Chapter 9 MEETINGS

• Jurisdiction: North Carolina

9 MEETINGS

§ 9.01. In General

There are generally two types of meetings for members of associations: annual meetings and special meetings. Annual meetings are an opportunity for all members to attend a meeting and learn about current issues facing the community and to vote on matters that properly come before the membership.¹ The most important aspects of the annual meeting of members are the election of the board of directors and the ratification of the annual budget. Special meetings, on the other hand, are generally unplanned meetings that are necessitated for a specific issue that either has to be addressed before the next annual meeting or a sufficient number of members or the board find it desirable to do so.

Almost all homeowners associations and condominium associations have to have at least one annual meeting. Both the PCA and the Condominium Act require planned communities and condominium associations to hold annual meetings.² The requirement that an annual meeting be held applies to planned communities and condominiums, regardless of when formed.³ For homeowners associations that do not meet the definition of "planned community," but are incorporated under Chapter 55A of the General Statutes, the Nonprofit Act would require an annual meeting as well.⁴ This significantly narrows the universe of associations that do not need to have an annual meeting. There is no statutory requirement for an unincorporated homeowners association that is not a "planned community" to have an annual meeting, although it is good practice to have such a meeting.

With the exception of the use of written ballots, almost all action that requires a vote of members (as opposed to signatures) has to be taken at an actual physical meeting of the membership. However, action by an association can be taken without a meeting if the action is taken by all members entitled to vote on the action.⁵ The action has to be evidenced by one or more written consents describing the action taken, signed before or after such action by all members entitled to vote thereon, and delivered to the association for inclusion in the minutes or filing with the corporate records.⁶ As a result of this lofty unanimity requirement, in the case of large communities, it will be rare that that the association can take action with "written consents" without a meeting. Proxy voting is generally understood as an acceptable manner of voting in order to offer a convenient manner in which owners can participate in the association's democratic process.

There are repercussions for incorporated condominiums and planned communities not holding an annual meeting. If a meeting is not held within 15 months of the last annual meeting, a member may bring an action against the association to compel an annual meeting be held.⁷ If the court orders the meeting, the court may also order the association to pay all or a part of the member's costs and attorneys' fees incurred in obtaining the order.⁸ Even in cases where the developer is in control, the association should have an annual meeting.⁹

§ 9.02. When and Where

Annual meetings are usually held in the beginning of the fourth quarter of the calendar year because most associations operate on a calendar year and both the PCA and the Condominium Act require associations to give at least 10 (14 in the case of condominiums) days' notice before the budget ratification meeting of the members.¹⁰ However, the actual time and place of the meeting is usually set forth in the bylaws for the association. Neither the PCA nor the Condominium Act dictate when the association has to have its annual meeting or where the annual meeting has to take place. As a practical matter, the meetings are held at least one month before the start of the new calendar year if not earlier. If the association is operating on a calendar year, then it is recommended that the annual meeting be held in October. This would allow the board ample time to re-write the budget in the event the membership rejected the budget initially proposed at the October meeting and re-notice another meeting to ratify the revised budget.¹¹

Under the Nonprofit Act, an association with members may hold regular membership meetings at the times stated in or fixed in accordance with the bylaws.¹² If the bylaws do not themselves specify a time for the annual meeting, authority to fix them may be delegated to the board of directors or to a corporate officer. The Nonprofit Act gives nonprofit corporations the flexibility to hold annual meetings at varying times as convenience may dictate.¹³ Absent a board member or officer fixing a different location, annual and regular meetings have to be held at the association's principal office.¹⁴ Many homeowners associations and condominium associations identify their principal office as the management company. It is helpful, therefore, for the bylaws to specify at least another general place to conduct the meeting or the board to designate a specific location, so as to avoid having a meeting at an office not sufficiently large to accommodate the event. Most officers or boards fix the location of the meeting at a church, school or other venue sufficiently large enough to accommodate all the attendees.

The failure to hold an annual or regular meeting at a time stated in the association's bylaws does not affect the validity of any corporate action.¹⁵ Thus, if the association is unable to schedule a meeting for the exact time in its bylaws, then another time may be scheduled without risking the legitimacy of the actions taken at the meeting. It is not uncommon at all for the bylaws to specify an exact date on which the association's annual meeting must take place. Rarely do the meetings take place on that date and the Nonprofit Act is clear that such changes in the time of the meeting will not be held against the association.

§ 9.03. Notice of Meetings

The provisions for notice of meetings in the Condominium Act and the PCA are applicable to condominiums and planned communities regardless of when they are formed.¹⁶ The requirements for notice, however, are slightly different depending on whether the association is for a condominium or planned community. For planned communities, the PCA requires that notice be given not less than 10 nor more than 60 days in advance of any meeting.¹⁷ For condominiums, the Condominium Act requires that notice be given not less than 10 nor more than 50 days in advance of any meeting.¹⁸ What this means is that if a meeting is held on October 15, notice cannot be sent earlier than August 16 for planned communities and cannot be sent earlier than August 26 for condominiums. It also means that the meeting notice cannot be sent any later than October 5 for either a planned community or a condominium. In short, the notice would have to be sent between August 16 and October 5 for a planned community and between August 26 and October 5 for a condominium. Note that the notice need only be mailed between these dates. The fact that the notice does not reach the owner until a later date is of no consequence under the PCA and Condominium Act.¹⁹

Both statutes require that the notice may be sent by the secretary or other officer specified in the bylaws by one of three methods: (1) hand delivery; (2) United States mail; or (3) by electronic means, including by electronic mail over the Internet.²⁰ While the statute requires the "secretary or other officer" to deliver notice, the Court of Appeals has suggested that this section may not be mandatory and indicated that others may notice the meeting.²¹ The notice can be sent by any of the means specified in the statute. If mailed, the notice should be sent to the address of the owner or another address designated by the owner.²² If sent by electronic mail, the notice should be sent to the electronic mail address designated by the owner.²³ A popular and cost-effective way for an association to send notices is by electronic mail. It is recommended that the association obtain consent from the owner to serve notices by electronic mail. One way to do this is to have an owner create an account on the association's webpage by, among other things, providing the owner's email address. As part of the process for creating an account on the association's website, the association should require the owner to consent to the terms and conditions for use of the website, among them being the receipt of notices of annual or special meetings of the association by electronic mail.²⁴

The notice of any meeting has to state the time and place of the meeting and the items on the agenda, including the general nature of any proposed amendment to the declaration or bylaws, any budget changes, and any proposal to remove a director or officer.²⁵ This is important. Typical pitfalls for a homeowners or condominium association involve inadequate notices that fail to give owners a description of the purposes of the meeting. Both the PCA and the Condominium Act require that the owners be given a list of the items on the agenda. In instances where an amendment to the bylaws or declaration is not being considered, the budget is not being changed or a board member is not being removed, then an outline of the agenda would suffice. For amendments, budget changes and removal proceedings, a brief description of the items to be considered by the membership should be given in the notice. For instance, with an amendment either the amendment itself or the proposed new language to be inserted into the declaration should be included. Some courts have found amendments invalid that were undertaken without proper notice to the members.²⁶ For a budget change, the item being amended, the amounts by which it is being changed and a brief description of the amendment should be given. For a removal of a director, a simple statement that one of the purposes is to remove a director (specifying the name of the director) should be given.²⁷ A detailed...