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Georgia Real Estate InfoBase Contents - Chapter 56

Chapter 56

Administration of Community Associations


THE FIRST BOARD OF DIRECTORS 

Community members often believe that there is no board of directors until the turnover meeting – that the owner-elected board is the first board of directors for the association.  That is a misconception.  At some point prior to the first closing of a property in the community, someone files articles of incorporation with the Georgia Secretary of State to create a non-profit corporation to manage and operate the neighborhood.  Normally, this is accomplished at the same time as the covenants for the neighborhood are recorded in the county land records.

The articles of incorporation are required to list the initial directors of the corporation.  This board can consist of any number of people.  Typically, the articles of incorporation list only one or two people and usually they are members of the declarant’s company or family.  Whoever they are, they are the first board of directors for the community association. 

“Turnover” is a term of art used in the community association industry to define when the board of directors of a community association changes from a developer-appointed group to an owner-elected group.  The turnover process itself is quite routine – a meeting and an election.  The transition process up to and after that point is much more complicated. 

Timing of Turnover Meeting

Only condominium corporations are bound by specific state law referencing the turnover process.  All other types of community associations in Georgia (homeowner associations, property owner associations and cooperatives) are governed only by the community’s legal documents without any statutory provisions.  Most legal documents specify that owners should elect their board members when 75% or more of the lots/homes are sold in the community.  

For condominium corporations, the Georgia Condominium Act identifies when the declarant loses the right to appoint and remove the board members.  The declarant-appointed directors remain in place until their successors are properly elected by the owners.  The Georgia Condominium Act states that the declarant loses the right to appoint and remove directors and officers in a one phase condominium project on the earlier of:

  1. The date that 80% of the undivided interest in the common elements have been sold
  2. Three years after recording the declaration
  3. The date that the declarant voluntarily surrenders this right

If the condominium project is phased (expandable), the declarant loses the right to appoint and remove directors and officers in a phased condominium project on the earlier of

  1. The date that 80% of the undivided interest in the common elements have been sold, unless the declarant still has the right to unilaterally add property to the condominium
  2. Seven years after recording the declaration
  3. The date that the declarant voluntarily surrenders this right

DECLARANT TURNOVER 

In order to hold owner elections for directors, the corporation must have a meeting.  There are a number of decisions that must take place before the meeting notice is sent to the owners. First, the declarant-appointed board members need to decide if they are calling an annual or special meeting.  Second, they need to confirm the number of directors to be elected at the meeting.  Third, they need to determine the terms of office for each elected director.  Last, they may have to obtain nominations for the board positions.

It is important to keep track of the terms for each position from the very beginning.  Otherwise, it can get very confusing to do so.  A suggestion is to identify each position by a letter, not by the name of the person who is filling that position.  For instance, assume a five-member board with 1 and 2-year terms.  Positions A, B and C are 2-year terms.  Positions D and E are 1-year terms.  If the turnover meeting happens in an odd year (2011, 2013, 2015, etc.) then positions D and E will be re-elected in every even year and positions A, B and C will be re-elected in every odd year.  If the turnover meeting happens in an even year (2012, 2014, 2016, etc.) then the opposite will be true – D and E will be re-elected in odd years and A, B and C will be re-elected in even years.  

It can become confusing when a board member resigns and someone else is appointed to fill that vacancy.  The group needs to remember what position the resigning board member held and when that position is up for re-election.  It’s important because most bylaws state that the person filling the vacancy only fills the slot until the position is up for re-election.  Therefore, the vacancy-filler does not serve a full 2-year term from the time he/she gets on the board.  The vacancy-filler serves only the remainder of the vacant term.  It will be difficult to enforce this concept if the association has no idea when the vacant terms begins and ends.  Keeping track of the positions from the turnover meeting is the best way to avoid this confusion.

Changes After the Turnover Meeting: 

Legally, nothing changes for the declarant or the owners after the turnover meeting except that the people on the board of directors making decisions and operating the association on a day-to-day basis are different people than they were before the turnover meeting.  The new group is owner-elected instead of declarant appointed.   This one change can be comfortable and free of conflict or it can be adversarial and litigious.  The owner-elected board usually reviews the operating and legal position of the community, the financial position of the association and the way the common areas/elements were physically constructed.  They judge the decisions of the declarant-appointed board of directors and determine if the association needs to hold the declarant accountable for any improper actions. 

NOTE: Although not the standard in Georgia (yet), in 2002, the Supreme Court of South Carolina held that: 

[D]evelopers are held responsible for the condition of the common areas at the time these areas are deeded to the [association].  If these areas are not in good repair at the time of conveyance, the developer is liable for the costs of repairs. . . [T]he developer has a fiduciary duty to the [association] to transfer common areas that are in good repair; if the developer transfers substandard common areas, the developer must, at the time of transfer, provide the [association] with funds necessary to bring the common areas up to a standard of reasonably good repair. Concerned Dunes West Residents, Inc. v. Georgia-Pacific Corporation, 349 S.C. 251, 259-60, 562 S.E.2d 633, 638 (2002). 

