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KASS: Documents should explain voting rights

DEAR BENNY: My condo building has 45 units. Our full-time building maintenance employee owns a unit and his wife is a board member. Do you think this is a conflict of interest considering she votes on his salary?

We also have a husband and wife on the board, which is allowed because they own two separate units. Do you think this is a conflict? The voting proxy was just sent out and it says I get four votes. I am a large unit owner. Should the amount of votes we receive be based on percentage of ownership or should all unit owners get the same amount of votes? – Paco

DEAR PACO:  Your last question is easy to answer. Your condominium has three important legal documents: the declaration, the bylaws and the rules. In some associations, voting is based on the percentage of ownership. You can find this percentage at the end of your declaration; there will be a list of units which contains the ownership percentage.

However, in some associations, each unit gets one vote. I am not sure why or how you have four votes, and you should discuss this with your property manager and/or your personal attorney.

Let’s look at your two situations. First, the maintenance worker owns a unit and his wife is on the board. I don’t consider that a conflict, but the wife should recuse herself on any vote regarding her husband’s salary or performance.

As for the husband and wife who own separate units and are both on the board, I have serious reservations about this. However, if the unit owners voted them into office, that’s democracy.  I have often referred to community association living as “democracy at its best and at its worst.”

If enough owners feel there is a serious conflict of interest, they can always mount a campaign and “throw the rascals out.”

DEAR BENNY: Our development consists of 16 buildings.  Each building has between four and six attached townhomes. The buildings all have mansard roofs with cedar shake shingles. The cedar shake shingles are nearing the end of their life and the board is considering replacing them with asphalt shingles due to cost issues.  The seven-member board believes it can mandate the change in the interest of uniformity throughout the development.

Each of the 16 buildings is individually responsible for its own maintenance and repairs, and reserves for these purposes.  These are not funded by the HOA.  I understand the board cannot allow every building to choose different roofing materials.  I don’t see how they can mandate a material alteration to the buildings, however, without homeowner approval. – Judy

DEAR JUDY: You should be able to find the answer in your legal documents. I need to know what authority the board has. The roofs are common elements, and thus the board has – or should have – the right to make improvements. In many association legal documents, this right is limited by a dollar cap; for example, the board cannot make improvements over XX dollars without a majority vote of the members. But there usually is no restriction on the board making repairs.

You indicate that each building is individually responsible for its own maintenance and repairs. Who makes the decision to spend the money for this work? Does each building have its own board? Is there a master board consisting of representatives from all 16 buildings or are the board members elected at large?

You really should carefully review your association’s documents, and if you have questions, talk with a real estate attorney in your area.

DEAR BENNY: Our tenants have requested a right of first offer. Is that the same as a right of first refusal? – Russ

DEAR RUSS: Good question, and there’s a major difference. A right of first offer (ROFO) means that when you decide to sell, you have to give your tenants the first opportunity to buy. If you go that route, put it in writing but limit their time to make an offer to perhaps two weeks.

A right of first refusal (RIFR) means that once you get a contract offer from  a third party, the tenants have X number of days in which to meet that price and buy your property.

If you know the value of your house, and want to save a real estate commission, give your tenants a ROFO. Otherwise, give them a ROFR and test the waters first to determine what your property will sell for.

In either case, put this in writing and have it signed by all parties.

Benny Kass is a practicing attorney in Washington, D.C. and in Maryland. He is not providing specific legal or financial advice to any reader. He wants readers to e-mail him, but cannot guarantee a personal response. He can be reached at: mailbag@kmklawyers.com.

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