No Meetings Doesn’t Mean No Board Authority
If your clients have problems getting sufficient attendance at meetings to elect new board members, they’re not alone. The good news, though, is that this generally doesn’t impact the authority of the incumbent board to act on behalf of the association. That was the ruling in a recent case that made it to the Michigan Court of Appeals.
The association in the case was incorporated in 2001, and the developer appointed the first board of directors a few months later. The articles of incorporation didn’t provide for a term for the first board, stating only that, after the first board was elected, directors would be elected according to the bylaws.
The bylaws required the association to hold annual membership meetings to vote on the election of new directors, but the association never held any meetings or voted on new directors.
In 2003, an owner began construction of a house; the bylaws required that he complete construction within 12 months. In September 2005, the association notified the owner that his continuing construction violated the bylaws and scheduled a hearing. The owner didn’t appear, so he was found in violation.
The association imposed monthly fines until the violation was remedied, which still had not occurred when it filed a lawsuit in 2016. By then, about $135,000 in fines and interest had been assessed. The lawsuit sought foreclosure and sale of the owner’s property to satisfy the debt.
The owner argued that, because the association didn’t comply with the bylaw requirements for annual board elections, it couldn’t take valid actions, including levying fines and filing lawsuits. The trial court agreed and dismissed the case. The association turned to the state Court of Appeals for relief.
To learn how the appellate court ruled, and the implications for associations in Michigan and possibly beyond, read our new article: Lack of Annual Meetings Doesn’t Deprive Board of Authority.