Depending on the results of these reviews, the owner-elected board may need to negotiate a turnover agreement with the declarant to resolve these issues.  For instance, if the declarant owes money to the association for unpaid assessments, the association can sue the declarant (adversarial/litigious) or the board members can talk to the declarant and see if something can be worked out. 

If some of the declarant lots do not comply with the architectural provisions of the association, the board can send violations letters and fine the declarant (adversarial and litigious) or the board can talk to the declarant first and see if the issue can be resolved together. 

If the improvements on the common are not properly built or conveyed to the association, the board can start the process to resolve disputes pursuant to the Georgia Right of Repair Act (adversarial and litigious) or the board can talk to the declarant first and see if they can negotiate some repairs and a deadline for conveyance of the property.  

There are many times when taking an approach that is comfortable and free of conflict will not work.  Sometimes the only way to obtain relief is to sue to recover damages.  Therefore, the owner-elected board needs to understand the statutes of limitation (deadlines) that restrict legal action against the declarant after a certain period of time.  If there is something wrong in the community but the association chooses not to proceed against the declarant immediately after turnover, the owner-elected board should obtain a written legal opinion about the statutes of limitations related to the unresolved issues so the board is aware of the relevant deadlines.    

Additionally, if one of the items that cannot be resolved in a turnover agreement relates to a construction defect issue state law may require the entire membership to approve a lawsuit against the declarant before the association can properly proceed to litigate the substantive issues of the claim.   

Declarant Status Before and After the Turnover Meeting: 

Community association covenants typically include special rights reserved for the declarant in addition to the declarant’s right to appoint and remove directors and officers of the association.  The additional rights usually have nothing to do with the board or the officers.  For instance, the legal documents might contain an easement right for the declarant to enter the community to continue to build and construct homes on their vacant lots.  These easement rights might give the declarant the ability to enter an individual lot/unit or the common areas/elements to tie into existing plumbing lines or other utilities.  The declarant might be completely exempt from requesting architectural approval before making any improvements to a property. The declarant also may have the right to submit additional property to the community without the consent of the owner-elected board or other community members. 

Condominiums 

Most importantly, in a condominium community, the declarant is required to pay all the bills for the community until the first common expense assessments is due from any other unit owner.  Usually this means that until the first closing of a unit sale, the declarant pays all of the association’s bills.  However, the declarant can continue to pay all the bills even after units are sold to other owners as long as the declarant-appointed board of directors does not charge any assessments to any of the sold units.  

Once the association starts imposing assessments on the unit owners for common expenses, no unit owners are exempt from them.  However, the declarant may elect to be excused from payment of assessments as long as three criteria are met.  First, the exception only applies to assessments against unsold and unoccupied units.  (If a unit is declarant-owned, but occupied, the declarant must pay assessments on the unit.)  Second, the exception can only last up to 24 months after the declaration of condominium is recorded in the county land records.  Third, the declarant is required to pay all the common expenses incurred by the association which exceed the amount assessed again the owner unit owners in the same condominium.  If the amount of money assessed against all the unit owners in the condominium is not enough to pay the association bills in a particular month, the declarant has to pay the difference, so the bills for common expenses still get paid.

POAs 

For many years the POAA collection provisions stated that no owner shall be exempt from any assessments.  This is the primary reason declarants did not submit new communities to the POAA.  As owners of lots (unimproved, improved, vacant or occupied) the declarant did not want to pay assessments to the association for lots that had not been built out, homes that have not been occupied and homes/lots that had not been sold to third parties.  If the declarant did not submit the community to the POAA, the declarant could be completely exempt from assessments. 

In 2004 the POAA was amended to include an exemption from assessments for any requesting lot owner, so long as the lot owner surrendered the voting right of the non-paying lot for the term of the exemption.  This exemption is only valid until a certificate of occupancy is issued for a dwelling on the lot.  If the covenants are subject to the POAA, the declarant is required to start paying assessments on each lot when a certificate of occupancy is issued for a dwelling on that lot. While the exemption applies to any owner of any lot without a certificate of occupancy, it does not apply after a certificate of occupancy is issued, even if the dwelling remains vacant.  For this reason, most declarants remain hesitant to submit the community covenants to the POAA at the beginning of the development.  

BOARD ETHICS AND CONFLICTS OF INTEREST

What Does the Board Do?

What Do the Officers Do?

For example, Board decides which landscaping company to hire.  Officers sign contract. 

What is the Difference between the Board and the Officers?

STANDARDS OF CONDUCT FOR DIRECTORS AND OFFICERS 

The Non-Profit Corporation Code imposes a duty of care and a duty of loyalty on board members and officers. 

