Most actions by community associations require a vote, either by the Board of Directors, or by the full membership. The basic forum for casting votes is at a meeting: an annual meeting of the association, a special meeting of the association called for a limited purpose, or a regular or special meeting of the Board. Special meetings may pose logistical or expense challenges, and some items cannot wait for the next regular meeting, particularly if it is an annual meeting several months off. Therefore, the Nonprofit Corporation Act authorizes Action Without Meeting.
Corporate Action Without Meeting – Usually Amendments and Loans
The Nonprofit Corporation Act allows members to take any action they would be required or permitted to take at an annual or special meeting, without a meeting, by written consent or electronic transmission (such as email) under MCL 450.2407, by ballot under MCL 450.2408, or at polling places under MCL 450.2409.
Associations most frequently seek consent under MCL 450.2407 when an action requires approval by a set percentage of the full membership – not just a majority of quorum present at a meeting. The first example is amendments to Condominium Documents or Homeowners Association Restrictions. For Condominiums, the Condominium Act, MCL 559.190, requires approval by the affirmative vote of 2/3 of co-owners, defined as 2/3 of all co-owners entitled to vote. For Homeowners Associations, the percentage to amend will be fixed in its Declaration of Covenants, Conditions, and Restrictions. Again, the requirement will often be 60%, 2/3, or 80% of all homeowners.
The second example is loans. Most association documents allow the Board to borrow money an “issue evidence of indebtedness” (promissory note, mortgage, lien), but only if at least 60% of the membership approves the loan – and the resulting assessment (dues) increase to fund the repayment. Because loans are often for urgent replacement needs, they often cannot wait for the next annual meeting, and therefore action without meeting is an expeditious option.
Action by ballot under MCL 450.2408 is less common for community associations. Most governing documents, when addressing action without meeting, specify that it is for any action that could be taken at a meeting, except election or removal of Directors. The rationale is that candidates for office should speak in favor of their election and be available for questioning by the members. Conversely, sitting Directors proposed for removal must have the option to speak in their own defense.
Action at polling places under MCL 450.2409 can provide welcome flexibility. Many Associations with clubhouses or offices have existing drop boxes for payments or maintenance forms that can easily accept consents or ballots. Associations without these facilities have the option to accept consents or ballots at other centralized locations, such as adjacent to CBU mailbox stations.
Board Action Without Meeting – Frequently Used, and Often Incorrectly
Because community association Boards are volunteers, many Directors will be busy with their day jobs. For this reason, most Boards conduct a lot of business by email, but often without observing the necessary formalities. The Nonprofit Corporation Act, MCL 450.2525, states:
Unless prohibited by the articles of incorporation or bylaws, action required or permitted to be taken under authorization voted at a meeting of the board or a committee of the board may be taken without a meeting if, before or after the action, all members of the board then in office or of the committee consent to the action in writing or by electronic transmission. The written consents shall be filed with the minutes of the proceedings of the board or committee. The consent has the same effect as a vote of the board or committee for all purposes.
The two critical factors: unanimity and inclusion in minutes.
First, when the Board votes by email, all Directors must respond, and the vote must be unanimous. A five-member Board with four approvals does not satisfy the statute. A 3-2 vote does not satisfy the statute. Incomplete or contested votes must be taken at a meeting. Failure to follow this procedure means that any member has standing to challenge the validity of the Board action.
Second, the written consents for any action without meeting (often a group email chain) must be included in the minutes of the next meeting. Any approvals existing only in the individual Directors’ emails may be lost when the Board turns over at the next election. Therefore, it is important to memorialize action without meeting approvals in the formal records of the Board.
We Can Help
If your condominium association or homeowners association has questions about action without meeting, or other topics in community association administration, then Tilchin & Hall, P.C., can help. Please call us at (248) 349-6203 or email us using the form below.
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