NEW LAWS RAISE ISSUES: ELECTION OF HOA DIRECTORS Part 2

New laws raise questions about the election of HOA directors, including:  (1) is an association required to permit nominations from the floor?; and (2) if an association is required to permit nominations from the floor, are votes cast by absentee ballot counted?

If Floor nominations Occur, Then

can absentee ballots be counted?

For some homeowners associations, the governing documents require that a nominating committee nominate candidates for election to the board of directors.  In such cases, associations provide ballots to their members in advance of the election so owners can cast votes without the necessity of attending such a meeting in person.  New HOA laws raise the question of whether votes an owner casts by absentee or electronic ballot for an election should be counted if nominations from the floor are made.

This issue arises because Section 209.00592 of the Texas Property Code is capable of at least two interpretations.  That section provides as follows:

(b)  An absentee or electronic ballot:

(3) may not be counted on the final vote of a proposal if the motion was amended at the meeting to be different from the exact language on the absentee or electronic ballot.

                (c) A solicitation for votes by absentee ballot must include:

                                (3) the following language: ‘By casting your vote via absentee ballot you will forgo the opportunity to consider and vote on any action from the floor on these proposals, if a meeting is held.  This means that if there are amendments to these proposals your votes will not be counted on the final vote on these measures.’

Interpretation One:  If the slate of candidates changes at the meeting due to nominations from the floor, the absentee ballot cannot be counted because the proposal to elect directors was amended.  In other words, the pool of candidates from whom the absentee voter chose is not the same pool of candidates considered by the voters at the meeting.  Perhaps the absentee voter would have voted for different candidates if he or she had attended the meeting in person. 

Interpretation Two:  Notwithstanding the addition of candidates due to floor nominations, the absentee ballot is counted because the voting restriction in the statute only applies to a “proposal” i.e. not a vote for an election.  An argument exists that this provision is intended to target a vote other than for election of directors, such as a proposed amendment to the Declaration or a special assessment.  If a motion is made from the floor to change the language of the proposed amendment or the terms of the special assessment, the absentee ballot should not be counted because the terms of those measures have changed.  As such, the vote cast by the absentee voter was for a different proposal that is no longer being considered by the association.  No Texas court has addressed this issue yet, and Riddle & Williams is not certain how a court would resolve the issue.  If your association is presented with this potential issue, Riddle & Williams suggests that you contact your legal counsel for guidance. 

This article is not intended to provide legal opinions or substitute for the advice of legal counsel.  The information contained herein encompasses proprietary and confidential information of Riddle & Williams, P.C. and shall not be used, disclosed or reproduced, in whole or in part, for any purpose, and the information contained herein shall not be furnished to others without the prior written consent of Riddle & Williams, P.C. 

Dean Riddle is a principal of Riddle & Williams, LLP, specializing in HOA law.  He has practiced law in Texas for 27 years.

NEW LAWS RAISE ISSUES: ELECTION OF HOA DIRECTORS

New laws raise questions about the election of HOA directors, including:  (1) is an association required to permit nominations from the floor?; and (2) if an association is required to permit nominations from the floor, are votes cast by absentee ballot counted?

WHAT ABOUT FLOOR NOMINATIONS FOR DIRECTORS?

With respect to elections, does a provision in a dedicatory instrument that prohibits nominations from the floor, and instead requires candidates to be nominated in advance of an election, impermissibly “restrict” an owner’s right to run for the board?  Section 209.00591(a) of the Texas Property Code provides:

Except as provided by this section, a provision in a dedicatory instrument that restricts a property owner’s right to run for a position on the board of the property owners’ association is void (emphasis supplied).

The statute does not define the term “restricts.”  Riddle & Williams believes there are two possible interpretations of this provision. 