Duty of Care: 

Directors and officers must discharge their duties in a manner the director/officer “believes in good faith to be in the best interests of the corporation” and “[w]ith the care an ordinarily prudent person in a like position would exercise under similar circumstances.” To comply with the Duty of Care, directors must:

Duty of Loyalty: 

Directors and officers must:

BUSINESS JUDGMENT RULE

Conflicts of Interest 

A director has a conflict of interest if the director or a “related person” to the director:

A “related person” includes (the definition is broader than the examples below):

Resolving Conflicts of Interest 

To avoid a transaction being set aside and/or personal liability for a transaction in which a conflict of interest exists:

A “qualified director” is:

Can the conflicted director still participate in the board discussion about the transaction and vote?

Conflicts of Interest and the Declarant-Appointed Board Members   

The board members chosen by the declarant have the same duties and obligations, the same authority and the same liability as all other boards of directors for all other Georgia non-profit corporations, including future boards of directors of the neighborhood. 

Example: The declarant-appointed board decides to spend $3,000.00 on landscaping the front entrance of the association.  From the declarant-representative perspective, this is a good idea because it creates positive curb appeal and helps bring buyers to the community.  From the association-representative perspective, it might not be such a good idea to spend so much money on landscaping.  However, the front entrance is a common area/element of the community and landscaping that area is well within the board’s decision.  Therefore, the declarant-appointed board members did not exceed the scope of its authority and it does not appear that there was a conflict of interest. 

Example:  If the declarant-appointed board members decided to hire the declarant’s company to install the new front entrance landscaping would that have been a conflict of interest?  Yes.  That creates a conflict of interest.  Since there are no “qualified directors” to vote on whether to hire the declarant’s company for the landscaping work, the Non-Profit Corporate Code would require the board to appoint a committee to vote on the transaction or obtain the approval of a majority of the membership.   (Interestingly, if the declarant is the owner of any lots/units, the declarant’s vote will count towards a “majority of the membership.”) 

Whether the association is professionally managed or self-managed, the declarant-appointed board members have the right to make decisions about all the day-to-day operations of the association.  They have the right to determine how to spend the association’s money and the right to enter into contracts with vendors.  As long as the decisions are in the best interests of the association the declarant-appointed board members have the authority to act on the association’s behalf.  

It is obvious that the declarant-appointed board members will want to take the needs of the declarant’s company into consideration also.  This is inevitable, as these board members are playing two different roles simultaneously.  They are the declarant’s representatives.  They are dealing with building issues, selling issues, county code issues, etc.  They also are association representatives.  They are dealing with assessment collection issues, covenant enforcement issues and contractor/vendor issues.   It is imperative to keep these two roles as separate as possible, but overlap is bound to occur.  It’s important to recognize that overlap does not always mean “conflict.” 

When an overlap happens the decision of the declarant-appointed board members needs to be evaluated from two different perspectives:  (1) did the board exceed the scope of their authority; and (2) was there a conflict of interest that caused damage to the corporation? During the transition process (before and after turnover) the owners often scrutinize and dissect the decisions of the declarant-appointed board members.  The owners try to find fault with these decisions, try to create some form of financial damages to the association.   Although there is a greater potential to exceed the scope of authority and improperly resolve a conflict of interest when the declarant-appointed board members are playing two roles at the same time neither may cause damages to the association.

LIMITING PERSONAL LIABILITY 

If directors are individually named as defendants in a lawsuit, the association will almost always hold them harmless and indemnify them for decisions and work completed in their capacity as directors.  

QUESTION: Is there anything for which a board member would not be held harmless or indemnified? 

ANSWER: Yes.  If a board member breaches his/her duty of care or loyalty to the association, the Non-Profit Corporate Code does not require the association to hold harmless or indemnify that board member. The Non-Profit Corporate Code lists the following examples of actions that create personal liability for a board member:

Dissenting Directors:

Paying the Board Members:

Removing and/or Replacing Board Members 

Non-Profit Corporate Code process for removing directors:

Non-Profit Corporate Code process for filling director vacancies:

Unless the bylaws or articles state otherwise, a new director can be elected to fill a vacancy on the board by:

QUESTION: What If We Cannot Get a Quorum at an Annual Meeting to Elect New Directors?

ANSWER: If an association cannot get a quorum at an annual meeting and the bylaws allow the remaining board members to fill vacancies on the board of directors, the board can engage in a series of resignations and vacancy appointments to change the members of the board.

OFFICER ROLES AND RESPONSIBILITIES

When are Officers Elected and for How Long?

