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Bemian

Board authorized change or fraud?

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Hello,

my question is about HOA Board of Directors vote.

Our association follows Illinois Condominium Act., Declaration, By-laws, Board Rule Book. Association is registered as Non-profit corporation.

 

(1) Our Board members with no membership approval voted to allow the President (board member) to work as property manager assistant for compensation.

 

(Our By-laws: ........Members of the Board shall receive no compensation for their services, unless expressly allowed by the Board at the direction of the voting members having two-thirds (2/3) of the total votes....)

 

Property Manager whom pushed for her becoming his assistant argues that such is allowed by Robert’s Rules and we should read it.

We never used or heard of Robert’s rules. Lately our Property Manager points to it frequently but never explains. I was unable to find anything in Robert’s rules regarding this matter.  

 

(2) Based on our By-laws most membership believes the President is not allowed to work for compensation and furthermore that elected Board members committed fraud by changing the rule in the favor of another elected official.

 

(3) Also, some members are questioning if the President lost or gave up her position on the Board by accepting the job within the association.

 

Thank you for your time.

 

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40 minutes ago, Bemian said:

(1) Our Board members with no membership approval voted to allow the President (board member) to work as property manager assistant for compensation.

(Our By-laws: ........Members of the Board shall receive no compensation for their services, unless expressly allowed by the Board at the direction of the voting members having two-thirds (2/3) of the total votes....)

Property Manager whom pushed for her becoming his assistant argues that such is allowed by Robert’s Rules and we should read it.

We never used or heard of Robert’s rules. Lately our Property Manager points to it frequently but never explains. I was unable to find anything in Robert’s rules regarding this matter.  

There are a number of problems with the Property Manager’s claim.

For starters, nothing in RONR allows for any such thing, and I have read it. Instead, what RONR provides regarding the board’s authority is as follows:

”Except in the simplest and smallest local societies, or those holding very frequent regular meetings, it is generally found advisable to provide in the bylaws for a board to be empowered to act for the society when necessary between its regular meetings, and in some cases to have complete control over certain phases of the society's business. Such a board is usually known as the executive board, or—in organizations where there is an executive committee within and subordinate to the board as described below—the board of directors, board of managers, or board of trustees. Any such body is referred to in this book as an executive board, however—regardless of whether there is an executive committee—in cases where the distinction is immaterial.” (RONR, 11th ed., pgs. 481-482)

“A society has no executive board, nor can its officers act as a board, except as the bylaws may provide; and when so established, the board has only such power as is delegated to it by the bylaws or by vote of the society's assembly referring individual matters to it. The amount of regular power delegated to an executive board under the bylaws varies considerably from one organization to another.” (RONR, 11th ed., pg. 482)

Furthermore, even if RONR did say this, your bylaws would take precedence (even if your bylaws specify RONR as the organization’s parliamentary authority, which is unclear, since apparently no one has ever heard of it).

”When a society or an assembly has adopted a particular parliamentary manual—such as this book—as its authority, the rules contained in that manual are binding upon it in all cases where they are not inconsistent with the bylaws (or constitution) of the body, any of its special rules of order, or any provisions of local, state, or national law applying to the particular type of organization. What another manual may have to say in conflict with the adopted parliamentary authority then has no bearing on the case. In matters on which an organization's adopted parliamentary authority is silent, provisions found in other works on parliamentary law may be persuasive—that is, they may carry weight in the absence of overriding reasons for following a different course—but they are not binding on the body.

Although it is unwise for an assembly or a society to attempt to function without formally adopted rules of order, a recognized parliamentary manual may be cited under such conditions as persuasive. Or, by being followed through long-established custom in an organization, a particular manual may acquire a status within the body similar to that of an adopted parliamentary authority.” (RONR, 11th ed., pgs. 16-17)

With that said, whether the bylaw provision in question (and other provisions defining the authority of the board) permit the board to take this action is up to the society to interpret.

40 minutes ago, Bemian said:

(2) Based on our By-laws most membership believes the President is not allowed to work for compensation and furthermore that elected Board members committed fraud by changing the rule in the favor of another elected official.

It is up to the membership to interpret the bylaws, and the proposed interpretation does not seem unreasonable. “Fraud” is a legal term, so that is a question for an attorney.

40 minutes ago, Bemian said:

(3) Also, some members are questioning if the President lost or gave up her position on the Board by accepting the job within the association.

I don’t think the President automatically gave up her position on the board by accepting the job. It would seem, however, that this is in violation of the bylaws. As a consequence, the President will have to rectify this matter by either (a) resigning from her office as President or (b) resigning from the job, either of which would resolve the conflict. If the President fails to resolve this on her own, the membership may have to take disciplinary action to remove the President, and possibly also other board members. Check to see if your bylaws have rules on that. Otherwise, see Ch. XX of RONR.

Edited by Josh Martin

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Thank you

(1) I strongly believe our By-laws are the document to rely on

(2) we want to and we will present this interpretation to an attorney

(3)she will not resign from either. Yes, our By-laws have rules on removal of the board member or a whole board at once. Also IL condo act has a chapter on that. 

 

 

Edited by Bemian

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1 hour ago, Bemian said:

(1) I strongly believe our By-laws are the document to rely on

No disagreement here.

1 hour ago, Bemian said:

(2) we want to and we will present this interpretation to an attorney

Okay.

1 hour ago, Bemian said:

(3)she will not resign from either. Yes, our By-laws have rules on removal of the board member or a whole board at once. Also IL condo act has a chapter on that. 

