Owners must use limited proxy to approve waiver of reserves

Question: We live in a condominium. There has been a lot of confusion this past year regarding membership votes, and how they are conducted. Our association recently sent out proxy letters that included two voting items.

The first item asked owners to approve waiving the collection of reserves. A second item, about which several board members were never made aware, asks owners to approve the use of designated “property improvement” funds for reserve purposes.

The letter mailed with the proxy stated that the board of directors recommended voting in favor of both items. I have several concerns. First, no formal discussion or vote was ever conducted at an open meeting. The decision to submit these items for a membership vote was completed by email, and several board members stated they were unaware of the second proposal. I am also concerned with the handling of the proxies, themselves. In my opinion, the term “proxy” indicates that you are allowing someone else to represent you and vote on your behalf.

If a ballot is submitted by mail by the individual who is voting, how is that a proxy? — L.W.

Answer: As you are likely aware, the Condominium Act provides that the board of directors of a condominium association is obligated to draft and pass a budget that includes the collection of reserves for certain deferred maintenance items.

The amount to be collected is usually determined by conducting a reserve study that lays out the amount of money that will be required for maintenance to be performed on the condominium property over the course of the next 20 or so years and then establishes a specific collection schedule for those funds. These funds must be collected unless the owners vote to waive collecting either all or part of the reserves. The decision to waive reserves must be approved by a majority of those owners voting at a meeting at which a quorum has been attained.

Typically, members of a condominium association vote at a membership meeting, either by casting their vote in person, or by proxy. A proxy is a person who attends a meeting and votes on the owner’s behalf (it is also the term used to describe the piece of paper that grants proxy powers).

Community associations regularly misuse proxies. A proxy is not a ballot. It does not allow a person to cast an absentee vote — it gives a proxy holder the power to vote on behalf of the owner when they attend the meeting. Usually, a proxy form will state that an officer of the association will serve as the proxy unless a different person is named. This guarantees that there is a person actually present at the meeting who is able to cast the vote.

Some people are suspicious of the officers and are reticent to grant the officers the power to vote on their behalf. However, unit owners may generally only vote by limited proxy — a proxy form that instructs the proxy holder to vote a specific way. Reserve votes may only be conducted by limited (rather than general) proxy. So, there is no real concern in granting an officer of the association your proxy power — they are obligated to vote on your behalf however you specify on the limited proxy.

Unfortunately, people misunderstand and misuse these proxy forms all the time. I often see proxy forms where the owner’s name is written in as their own proxy, or where they name a person who has no intention of attending the meeting (in which event the proxy form has no effect).

Normally, these membership votes come and go without any consideration of whether the proxies were properly filled out or whether the specified proxy holder actually attended the meeting to cast the vote — but, if a challenge arises, these issues can invalidate a membership vote.

You expressed concern that the board, as a whole, never discussed whether to allow the membership to vote on using the improvement funds for reserve purposes, and that the decision to include this on the proxy was made by only a few directors. While this is not the ideal procedure for making these decisions, I don’t think this alone would invalidate a membership vote. It is the membership that ultimately will need to approve or reject the proposal, and in many associations the membership (usually by petition) would have the right to raise the proposal on its own. If you oppose either of these items you are entitled to communicate with your neighbors and encourage them to vote “no.”

Ryan Poliakoff is a co-author of “New Neighborhoods — The Consumer’s Guide to Condominium, Co-Op and HOA Living” and a partner at Backer Aboud Poliakoff & Foelster, LLP. Email questions to condocolumn@gmail.com. Please include your hometown.

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