President:

Vice President:

Secretary:

Treasurer:

Others:

Owners’ Authority: 

In most corporations, the members do very little.  The members must elect their directors.  They usually have authority to approve the budget or veto a board-approved budget.  Owners/members vote to adopt changes to the legal documents of the corporation.  Owners/members often participate through a committee structure.  Typically these committees make recommendations to the Board and the Board makes the decisions.  Sometimes, the committees are empowered by the Board to make the final decision on a particular issue.  It is true that the board does not have to listen to or follow any of the advice the owners and/or a committee offers.  However, the board that completely ignores the owners and the committees will create more problems in the community in the future. 

Typically the friction between the board of directors and the owners is inversely proportional to the amount of input and authority the owners are given by the board.  The more input the owners have, the less tension and friction there is between the owners and the board.  This is because the board creates a cooperative environment which means the owners are less likely to blame or think poorly of the board.

COMMUNITY MANAGERS

Roles and Responsibilities: 

Described in your management contract. Board can delegate responsibility, but not liability.  Management contract may require the manager to do something, but if it does not get done, the board is liable for it too.  

What Tasks are commonly delegated to the Community Association Manager?

Manager’s Relationship with the Board of Directors 

A licensed Community Association Manager (CAM) is the agent for his or her broker, in just the same way as a licensed real estate agent.  As a result:

Licensed CAM also is the agent of the association

QUESTION : What if there is a conflict between what the broker and the association authorize? 

ANSWER: The broker trumps the association. If the association requests the CAM to do something and the broker does not authorize the CAM to do it, then the CAM is not permitted to engage in such activity.

EMPLOYEES OR INDEPENDENT CONTRACTORS

Hiring and Firing Employees

If the Association hires direct employees in addition to (or instead of) a licensed CAM, the board must remember that there are legal, accounting and insurance issues that accompany the decision to become an employer and to ending someone’s employment. 

DO’s

DON’Ts

Employee Contracts

A contract with a direct employee of the association should include the following information:

Independent Contractor

PEOPLE ASSIGNED BY A MANAGEMENT COMPANY TO WORK WITH A PARTICULAR COMMUNITY ASSOCIATION RARELY ARE DIRECT EMPLOYEES OF THE ASSOCIATION.  THEY MIGHT BE DIRECT EMPLOYEES OF THE MANAGEMENT COMPANY OR THEY MIGHT BE INDEPENDENT CONTRACTORS WORKING FOR THE MANAGEMENT COMPANY OR THE ASSOCIATION….EITHER WAY, THE BOARD SHOULD KNOW THE DIFFERENCE. 

THERE IS MUCH MORE INFORMATION AND REGULATIONS REGARDING HIRING AND FIRING DIRECT EMPLOYEES AND/OR INDEPENDENT CONTRACTS.  ASSOCIATIONS SHOULD SEEK LEGAL AND ACCOUNTING ADVICE SPECIFIC TO THEIR SITUATIONS BEFORE MAKING SUCH DECISIONS.

MEETINGS OF THE BOARD OF DIRECTORS

Notice Requirements: 

Georgia Condominium Act is Silent – Look at Nonprofit Corporate Code 

Unless association’s legal instruments state otherwise: 

Regular or pre-determined meetings of the board - no notice required

No Pre-Arranged Board Meeting Schedule - at least two days’ notice of date/time/location 

If permitted by association’s legal instruments – notice of board meetings:

Notice Objections:

Quorum:  

Quorum is the minimum number of people that must be present at a meeting to call the meeting to order and conduct official corporate business.  

GCA/POA – Unless the instrument or bylaws specify a larger percentage, the presence of persons entitled to cast one-half of the votes of the board of directors shall constitute a quorum for the transaction of business at any meeting of the board.  (O.C.G.A. §§44-3-103 and -228) 

HOA – Corporate Code – Except as otherwise provided in this chapter, the articles, or the bylaws, a quorum of a board of directors consists of:  (1) a majority of the fixed number of directors if the corporation has a fixed board size; or (2) a majority of the number of directors prescribed, or if no number is prescribed, the number in office immediately before the meeting begins, if the corporation has a variable-range size board.(O.C.G.A. § 14-3-824) 

Board Voting: 

GCA/POA – silent – nothing specific about Board voting. 

Condominium, Property Owner Association and HOA - Corporate Code - No action permitted unless quorum is present at time of vote.  Unless the legal documents specify otherwise, the affirmative vote of a majority of the directors present when a vote is taken is the act of the board of directors as long as a quorum is present. (O.C.G.A. § 14-3-824) 

QUESTION: If we have five people on the board of directors and three are present at a meeting do we need unanimous consent of all three directors to take action or can we pass the action with two of the three directors present? 

ANSWER: We know a quorum is present because three out of five directors (a majority) are at the meeting.  The Board only needs the consent of a majority of directors present at the board meeting (as long as a quorum is present).  That means that two of the three directors at the meeting need to consent—not all three. The vote is not a vote a majority of the entire board, it’s a majority of the board members at the meeting (as long as a quorum is present). 

