Home Shaping SuccessSM
September 12, 2016
By Erik Newman*
The overhaul of condominium association governance that I previewed a year ago has been adopted as New Hampshire law. If you are wondering whether your unit owners' association should amend its bylaws to incorporate the new requirements, read on.
Significant changes to the way condominium owners' associations (COA's) elect officers and directors, conduct meetings and adopt budgets under the New Hampshire Condominium Act, RSA 356-B, became effective on August 1, 2016 and can be reviewed on the New Hampshire General Courtís website at: Chapter 311 HB 353 - Final Version.
The new law states that in the event of a conflict with an associationís existing declaration and bylaws, the provisions of the Condominium Act shall control, suggesting that bylaw amendment may not be necessary. However, several of the changes impose new content requirements for bylaws, which, if not already present in your bylaws, would necessitate amendment to comply.
For instance, bylaws must now specify the powers and responsibilities of the board of directors. If your bylaws already do so, congratulations; but if they donít, the only way to comply will be to adopt an amendment encompassing a statement of those powers. And if your association has operated without a board of directors, that is no longer allowed and you should consider holding a special meeting promptly to elect a board and adopt guidelines for its conduct.
Members seeking election as officers or directors may now be subject to a background check, if authorized by an associationís bylaws. If elected as director, the new law imposes a fiduciary relationship between the board and the association members, making director (and officer) insurance coverage more important than ever. Such coverage serves to both protect directors (and officers) and attract qualified candidates who might be wary of the heightened potential liability imposed by a fiduciary standard.
Boards of directors are encouraged to provide greater transparency to their members under the new laws. Regular board meeting must be held at least quarterly with 10 day advance notice to unit owners, except in the case of emergency. Board meetings must be open and provide unit owners with an opportunity to comment, except for meetings in executive session, which may be closed but where no final vote or action is allowed to be taken. Directors are now expressly prohibited from using incidental or social gatherings to evade open meeting requirements.
Condominium owners' association meeting and voting procedures requirements are also significantly expanded. Members are entitled compel a special meeting on any matter if called for by members representing thirty-three percent or more of the voting interest in the association, or any lower percentage the bylaws may specify. Any former uncertainty over whether meetings may be called for the express purpose of removing an officer or director is resolved with a new affirmation of that lawful purpose. At such a meeting, any officer or director may be removed from his or her position at a meeting, with or without cause, if votes in favor of removal exceed votes against. Associations may also vote on matters without meeting, upon prior notice and ballot compliance.
Proposed annual budgets or special assessments must be supplied to unit owners in advance and ratified or rejected at a meeting. Unless a proposed budget or special assessment is rejected by the votes of two-thirds of the unit owners, it is deemed ratified. Emergency special assessments adopted by two-thirds of a board of directors are exempt from the unit owner voting and ratification requirement.
A change that should help the bottom line of many associations authorizes meeting notice to be delivered electronically if an email address is designated by a unit owner. One final observation Ė be sure to stock up on copies of Robertsí Rules of Order Newly Revised for all your officers and directors because all meetings are now required to follow those procedures, unless waived by the bylaws.
This article highlights certain of the key changes to association governance provisions of the Condominium Act, but the full scope of the changes is broader. Condo associations that ignore these new requirements risk a range of consequences, from having future actions rescinded to potential litigation. Moreover, some of the new requirements can be strengthened, relaxed or waived, depending on an associationís preferences, but only if the bylaws include a clear statement of that intention. That accommodation reinforces the importance of performing a comprehensive review of an associationís existing bylaws and practices to ensure that they are in agreement with current law and taking advantage of the customization that is available.
* Erik Newman is admitted in New Hampshire.