Then follow those procedures.

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6 hours ago, Josh Martin said:

With that said, whether the bylaw provision in question (and other provisions defining the authority of the board) permit the board to take this action is up to the society to interpret.

I agree with this statement. 
 

6 hours ago, Josh Martin said:

I don’t think the President automatically gave up her position on the board by accepting the job

I also agree would this statement. 
 

6 hours ago, Josh Martin said:

It would seem, however, that this is in violation of the bylaws. As a consequence, the President will have to rectify this matter by either (a) resigning from her office as President or (b) resigning from the job, either of which would resolve the conflict.

I disagree ... strongly ... with this statement. As I read the bylaws, they prohibit compensating directors for their service as directors. Service as a property manager or assistant property manager is completely different from service as a director.

I think the provision is ambiguous and can be interpreted either way. Both interpretations are reasonable. It is ultimately, as Mr. Martin has stated, up to the assembly itself to interpret its own bylaws. I think it is a stretch for us in this forum to say that the president has violated the bylaws and should resign from one of the positions or to be subjected to disciplinary action. That is something for this organization itself to decide.

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Thank you.

On 11/12/2019 at 11:49 PM, Richard Brown said:

I disagree ... strongly ... with this statement. As I read the bylaws, they prohibit compensating directors for their service as directors. Service as a property manager or assistant property manager is completely different from service as a director.

I’m licensed Real Estate Broker in IL 

If I analyze wording in our By-laws the same way as I would a sales contract:

The By-laws use the plural form 'services' which is used mainly because most institutions typically provide not just one service, but a variety or range of services.

(Our By-laws: ........Members of the Board shall receive no compensation for their services, unless expressly allowed by the Board at the direction of the voting members having two-thirds (2/3) of the total votes....)

Service vs Services

Considering the word service as a countable noun, then there must be different services in mind.

Services is plural and since I am counting more than one service to make it plural, it is implied that this is a countable noun.

- question is what is countable service and what is uncountable service/s because By-laws clause in that section mostly talking about the Board election so countable service in that conjunction its pointing toward serving on the Board.

However, the president is still the Board member when working in the office so then the president will be providing services (uncountable).

- furthermore, if the president serves on the Board he/she provides service (countable) which is part of Association’s service/s as a whole (uncountable) because the Association is providing range of services to homeowners.

In that conjunction no pay for any service within the Association.

Eg.

Joe offers three transportation services. You can travel by bus, taxi or subway.  (serving on the board, performing front office operations, performing back office operations)

Alex offers only one transportation service. You can travel only by taxi. (serving only on the Board)

 

 

On 11/12/2019 at 11:49 PM, Richard Brown said:

I think the provision is ambiguous and can be interpreted either way. Both interpretations are reasonable. It is ultimately, as Mr. Martin has stated, up to the assembly itself to interpret its own bylaws. I think it is a stretch for us in this forum to say that the president has violated the bylaws and should resign from one of the positions or to be subjected to disciplinary action. That is something for this organization itself to decide.

Also President’s conflict of interest:

In the state of Illinois the  Community Association Managers are licensed by IDFPR (Illinois Department of Financial and Professional Regulation, Real Estate Division) therefore the president has conflict of interest.

If he/she is caught performing anything else, then a ministerial act he/she may be fined $10,000 and  charged with misdemeanor for not being properly licensed under Illinois Community Association Manager Act.

It is impossible to distinguish when he/she is acting as a president or as a manager assistant or as a licensed manager.

E.g. He/She is managing the community by herself during regular business hours without property Manager being present on the property on his day off.

 

(Disclaimer: all the above analysis is my personal expression for the purpose of discussion and general informational purposes only. I'm seeking no binding advice in this forum. This is not legal advice or practice of law).

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On 11/12/2019 at 11:49 PM, Richard Brown said:

I disagree ... strongly ... with this statement. As I read the bylaws, they prohibit compensating directors for their service as directors. Service as a property manager or assistant property manager is completely different from service as a director.

I think the provision is ambiguous and can be interpreted either way. Both interpretations are reasonable. It is ultimately, as Mr. Martin has stated, up to the assembly itself to interpret its own bylaws. I think it is a stretch for us in this forum to say that the president has violated the bylaws and should resign from one of the positions or to be subjected to disciplinary action. That is something for this organization itself to decide.

I would note that my statement that this seems to be in violation of the bylaws is not based on my own views, but on the OP’s statement that “Based on our By-laws most membership believes the President is not allowed to work for compensation...”

I agree that your interpretation is also reasonable. I don’t think I have enough information to stake out an opinion one way or the other.

1 hour ago, Bemian said:

If I analyze wording in our By-laws the same way as I would a sales contract:..

As Mr. Brown and myself have both noted, the society will decide what this rule means. So there is no point in arguing with us about it. :)

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11 minutes ago, Josh Martin said:

As Mr. Brown and myself have both noted, the society will decide what this rule means. So there is no point in arguing with us about it. :)

I'm so sorry but arguing was not my intention. I'm grateful for the discussion and I appreciate every word. As a society we are puzzled,  some would like to deal with this matter within our By-laws, some would like to see legal action. I'm just figuring out which one I will support.

 

23 minutes ago, Josh Martin said:

If I analyze wording in our By-laws the same way as I would a sales contract:..

You are right I should not post the analysis. I'm sorry.

 

Thank you

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