This article is part of an ongoing series in which we'll take your questions from the HOAleader.com discussion forum and get you the answers you need from experts who specialize in association management. If you have a question you need answered, post it on the message board.
An HOAleader.com reader recently asked when a board could fail to notify a fellow member of a vote. As a follow up, here we discuss another part of the reader's question: When and how can boards act without a meeting?
Does That Say What It Seems To Say?
The question arises because the reader mentions a provision of the Maryland Condo Act, 2-408(c). It states, "Any action required or permitted to be taken at a meeting of the board of directors or of a committee of the board may be taken without a meeting if a unanimous consent which sets forth the action is: (1) Given in writing or electronic transmission by each member of the board or committee; and (2) Filed in paper or electronic form with the minutes of proceedings of the board or committee."
That provision seems to say that boards can make decisions without meetings. Is that accurate? "Yes," says Bob Kmiecik, a partner at Kaman & Cusimano LLC, which represents associations throughout Ohio. "In Ohio, we have a similar statute that basically states that all board action must take place at a meeting, by telephone, or by something like Skyping, where all board members can hear one another and debate the issue. The only time where action can be taken otherwise is with writing, which includes email correspondence, with unanimous consent. And that's when everybody agrees."
That's also the case in Washington. "Yes, boards can do this," says Kevin Britt of The Law Office of Kevin L. Britt, who specializes in representing associations in Seattle. "The key there is simply whether this all has to be in the form of a written document or whether an e-document is acceptable. By that I mean whether it's sending emails from each board member, or whether each board member must sign a single document or submit a letter stating they approve. There are a number of different ways this can be done."
Britt says what he typically sees is that boards make decisions this way by sending all board members an email. "But email is tricky because not all states allow decisions to be made that way or votes to be submitted that way," he warns. "In Washington, there has to be something submitted in advance showing those board members are consenting to receive notice and submit votes this way."
Nothing is needed in advance in Ohio. "If I'm a board member and I refuse to participate, I'm effectively stopping that process," he notes. "But there's no process by which the board has to give prior notice. So let's say I'm the board president, and I send an email stating, 'We had a pipe burst, and we need to hire a plumber. He's going to cost $5,000. Can we do this?' I don't have to give prior notice of that. And if I don't get all the responses, I don't have the authority to take that action through this process."
Britt stresses that point, too. "It's important that every board member be given notice and a chance to weigh in," he says. "Obviously, unanimous consent means everybody on the board. If there are five members, and the fifth isn't notified and doesn't consent, it's not unanimous consent."
Boards also often "tidy up" their actions later. "What usually happens is at the next meeting, the board will ratify the decision," says Britt. "They'll take that issue up and say, 'This is a decision we made by unanimous consent,' and then the board will have another vote on that to ratify it."
When Should You Do It?
This tactic should be used sparingly, say our experts. "Typically, it's when you need a quick decision in advance of the next meeting and, for whatever reason, you don't want to call a meeting," says Britt. "The board knows the decision it wants to make, and later it'll memorialize the decision during a meeting to have it in the minutes.
"It's wise to not use this as much as possible because the default—the preference in the statutes and governing documents—is for everything to be done at a meeting, where it can be entered into the minutes and where there can be discussion and debate," adds Britt. "The decision I'd see as ideal for this kind of situation—and it's fairly rare—is if there's some kind of litigation decision that needs to be made in advance of a meeting, and the board isn't able to call a meeting. Maybe the question is whether to settle, and there's a deadline on accepting a settlement offer. But even in those situations, my preference is to schedule a quick meeting before your next meeting. I'd try to not use unanimous consent at all, if possible."
Kmiecik agrees. "Anything of a nonemergency or crucial nature is always better discussed out loud with all board members' participation," he says. "When you're talking about things like hiring a new management company, a major roof repair project and awarding bids, and whether to proceed with enforcement action, I think the default should be that it's better to communicate. It's better to be in a room, or at least on the phone.
"Decisions sometimes end up being unanimous only until people start talking about the issue," adds Kmiecik. "That's why people are elected to the board—for that specific dynamic. They want that give-and-take and interaction. When you start to see a board doing 90 percent of its business by unanimous consent, people wonder, 'Are they fully engaged in the process?' Or they begin to think that's when one board member is doing all the work and making the decisions and the rest of the board is a rubber stamp. It's not necessarily true, but it lends itself to that accusation. You want that discussion and even disagreement."
That's also the general principle advocated by Andrew Schlegel, CCAM®, executive vice president of community management for Orange County and Los Angeles at FirstService Residential in Aliso Viejo, Calif. "As a matter of practice, any time you make a decision that impacts the membership, you really want to have it, at a minimum, ratified at an open session," he explains. "Otherwise people will be asking, 'When was this decided? And why was it decided this way?' When you say by email, then they'll inevitably ask, 'Why was there no discussion?'"
Perhaps that's why, even though states permit the practice of unanimous consent, its use may be heading in the other direction. "Many states have permitted that in the past," says Duane McPherson, president of corporate development for CiraConnect, which provides management companies, developers, and large-scale self-managed associations with a cloud based software solution and back-office shared service. "But I've seen a trend to move away from it more to follow the open meeting acts that cities, states, and the federal government use. In fact, some states have specifically disallowed email meetings to do away with this particular thing.
"The problem is that even if you sign forms and do all kind of things to justify that it was OK, there's that perception that the board did something behind closed doors," says McPherson. "It's always best to go above and beyond and to do everything possible to make sure board activities are as transparent as possible."
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