CAUTION -- The association document could require the consent of a majority of the entire board or some other number of directors.  The example assumes the documents are silent. 

Proxies: 

A proxy is a document appointing someone else to act on behalf of an absent member.  Board members cannot give proxies to anyone (even another board member) to attend a board meeting and vote in his/her place.  Board members are considered “present” at a board meeting and count toward the quorum if they participate in the meeting so that all directors can simultaneously hear each other during the meeting (speaker phone, conference calling or video conferencing). 

Agendas:

Minutes:

Parliamentary Procedure – Robert’s Rules of Order

Basics of Robert’s Rules of Order:

Motion from a board member
If no second - motion dies and is not discussed
If second is received from another board member – discussion/debate/opinions of motion
President can impose discussion rules (maximum time; maximum number of turns)
President call for vote on motion
Board members vote
President announces results of vote


Methods of Voting Outside a Meeting

Corporate code - director deemed to assent to actions properly taken at board meeting unless:

Resolutions: Unless association’s legal instruments state otherwise, majority of directors sign same document. 

Written Consents/Faxes: Unless association’s legal instruments state otherwise, majority of directors must consent to action in writing. 

Email - Usually permissible by association documents, but must make sure:

Telephone­: Board voting by telephone is acceptable only when all members of the board can hear each other simultaneously.  Otherwise, action must be taken in writing. 

MEETINGS OF THE OWNERS 

Types of Owner Meetings

1. Annual Meetings

2. Special Meetings

3. Town Hall Meetings

Location of Owner Meetings

Corporate Code: Inside or outside the State of Georgia at place stated in or determined in compliance with the bylaws 

If Bylaws Are Silent: Corporate Code states meetings must be held at the corporation’s principle office or other “suitable” location 

Notice Requirements

Annual Meeting Notices - TIMING 

GCA and POAA: (O.C.G.A. §§ 44-3-102 and -230) At least 21 days advance notice of annual or regular meeting.  Notice can be delivered by:

HOA (O.C.G.A. § 14-3-705(c)) 

Corporate Code: Give notice of the meetings as described in bylaws  

If Bylaws are Silent: Corporate Code states notice is fair and reasonable if give members date, time and place of the meeting - no fewer than ten days (or if notice is mailed by other than first-class, registered mail, or statutory overnight delivery, 30 days) nor more than sixty days before the meeting date. 

Annual Meeting Notices - CONTENT

GCA, POAA, Corporate Code: Annual meeting notice must state meeting date, time and location

Corporate Code Additional requirement: annual meeting notice must describe matters to be approved by members if they relate to:

Members who appear at meeting, participate and/or vote at meeting

Members who appear at meeting, challenge notice and do NOT participate or vote or members who do not appear at meeting at all. The board could send new notice to members if there is enough time before the meeting or the board could cancel and reschedule the meeting.

Special Meeting Notices - TIMING

GCA and POAA:  (O.C.G.A. §§ 44-3-102 and -230)
At least seven days before special meeting. Notice can be delivered by:

Corporate Code – limitation: (O.C.G.A. § 14-3-722(d))
Unless 20% or more of voting power is present at meeting in person or by proxy, member vote only permitted on issues described in meeting notice. To vote on issues even if less than 20% of the voting power is not at meeting, describe all voting issues in meeting notice.

QUESTION: Is the board required to send annual meeting notices to every owner, even if the owner is delinquent, in violation of the covenants or lives out of town?

ANSWER: Yes. Although an owner may not be able to vote at the meeting, the owner (as a member of the corporation) has the right to attend the annual meeting. Therefore, the association has the obligation to send the meeting notice to ALL owners.

QUESTION: What if the association does not have the owner’s current address?

ANSWER: If the association does not have a current address for an owner, the meeting notice should be sent to the property the person owns in the community.

QUESTION: Can the board send annual meeting notices to the owners via email?

ANSWER: It depends on the association’s legal documents. If the documents allow meeting notices via email or the website, then the association is permitted to send notices in that manner. However, the association must provide written notice to all owners who do not have access to a computer. Most association documents do not contain the necessary language to send electronic notices to the owners. An amendment to the bylaws would remedy this problem.

QUESTION: What if the annual meeting notice is defective in some way?

ANSWER: Sending a defective notice means the meeting and all actions taken at the meeting are subject to challenge by certain members. The board could send new notice to members if there is enough time before the meeting or the board could cancel and reschedule the meeting.

Special Meeting Notices - TIMING

GCA and POAA: (O.C.G.A. §§ 44-3-102 and -230)

At least seven days before special meeting. Notice can be delivered by:
• First-class mail
• Registered mail
• Statutory overnight delivery
• Personal delivery
• Electronically as describe in Georgia Uniform Electronic Transactions Act

HOA: (O.C.G.A. § 14-3-705(c))

Corporate Code: Give notice of the meetings as described in bylaws

If Bylaws are Silent: Corporate Code states notice is fair and reasonable if it gives members date, time and place of the meeting - no fewer than ten days (or if notice is mailed by other than first-class, registered mail, or statutory overnight delivery, 30 days) nor more than sixty days before the meeting date.