Interpretation One:   A provision that prohibits floor nominations does not restrict an owner’s right to run for the board because such a provision does not, on its face, seek to restrict an owner from running for the board.  Rather, such a provision sets forth a procedural mechanism with the purpose of fostering orderly elections.  For example, prior to the effective date of this statute, it was common for associations to enforce provisions in their dedicatory instruments that prohibited owners who were not in good standing from running for the board.  If the statute is directed at those types of provisions, which prevent certain types of owners from running for the board, there is an argument that provisions in dedicatory instruments that merely regulate the election process, such as those that prohibit floor nominations, do not fall within the coverage of this statute.  However, the effect of such seemingly neutral, innocuous provisions is that an owner who fails to be nominated by a nominating committee could be prohibited from running from the board.   

Interpretation Two:  At least two arguments can be made that such provisions do impermissibly restrict an owner’s right to run for the board.  First, the statute identifies two specific situations where an association can restrict an owner’s right to run for and serve on a board, neither of which addresses the issue discussed in this article: (1) where a board member has been convicted of a felony or a crime involving moral turpitude; and 2) during a period of declarant control, where the declarant may appoint and remove board members other than those board members elected by the owners.   Neither of these exceptions to the general rule addresses the issue discussed in this article.  As such, there is an argument that an owner’s failure to comply with a provision in a dedicatory instrument that requires him or her to submit his or her name to the association as a candidate in advance of an election is not a statutorily recognized basis on which to prevent an owner from running for the board. 

Second, the plain and common usage of the term “restrict” arguably dictates that no limitations are permitted on an owner’s right to run for the board.  Section 311.011 of the Texas Government Code provides that when interpreting statutes such as the one at issue: “Words and phrases shall be read in context and construed according to the rules of grammar and common usage.”  Webster’s New College Dictionary (3^rd ed.) defines the term “restrict” as follows:

restricts.  To hold within limits:   CONFINE.

Based on the plain language of the statute and the common usage of the term “restrict,” there is an argument than any limitation on an owner’s right to run for the board (except those limitations that are expressly authorized in the statute) are prohibited.  If the Texas Legislature wanted to prohibit only provisions that facially “prohibited” or “disqualified” owners from running for the board, it could have chosen those terms.  In fact, Section 209.0059 of the Texas Property Code, which immediately precedes Section 209.00591, uses the word “disqualify” in prohibiting provisions which would disqualify an owner from voting.  The use of the word “restrict” in Section 209.00591 rather than the word “disqualify” used immediately above it would seem to indicate that the Texas Legislature intended for the meaning of “restrict” to be something other than mere disqualification.  Under this interpretation, the term “restricts” is a lower threshold that results in the invalidation of provisions that in any way attempt to limit an owner’s right to run for the board.             

No Texas court has addressed this issue yet, and Riddle & Williams is not certain how a court would resolve the issue.  If your association is presented with this potential issue, Riddle & Williams suggests that you contact your legal counsel for guidance. 

This article is not intended to provide legal opinions or substitute for the advice of legal counsel.  The information contained herein encompasses proprietary and confidential information of Riddle & Williams, P.C. and shall not be used, disclosed or reproduced, in whole or in part, for any purpose, and the information contained herein shall not be furnished to others without the prior written consent of Riddle & Williams, P.C.

Dean Riddle is a principal of Riddle & Williams, LLP, specializing in HOA law.  He has practiced in Texas for 27 years.

Outside Forces Factor in HOA’s Planning

Planning for the Future

HOA leaders work with town to plan for growth and community improvements

Our community near the lake lies in the path of growth and change, like many other associations in our area.  Besides managing the HOA day-to-day, the BOD has a number of situations on our radar that may develop in the future.  Our long-range plan considers potential challenges that could affect many areas, such as these three:  the creek and pond, a retention pond, and future use of some green space.

A mostly south-bound creek flows along the eastern edge of our neighborhood before it turns west and flows through the pond, and then ultimately on to Lake Lewisville.  Most people don’t realize how the creek affects our community because it is a largely “wild,” unseen area.

The creek erosion and past trash dumping in the creek affect our pond.  At some point, a governmental agency such as the Environmental Protection Agency or the US Army Corps of Engineers could force the HOA to take some type of corrective action.

The BOD has contracted with a company to do our reserve study, something we are required to do periodically, and asked them to estimate how much we might need to set aside to fund any needed corrective action in the natural areas, such as the creek.  I doubt we’d try to keep enough for such a large project in reserve, especially when the chance of an agency requiring action is pretty low and might never happen.

