By Ryan D. Poliakoff / Published January 2020
I have been living in a 250-home community governed by an HOA for the past 18 years. While most communities in our area have an American flag facing the street, our HOA boards have never considered a project to put up a flagpole on common property.
A committee of residents appealed to the board with this proposition: Since our declaration has a cap of $5,000 on any capital improvement without a 2/3 vote of our homeowners, we recommended that the board appropriate $4,990, and community members could voluntarily contribute, out of their own pockets, the remaining $3,000 needed for the flagpole.
The HOA board attorney nixed this plan by saying, “Since the aggregate cost is still greater than $5,000, since this is a clear attempt to circumvent the…. provision requiring a membership vote (which could set a bad precedent for future alterations), since this is not a budgeted expense, and since there will be an ongoing cost and liability, I would not be able to advise you to proceed with this work unless you secure a 2/3 vote of the owners present at a meeting held for the purpose of voting on this issue.”
My questions are as follows:
Do you agree with the attorney’s opinion? Does that mean that any HOA-private partnership in funding capital improvements are improper?
And, does “a 2/3 vote of the owners present at a meeting held for the purpose of voting on this issue” mean 2/3 of the entire 250 homes, or 2/3 of those who vote at the prescribed meeting? That makes a big difference.
While you did not provide me with the exact language of the limitation, I do tend to agree with your association’s attorney. In fact, I know that one of my partners litigated this exact issue in circuit court, and the court found that the limitation applied regardless of where the money came from. Now, that was an interpretation of very specific language in a declaration, and the way the limitation is phrased does matter. Here’s generally how it would be evaluated.
A court, in interpreting a contract, will look to the plain language; and if that language is not ambiguous, it will apply it as written. If the language is ambiguous, the court may look to other factors, including but not limited to the intent of the parties who drafted the agreement.
Your declaration of covenants is, in essence, a contract. I will assume that your limitation provision states something to the effect that “the board of directors shall have the authority to make any alteration where the cost is less than $5,000, but for any alteration greater than $5,000, such alteration must be approved by a 2/3 vote of the owners present at a meeting held for the purpose of voting on this issue.” On its face, the project you describe is an alteration that will cost more than $5,000, and so I think the limitation does facially apply. Even assuming, for the sake of argument, that this language is ambiguous, I think the intent of the drafting parties would suggest that the paragraph is intended to allow the board to make small modifications to the property, but to ensure that any significant modifications to the property (as measured by cost) will require membership approval. Now, I can imagine a situation where the evidence of the drafter’s intent is otherwise. It is possible that the real concern was limiting the board’s ability to spend more than a certain amount of money without membership approval, rather than limiting the nature of the modification. But, if that was the case, one would think the declaration would simply prohibit the board from spending more than a certain amount of money on any non-budgeted expenditure (whether modifications, repairs, etc.) without membership approval. I think it’s more likely that the intent of the paragraph is to limit the nature of modifications that may be made without membership approval, and that the cost of the modification is simply a convenient way of defining and limiting such modifications.
Now, while I do not state the above with certainty, I do think your attorney’s advice is reasonable, if only from a practical perspective—if the end-around that you describe is legal, the association can make major modifications to the property if approved by even a minority of the membership, so long as those members are willing to kick in money to the project (which they often are)—and that to me goes against the nature of these kinds of limitations.
As for your question regarding voting, I do think that a “2/3 vote of the owners present at a meeting held for the purpose of voting on this issue” requires 2/3 of a quorum and not 2/3 of the entire membership. The phrase “present at a meeting held for the purpose of voting on this issue” is a qualification that applies to “owners.” If it was otherwise, it would simply refer to a 2/3 vote of the members. The word “present” is key here.
Ryan D. Poliakoff
Partner, Backer Aboud Poliakoff & Foelster
Ryan D. Poliakoff is a partner of Backer Aboud Poliakoff & Foelster and serves as general counsel to condominiums, homeowners associations, and country clubs throughout South Florida. He is a Board Certified Specialist in Condominium and Planned Development Law and the co-author of New Neighborhoods—The Consumer’s Guide to Condominium, Co-Op, and HOA Living. He is also a frequent contributor at seminars and workshops for attorneys and board members, and he has written hundreds of articles for magazines and newspapers throughout the United States. He can be reached at firstname.lastname@example.org. For more information about his firm, visit www.bapflaw.com.