Special Meeting Notices - CONTENT

GCA and POAA: Special meeting notice must include date, time, place and purpose of meeting. (O.C.G.A. §§ 44-3-102 and -230)
Usually members cannot vote on anything not expressly described in special meeting notice. For instance, if the special meeting notice states the purpose of the meeting is to discuss the proposed amendment to the covenants, a vote to approve or disapprove of the amendment would not be proper. The stated purpose was to discuss, not vote on the amendment.

HOA – Non-Profit Code: Notice of a special meeting is fair and reasonable if it includes a description of the matter(s) for which the meeting is called. (O.C.G.A. § 14-3-705(c)(3))

Quorum Requirements

Required number to meet a quorum usually specified in association’s legal documents 

If legal documents are silent about how to calculate a quorum here’s the law:

GCA and POAA (O.C.G.A. §§ 44-3-103 and -228) 

Unless the instrument or bylaws provided otherwise, a quorum shall be deemed present throughout any meeting of the members of the association if persons entitled to cast more than 1/3 of the votes are present at the beginning of the meeting. (See Q&A below for discussion of the phrase “entitled to cast” and a discussion of the word “present”.) 

HOA (O.C.G.A. § 14-3-722) 

Corporate Code – Unless this chapter, the articles, or bylaws provide for a higher or lower quorum, 10 percent of the votes entitled to be cast on a matter must be represented at a meeting of the members to constitute a quorum on that matter. (See Q&A below for discussion of the phrase “entitled to cast” and a discussion of the word “represented”.) 

NOTE: Legally, the bylaws can state that a quorum is 1% of the votes entitled to be cast, but it is very rare to see a quorum requirement lower than 10%. 

QUESTION: What does the phrase, “entitled to cast” in the GCA, POAA and Corporate Code mean? 

ANSWER: It means that members who are ineligible to vote do not count towards the quorum requirement. With this language, it is easier to obtain a quorum. 

For example, a condominium with 100 units has 10 delinquent owners who are automatically ineligible to vote. The bylaws do not specify the number needed to obtain a quorum. According to the GCA, the annual meeting could be called to order if owners representing at least 31 units are present in person or by proxy at the beginning of the meeting. 100 units – 10 units ineligible to vote = 90 voting units. One-third of 90 is 30. Accordingly, people representing 31 units would need to be present in person or by proxy at the beginning of the annual meeting in order to meet the GCA requirement that MORE THAN one-third of the votes are needed for a quorum. 

It is important to determine how a member becomes ineligible to vote. Some documents automatically suspend a member’s vote for certain violations. Other documents state that the board must notice a member before the vote can be suspended. If notice is necessary, but never given, the member would still be entitled to vote and would count towards the quorum. 

For example, an HOA with 100 lots and 10 are delinquent. The bylaws state that the association must notify a member in advance in order to suspend the right to vote. No voting suspension notices were sent to the delinquent owners. The quorum requirement in the bylaws is 1/3 of the votes entitled to be cast. To call the meeting to order, the association would need owners representing 34 of the lots present in person or by proxy at the beginning of the meeting. (100 divided by 3 is 33.33. 33 is too low, so 34 members are required to call the meeting to order and conduct business.) 

QUESTION: What does “present” mean in the GCA and POAA? 

ANSWER: “Present” – means that the person/owner must physically be present at the meeting to count towards a quorum. A proxy showing that someone is representing the person is not good enough. Unless the Association documents allow otherwise, the GCA and POAA do not permit proxies to count towards a quorum. 

QUESTION: What does “represented” mean in the GCA and POAA? 

ANSWER: “Represented” – means that the person/owner can use a proxy to represent him/her at a meeting of the corporation in order to count towards a quorum. 

QUESTION: What if we do not get a quorum? 

ANSWER: If a quorum of members does not attend the annual meeting, the association cannot conduct any voting business. Most associations take the opportunity to conduct a “town hall meeting” to present information to the members. The board members provide reports and inform the members about the status of the community, but the corporation cannot take an action at the meeting (no elections, no voting, no official action). 

Robert’s Rules of Order state that the members can:

QUESTION: Do we have to call another meeting if we do not get a quorum?

ANSWER: Generally, no. Unless the community legal documents require the board to call additional meetings, the law does not require the board to try to hold additional annual meetings that year after not obtaining a quorum.

QUESTION: What if we have a quorum at the beginning but people leave so there is no more quorum?

ANSWER: GCA and POAA state that once a quorum is present at the beginning of a meeting of members, a quorum shall be deemed present throughout such meeting, regardless of how many people leave the meeting.HOA must comply with Corporate Code. Corporate Code states that a quorum must be present for each “matter” voted on at any meeting of the association.

