and there are remedies for that.  But, as a homeowner, I want that duty to be attached to decisions regarding funding of reserves.

As an attorney who has had to repeatedly deal with the fallout and consequences of inadequate or nonexistent reserve accounts, I hope the collective wisdom of a majority of homeowners at a meeting will allay my above concerns as this new law goes into effect.

Curtis G. Kimble

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