HOA did not provide proper notice when changing rule

Updated August 7, 2018 - 1:51 pm

Q: I came across your column on the Review-Journal’s website when I searched for “HOA fiduciary responsibility” and thought I’d pick your brain for a minute. I have a question regarding a policy that my homeowners association implemented a couple of summers ago with regard to exterior lighting.

This HOA has banned the use of string lighting and did so by way of the board approving the design committee’s recommendation. My question is whether the board acted improperly in the way that they passed this regulation.

First off, the agenda for the meeting was published on the community webpage seven days prior to the meeting, not the required 15 days, per Nevada Revised Statutes 116.3108, and not in the manner prescribed by NRS 116.31068. Secondly, the agenda did not explicitly state that string lighting would be banned, but rather stated it as “Design Review Issues – Adopt Lighting Guidelines Submitted by DRC.”

I contend that this was a poorly advertised meeting and that the proposed change was vague, thereby keeping the homeowners uninformed of these potential changes. I intend to work with my board, but I also feel that this particular policy was done in a somewhat opaque manner and that it might not be enforceable because of that. Also, is it a potential conflict of interest if one of the members of the design review committee and board that voted on this is a residential designer in the area? What are your thoughts on this?

A: The actual state law concerning board of directors’ meetings is NRS 116.31083. The law that you stated pertains to meetings of the homeowners, such as the annual meetings. Section 2 of NRS 116.31083 states that the association shall provide a 10-day notice to the homeowners of a board meeting and not a 15-day notice. As to the distribution of the notice of the meeting, under NRS 116.31068, it can be hand-delivered, U.S. mail, electronic and any other method reasonably calculated to provide notice. Under NRS 116.31083, section 2b and 3b 1 and 2, notice can also be provided by newsletter, posted in one or more prominent places within the association community and also by electronic means.

The notice of the board meeting under NRS 116.31083, subsection 5, states that it must include the time and place of the meeting and include a copy of the agenda or the date on which the agenda and the location of copies of the agenda may be conveniently obtained by the owners. The agenda must comply with subsection 4 of NRS 116.3108, which states the agenda must consist of a clear and complete statement of the topics to be considered, including a list describing the items on which action may be taken. In an emergency, action may be taken where an item was not listed on the original agenda.

I don’t think that the one board member had a conflict of interest per se because she is a residential designer, but you are correct that the association did not provide proper notice to the membership of the proposed change.

Q: The HOA where I live send out a newsletter this week stating “Our current Articles of Incorporation expire in 2021. You will be receiving a ballot to AMEND the Articles. It requires a yes vote from 75% of all 510 homeowners which is a 383 yes vote. If we allow the article to lapse, we will not have a corporation to collect fees and expend them to maintain our community. There will be no means to maintain front yards, paint houses or maintain commonly owned spaces including parks, clubhouses and pools. It is vital that you return your ballot as soon as possible and by August 1, 2018, at the latest. The amendment will protect our community ‘in perpetuity’ so we won’t have to do this again.”

I checked the original articles of incorporation. It did have a 50-year expiration on it, and it requires a 75 percent vote to amend the articles.

1. Why would anyone put an end date on an HOA to begin with?

2. What will occur if the HOA cannot get the votes? Do we turn into a slum area?

3. Is there no way to continue business as usual if we do not remain incorporated?

A: Excellent questions. I wished I had the answers. To the best of my knowledge, there was never any state law that required an expiration time as to the incorporation of an association. There is a difference between an expiration of an association being a corporation and a termination of the association. An association does not necessarily have to be a corporation, although being a corporation provides much protection to the association and board of directors. Not being a corporation does not mean that the association is now terminated.

I believe that the board could continue to manage the association under the current governing documents, i.e. the declaration of covenants, conditions and restrictions, along with their bylaws and other documents.

I would highly recommend that all association boards and management companies check their articles of incorporation as to any expiration period. In addition, those associations that have expiration in the near future should absolutely contact their legal counsel to begin the process to amend their articles of incorporation.

Barbara Holland is a certified property manager, broker and supervisory certified association manager. Questions may be sent to holland744o@gmail.com.

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