Proxy Requirements: (O.C.G.A. §§ 14-3-724; 44-3-79(c) and44-3-224(b))

QUESTION: What is a Proxy?

ANSWER: A proxy is a document appointing someone else to act on behalf of an absent member. The law allows proxies to be used for all meetings unless prohibited or limited by the association’s legal documents. Sometimes proxies are general, and the absent member gives the proxy-holder complete discretion to act on behalf of the absent member at the meeting. Sometimes the proxies are “directed.” With directed proxies, the absent member gives the proxy-holder authority to act only on certain matters or vote a certain way at the meeting. 

QUESTION: What does a proxy have to say to be valid?

ANSWER: A proxy must be signed by the proxy-giver and must state the name of the person authorized to act on the owner’s behalf. (O.C.G.A. § 14-3-724)The GCA and POAA also require that a proxy be dated. (O.C.G.A. §§ 44-3-79(c) and -224(b))

QUESTION: Who can give a proxy?

ANSWER: Only members who are permitted to vote and who cannot attend the meeting may give a valid proxy to someone else. If a member is ineligible to vote and the member gives a proxy to someone else, the proxy may help establish a quorum for the meeting (depending on the language in the association’s documents) but the proxy-holder will not be able to cast a vote on behalf of the absent owner. 

QUESTION: Who can act as a proxy-holder?

ANSWER: The proxy-holder must be at least 18 years old. Unless the association documents have limiting language, the proxy-holder can be anyone over 18 -- another owner, a non-owner, a delinquent owner, someone in violation of the covenants, or even a tenant at the property. The proxy-holder can be someone from a different city or even a different state. The proxy-holder is simply a substitute for the absent member. The proxy-holder has the same rights or limitations as the absent member. 

QUESTION: If the proxy-giver is not permitted to vote, can the proxy-holder vote for him?

ANSWER: If the proxy-giver is not eligible to vote, the proxy is worthless for voting purposes. The proxy-holder cannot vote on behalf of the property owned by the proxy-giver. 

QUESTION: What if the proxy-holder is not permitted to vote, but the proxy-giver is permitted to vote?

ANSWER: Unless the documents have limiting language, the proxy-holder can cast the proxy-giver’s vote, but the proxy-holder cannot vote on behalf of the property he/she owns in the association. Be careful - some association documents will not permit a proxy-holder to vote on behalf of a proxy-giver if the proxy-holder is not eligible to vote for his/her own property. 

QUESTION: What if the proxy-holder gets sick and cannot attend the meeting?

ANSWER: A proxy-holder cannot give someone else the proxy to exercise at the meeting unless the proxy includes substitution language. Substitution language allows the proxy-holder to substitute someone else for him/herself. 

QUESTION: What if the proxy-giver wants to require the proxy-holder to vote a certain way?

ANSWER: The proxy-giver can “direct” the proxy-holder to vote in a particular way by giving a “directed proxy” instead of a general proxy. The directed proxy identifies a particular topic and states that the proxy-holder has authority to cast a vote on that topic only in compliance with what is shown on the directed proxy.

QUESTION: Is a copy, fax or email of a proxy valid?

ANSWER: Yes. According to the Corporate Code, a copy of a signed proxy and any proxy sent via facsimile or email is valid. 

QUESTION: What if someone brings a proxy that is signed, but the board cannot tell who signed it? 

ANSWER: Board members have the ultimate authority to accept or reject a proxy form. If the board reasonably cannot tell who gave the proxy, the board is entitled to reject the proxy. If there is a reasonable amount of information from which to determine the identity of the absent member, then the board has the authority to accept the proxy. This decision is within the board’s reasonable discretion.

QUESTION: How many proxies can one person have for a particular meeting?

ANSWER: Unless the association legal documents limit the number of proxies a person can hold, a proxy-holder can be appointed as the proxy for any number of members. In fact, one person can be a walking quorum all by himself if he has enough proxies!

QUESTION: How long does a proxy last?

ANSWER: Unless otherwise specified in the proxy form, a proxy is valid for 11 months.

QUESTION: How can the proxy-giver revoke the proxy?

ANSWER: The proxy-giver can attend the meeting, which automatically revokes the proxy for that meeting. The proxy-giver can give a written statement to the secretary of the association revoking the proxy. This statement must be given before the meeting. The proxy-giver can give a more recently-dated proxy to someone else. Also, if the proxy-giver dies, the proxy is automatically invalid.
Conduct at Member Meetings

Rules of conduct should be decided at the beginning of each meeting. 

For example – can member meetings be tape recorded or videotaped?  Is there a time limit within which to speak?  Must each person be given a turn to speak before someone speaks a second time?  Is there a maximum number of turns a person gets in which to speak?  

