Well, That’s a Surprise: Common Governance Pitfalls

I regularly advise community association executive boards (often called boards of directors) and property managers that the governing documents – the declaration, bylaws and rules – should be regularly reviewed to ensure that they conform to current law.  The governing documents are the primary resource for board members, owners and property managers in understanding how the association operates.  It’s not fair or smart to perpetuate inaccurate guidance, and it won’t help to encourage people to serve on the board.  

Here are a few governance surprises I’ve had to share over the years.  

Boards cannot act without a meeting. Many community associations are organized as Vermont nonprofit corporations.  Unfortunately, some association bylaws seem to have been drafted without accounting for the nuances of the Vermont Common Interest Ownership Act.  They may provide that the board may act without a meeting by unanimous written consent.  That’s true for ordinary nonprofit corporations, but not for community associations.  After the declarant control period, an association board may act without a meeting “only to undertake ministerial actions or to implement actions previously taken at a meeting of the executive board.”  This is very inconvenient, but in most cases very clear.  The board can’t decide to enter into a contract without a meeting, but can designate someone to sign it, for example.  

Remote meetings of members are permitted only if the declaration or bylaws so provide. During the COVID pandemic, associations and their boards conducted virtual meetings by necessity.  However, Vermont law establishes different default rules for meetings of association executive boards – which may be held remotely unless otherwise provided in the declaration or bylaws – and meetings of the members – which may be held by remotely if permitted by the bylaws or declaration.  With the lifting of pandemic restrictions, associations wishing to continue remote or hybrid meetings of members should ensure that the governing documents permit it.  

Fines can’t be imposed before a hearing is held and must be reasonable. It’s tempting to set out a schedule of fines in association rules, and to simply notify owners that they’re being imposed, perhaps with a notice that the unit owners may request a hearing, and I’ve seen many rules and informal procedures that do just that.  Vermont law requires the opposite process:  associations, acting through their executive boards, “after notice and a hearing, may impose reasonable fines for violations” of the governing documents.  Notice means that the violator – it may be a unit owner or, for many associations, a tenant – must be advised of the alleged violation sufficiently to be able to respond to it at a hearing.  After the hearing is closed and a violation is established, the board must determine a reasonable fine.  What’s reasonable will necessarily depend on the violation, and may not correspond with a schedule of fines.  A reasonable fine for parking in the wrong spot is certainly different from a reasonable fine for running a drug dealing operation, for example – and neither may correspond to a pre-determined schedule of fines.