As for the pond, the Town of Little Elm did our association a huge favor by fixing the very worst of the drainage, silt build-up, and flooding issues we had coming in from the creek, perhaps pushing out any additional required action by not just years, but maybe decades.  Among many improvements, the Town created a clean-out area so that with small equipment, the area just east of our pond can be easily cleaned periodically.  However, the BOD, is still making contingency plans for pond maintenance needed in the future.

Our neighborhood also has two retention ponds.  The town has started discussions with the BOD about a possible joint project to improve the more public retention area.  Town engineers believe they could make that area more attractive and usable.  Beyond expressing a willingness to look at something, we aren’t committed to anything.  Generally joint town/HOA projects have been good for our association, so I’m excited to see what they may come up with.

The Town has also approached the BOD about how some of our green space is used.  Parts of our walking trail are not well-maintained.  The Town is interested in making some public walking trails available that it would maintain.  Our Board is open to ideas and understands the benefit of working together with the community.

That’s just part of a long-range plan that is complicated by several years of road construction and a major shopping area on the horizon.  It is hard to say how all these outside forces and changes will affect our association, but our BOD keeps looking ahead and making proactive plans to stay ahead of the curve.

Rex Hogue is President of the Villages of Woodlake Association in Little Elm.  He has served on the HOA board for  7 years. This article was adapted from his column in the HOA’s newsletter. Mr. Hogue is a practicing attorney specializing in estate planning, including estate and gift tax planning, tax planning, business planning, asset protection planning, charitable planning, and probate matters.

How to Draw Owners to an HOA Triple Play

Creating Community Involvement

Pool pass and shredding event scores proxies for HOA

Besides serving on the board of my HOA, I manage our custom CMA association website (www.LostCreekRanchHOA.com). While we post the latest news on our homepage, I find that the e-mail blasts sent via our website are a great tool to keep our owners apprised of association news and activities.
Owners who opt-in to receive e-mails receive our announcements about our varied community activities. It’s one way we encourage strong community turn-out, we keep reminding folks of good things happening in our community. Plus, if you leverage the calendar for coinciding events, you can score the HOA equivalent of a “hat trick” between the website homepage, email blasts and website calendar.

I’ll cut to the chase of how we scored with our recent Earth Day event.

1. Arranged for a Shredder truck to be in the neighborhood for 2 hours on Sunday, April 22nd. You can get a sponsor for this if you want (I sponsored ours as a Realtor who specializes in our neighborhood) then promote it on the HOA website and by e-mail blast with these added attractions:

2. At the same time and location as the shredding, owners could pick up their new pool cards and

3. fill out their proxy form for the annual meeting.

These extra incentives brought us a great turnout, plus netting us around 100 proxies! Earth Day awareness was the icing on the cake!

Here’s the flavor of what we announce in our e-mail blasts and how it can click like 1,2, 3!

New key cards required for entry; old cards won't work
As the pool opens, the VERY old (and failing) key card system at the pool was replaced with a new and improved key card system. So, the old pool key cards won't work anymore. To get a new pool key card (no charge for initial card; one card per household) Homeowners will need to bring their ID, showing their property address, to one of these places and times…
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Annual HOA Meeting; Important for ALL Homeowners!!!
The annual HOA board meeting is scheduled for (date place and time). This is the big, annual HOA meeting where homeowners vote on board members and attendance is critical. So, be there or send in your proxy (attached) so that we have a quorum and all homeowners don't have to pay for another meeting! In fact, if you're not already 100% sure you will be attending, we recommend that you go ahead and send in your proxy now. For those who actually do attend, CMA will just remove your proxy and you can vote in person...

Anything on our homepage news section can be in the emails, from details on our community garage sale to our Fall Festival or even crime alerts.  Communicate. Communicate, Communicate!

Ryan Cave, The “Caveman” is secretary of his HOA Board and principal of The Cave Realty Team at Keller Williams Realty in Allen, TX .   He has been a Realtor for almost 10 years, served on the board for around 5 years, and uses his technical background to administer the association website and email communications.