Absent rules of conduct, most associations comply with “Roberts Rules of Order” (“Robert’s Rules”) Agendas for Membership Meetings:

Board Elections

What if the bylaws require a nominating committee, but one is never formed? 

If the candidates for the board are supposed to be nominated by a committee prior to the meeting and that is never done, technically the association is in breach of the bylaws.  It is rare for an association to get volunteers interested in serving on a nominating committee.  For this reason, most nominations are taken from the floor of the annual meeting as part of the election process.  The failure to use a nominating committee will not invalidate an election where the vote is taken from the floor of a valid meeting.  If a nominating committee is required by an association’s bylaws, but rarely formed, it is best to amend the bylaws and remove the requirement for a nominating committee. 

Are there any qualifications for board members?  

Unless additional qualifications are described in the association’s legal instruments, the Corporate Code requires board members to be natural persons who are at least 18 years old.  Other than age, the law does not set additional requirements.  Some associations have created additional qualifications for board members.  

For instance, sometimes candidates for the board cannot be delinquent in association fees, or be in violation of any of the association’s covenants or rules and regulations.  Sometimes board members are required to own property in the community, or to be on-site owners.  

We have created candidate applications for some communities that allow the association to run background and credit checks against board candidates.  If the board wants to establish candidate or director qualifications, these should be added to the bylaws by amendment.  Alternatively, if the legal documents give the board the authority to create qualifications, the association can do so by board resolution. 

How can we conduct elections if we do not have a quorum at the meeting?  

If an association does not obtain a quorum at the annual meeting, elections cannot take place at that meeting.  The Corporate Code states that directors remain in place until their successors are elected, designated or appointed.  

Some bylaws permit elections outside of a meeting by ballot – either by mail or electronic means.  If an association is not permitted to conduct elections outside of a meeting, we suggest amending the bylaws to permit this process because this likely will be the way elections are conducted in the future. 

Other bylaws contain provisions allowing directors to resign and permitting the remaining directors (without a vote of the membership) to fill the vacancy created by the resignation.  This allows new directors to take office if some current directors want to resign. 

Voting at Membership Meetings

General Member Actions 

GCA/POA – silent – nothing specific about the number of votes necessary to take action at a member meeting.  BE CAREFUL – Most association documents identify the percentage vote necessary for different actions 

Condominium, Property Owner Association and HOA - Corporate Code - Unless this chapter, the articles, or the bylaws require a greater vote or voting by class, if a quorum is present, the affirmative vote of a majority of the votes cast is the act of the members. (O.C.G.A. § 14-3-723) 

Director Elections 

GCA/POA – silent – nothing specific about number of votes necessary to elect directors. 

Condominium, Property Owner Association and HOA - Corporate Code - Unless otherwise provided in the articles, directors are elected by a majority of the votes cast by the members entitled to vote in the election at a meeting at which a quorum is present.  (O.C.G.A. § 14-3-725)

Voting Outside a Meeting 

Ballots: (O.C.G.A. § 14-3-708)

A Ballot must:

Ballot vote outside a meeting is valid if:

Written Consents (O.C.G.A. § 14-3-704)

Effective Date

Manager’s Role Regarding Membership Meetings

ASSOCIATION BOOKS & RECORDS

GCA and POAA: Require associations to keep books and records that accurately reflect the affairs and activities of the association, but neither law defines the term “book” or “record” 

Corporate Code: Requires corporations to maintain the following records in written format or a format that can be converted to writing in a reasonable period of time 

Easy Records:

Hard Records:

What Records Can Members Inspect and Copy?

Corporate Code: Unless association’s documents allow a member to see ALL books and records, member entitled to see only books and records listed above according to Corporate Code.
For example: Many records that would be required by the GCA and POAA to accurately reflect the affairs and activities of the association are not on the Corporate Code list. They exist in the books and records of the corporation, but members would not be entitled to inspect or copy them. Records in this category include:

QUESTION: What does a member do if he/she wants to inspect and/or copy certain records?

ANSWER 1 - If a member wants to see “Easy Records”:A member wanting to inspect and copy EASY records must give association written notice or demand at least five business days before the date on which member wants to inspect and copy records.

ANSWER 2 - If a member wants to see “Hard Records”:A member wanting to inspect and copy HARD records must:

Without Board consent, member cannot use membership list: 

To solicit money or property unless such money or property will be used solely to solicit the votes of the members in an election to be held by the corporation

After receipt of a request to inspect and copy records, the Board should:

When the association does not want to let the owner inspect or copy the requested records

*Unless the association documents include language limiting the length and scope of record inspections, even if a member is a record-requesting “addict” the association must comply with the owner’s inspection requests.

QUESTION: Are there ANY records the association should not let members inspect or copy?
ANSWER: Confidential or privileged information should never be made available to members for inspection or copying. These records include: