Rob Samouce: Do you really need a quorum for an annual meeting?

In Southwest Florida, it's season, and because they are here, season is also the time for condominium and homeowners associations' annual members meetings. This is the time of year that most association members are in town and therefore the best time for most associations to have their annual meetings of their members.

Some association directors fret over the fact that they may not have a quorum of their members show up and therefore will not be able to have their annual meeting. Unless the association is planning to have their members vote on something that requires a quorum of the members, the lack of a quorum at the annual meeting has no real legal significance and therefore one should not worry about not making a quorum.

Although the law requires community associations to call for and notice to the members the annual meeting, you cannot force the members to attend. Thus, many associations never have a quorum at their annual meeting. Without the quorum, it's not an official annual meeting, but rather an informal annual meeting of the members. The association usually still goes through the agenda items giving officer and manager reports and letting the members discuss items under old and new business, and informal minutes are taken, but no issues are voted on as a quorum of the members is not present.

For condominium associations, Section 718.112 (2)(b)(1.), Florida Statutes provides that "unless a lower number is provided in the bylaws, the percentage of voting interests required to constitute a quorum at a meeting of the members shall be a majority of the voting interests." However, for the election of directors the Condominium Act only requires at least 20 percent of the eligible voters to cast ballots in order to have a valid election of the members of the board. Because ballots are sent out for election of directors with return envelopes, a minimum 20 percent return of ballots is usually always obtained. The election can proceed even though you may not have a majority of the members at the annual meeting for a quorum.

For homeowners associations, Section 720.306(1) (a), Florida Statutes provides that "unless a lower number is provided in the bylaws, the percentage of voting interests required to constitute a quorum at a meeting of the members shall be 30 percent of the total voting interests." In homeowners associations, nominations for director elections are always allowed from the floor. Therefore, you could have the real chance that less than 30 percent of the members turn out for the annual meeting and an election therefore will not occur. What happens to the director seats expiring will depend upon what the bylaws of the individual association provide. In most, the bylaws say the directors terms end at the annual meeting. In these cases, the remaining sitting directors will appoint replacements to those whose terms expired. In other associations, the bylaws may say the director's terms end when they are replaced. In those cases, the directors will remain for another year.

Many say that if you send out proxies you will have a much better chance of having a quorum. While this is true in the event that you wish for the members to vote on matters other than election of directors, if you are not planning on the members voting on anything else at the annual meeting (other than rollover of excess operating funds), proxies become an unnecessary waste of everyone's time and money.

While the Internal Revenue Service requires a vote of the members of a non-profit community association to roll over any excess operating funds into the next year's operating or reserve funds in order to prevent such funds from being taxable, the revenue ruling requiring such a vote does not specify that a quorum of the members is required for such a vote. Therefore a vote at an annual members meeting to roll over funds where a quorum is not obtained should be sufficient for IRS purposes.

There are times when you will need a quorum of the members at an annual meeting and such times include when you want the members to vote on material alteration questions, special assessments, revisions to the governing documents, funding less than statutory required reserves or spending money from a reserve account for a purpose other than which the reserve account is for and voting to waive more expensive compiled, reviewed or audited yearly association financials in exchange for less costly minimal financial statements as required by statute. If you are voting on one or more of theses issues, you will want to send out a proxy to obtain maximum attendance in person, or by proxy, at the annual members meeting so that approval of the issue has the best chance of being obtained.

In addition, if it appears from returned proxies that the vote will be close and you want to give members who did not vote in time a chance to vote, you can postpone counting the votes and adjourn the meeting to a later time and use the votes of those who have already voted by proxy plus the new ones you receive before the meeting reconvenes.

If you are not planning to vote on anything (other than rolling over excess operating funds where a quorum is not required) you can save a lot of time, stationery, envelopes and stamps by skipping sending out a proxy for the meeting.

Rob Samouce, a principal attorney in the Naples law firm of Samouce, Murrell, & Gal, P.A. concentrates his practice in the areas of community associations including condominium, cooperative and homeowners' associations, real estate transactions and closings, general business law, estate planning, construction defect litigation and general civil litigation. This column is not based on specific legal advice to anyone and is based on principles subject to change from time to time. Those persons interested in specific legal advice on topics discussed in this column should consult competent legal counsel.

© 2005 marconews.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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