What Is An Illegitimate HOA Board?

Q: Are the actions of an illegitimate HOA board valid?

The answer is, it depends. If a board extends its term because it fails to hold an election, its actions may be considered invalid. But, it still depends on the state where the HOA is located. In Utah, there has been a case where the terms of three board members had expired, yet they continued to serve on the board. They failed to hold an annual election for three years, and homeowners didn't complain because things were going smoothly. But, when a problem arose, the validity of that board's actions came into question. In the end, the suit reached the district court and a judge overturned three years' worth of decisions. In other states, though, that may not be the case. For instance, in Colorado, governing statutes say that failing to hold an annual meeting does not nullify a corporation's actions.

Due to concerns over not being able to hold elections, many associations are facing an issue over something called an illegitimate HOA board. But, what exactly makes a board illegitimate?

What Is an Illegitimate HOA Board?

At the helm of every homeowners association sits a group of members known as the HOA board. While these board members are technically volunteers, which means they do not get paid, they are still elected into their positions through a vote from the membership. HOA elections are typically held every year at the annual meeting.

A legitimate board is one whose members were properly elected and whose authority has credibility. This means they have the power to act and make decisions on behalf of the community.

On the other hand, an illegitimate HOA board is one whose members may not have been elected using the proper procedures. For example, if an association does not hold an election even if state laws and their governing documents mandate it, homeowners may call the board’s legitimacy into question. This is because board terms usually expire.

Of course, it is not always so black and white for all homeowners and condo associations. There are some variables to consider when determining whether a board is legitimate or not.

How the Pandemic Has Affected HOA Elections

When the COVID-19 pandemic hit the United States, it forced a huge shift in the way people lived their daily lives. A lot of businesses shut down, either temporarily or permanently, and students had to move to online learning. Some employees had to work from home, while others lost their jobs entirely.

The pandemic also affected many HOA communities. Due to the highly contagious nature of the virus, it was dangerous to hold face-to-face meetings. Health officials encouraged everyone to wear masks and practice social distancing. Many states also issued executive orders which made it impossible to meet in person at all.

This sudden change prevented many homeowners associations from doing business as usual. The pandemic made it difficult to hold annual and board meetings, thereby impeding board elections.

But, many associations had no problem adapting to the new regulations. Several states also allowed nonprofits, including HOAs, to hold their meetings online. It was also still possible to hold elections by distributing information through videoconferencing platforms and physically mailing out ballots.

Holding Elections According to State Laws

Holding HOA elections was a no-brainer for associations before the pandemic. It was easy to follow state laws and their governing documents on the proper procedures because in-person meetings were possible and permitted. With the COVID-19 outbreak, though, many associations have had to adjust their methods while still keeping in line with what’s allowed.

In Nevada, the law requires HOAs to hold a meeting every year. Associations also have a set amount of time to hold an annual meeting if a board misses one. If a board fails to conduct an election, the state’s real estate division will step in and force an election.

From a legal standpoint, a court may also consider a board as acting in bad faith if it does not hold elections. It would be relatively easy for owners to petition a court to order an election. There is also an issue with liability. A court may find board members personally liable if they don’t uphold the provisions of their governing documents.

Of course, there are some states wherein an election is not entirely possible when faced with something like a pandemic. For example, Florida statutes require HOAs to establish a quorum for meetings, but that does not work well with remote meetings. It is also more flexible in Florida given the restrictions due to COVID-19, allowing for holdover boards to run communities. Plus, some HOAs are still operating under a state of emergency, which allows for the postponement of elections.

Questioning the Legitimacy of Board Actions

If the current board fails to hold an election, thereby extending their term beyond the set limit, are their actions still considered valid? The answer is, it depends.

As previously explained, if it is possible for an association to hold elections even with COVID-19 restrictions, then there is no reason for a board to delay it. The technology for remote meetings is readily available to everyone, after all. And, in many states, you can simply mail the ballots out and then hold a videoconference call to watch the tallying of the votes.

As such, if a board extends its term because it fails to hold an election, its actions may be considered invalid. But, it still depends on which state the HOA resides in.

In Utah, there has been a case where the terms of three board members had expired, yet they continued to serve on the board. They failed to hold an annual election for three years, and homeowners didn’t complain because things were going smoothly. But, when a problem arose, the validity of that board’s actions came into question. In the end, the suit reached the district court and a judge overturned three years’ worth of decisions.

In other states, though, that may not be the case. For instance, in Colorado, governing statutes say that failing to hold an annual meeting does not nullify a corporation’s actions.

What If There Is No Functioning Board at All?

Aside from an illegitimate HOA board, some communities suffer from a non-existent board. In such communities, there is either only one person running the association or no board at all. What remedies are available for this kind of situation?

Appointment. If your state laws or governing documents permit it, the person on the board (usually the president) could appoint other members to serve as well. This is usually done when there aren’t any residents interested in running or if you can’t seem to reach a quorum because residents lack interest.
Receivership. In some states, homeowners can petition the superior court for a receivership. This means the court will appoint a third party to manage the community. This is generally not ideal because the HOA loses a lot of control. Plus, it can be very expensive.

The best way to address this issue, though, is to simply hold elections at the annual meeting. In most associations, homeowners can even call for a special meeting for this very purpose.

Doing What Is Best for Your HOA

When it comes to an illegitimate HOA board, the first thing you should check are state laws and then your association’s governing documents. Since the technology is available, you should also make sure to avoid missing an election. It is always best to err on the side of caution than to risk having a court reversing all prior decisions of a board that it finds illegitimate.

Navigating ever-changing laws and the legitimacy of board actions can be a headache. The good news is that you can make things easier for your board with the help of an HOA management company like Clark Simson Miller. Call us today at 865.315.7505 or contact us online to request a proposal.

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