Publications
Voting Percentages and Owners
Published on December 18, 2004 as
Make sure numbers add up for meeting quorum
Occam’s Razor -
“Given the choice of a series of answers,
always choose the simplest one”
Owners Meetings
Seemingly, such a simple topic, yet so fraught with complication and disputes. GENESIS… (or in the beginning), the typical quorum was 50% for homeowners associations and condominiums to have an owners meeting. I have many memories of sitting and waiting at an annual meeting while board members and others ran back to the property hunting down signatures on proxies so the meeting could proceed.
Occasionally, we would see the creative “arithmetically declining” quorum requirement in the bylaws whereby if quorum was not obtained, another meeting could be called with one half the prescribed amount, and if that quorum was not obtained, another meeting could be called with half of that amount and so on. Seemingly it could extend out far enough so that one person could be a quorum, I guess! To the best of my knowledge, some of the aforestated provisions still exist in older declarations.
Part of the problem was solved in 1984 with a revision to the Illinois Condominium Property Act, which reduced quorums for owners meetings to 20% (unless the owners voted to increase it) and it superseded all declarations in existence. Henceforth, clever draftsmen of association documents would forever use the 20% standard even for non-condominium associations. (However, older bylaws for homeowner associations are still governed by what is stated.)
Owners, board members, managers and lawyers rejoiced and the average annual meeting time frame shrank significantly.
Board Meetings
Quorums for boards of directors’ meetings are governed by the bylaws. Usually it is a simple majority, although I have seen a specified number on occasion (7 directors, 5 is a quorum, etc.). This becomes a problem when the board is operating with less than the prescribed amount; 7 directors, 5 sitting, 3 is a quorum or 5 directors, 3 sitting, 2 is a quorum. Since the Illinois General Not For Profit Corporation Act requires a minimum of three directors for an association [805 ILCS 105/108.10(a),] less than three directors is not a legal board.
Voting Percentages
A simple majority of the owners will conduct most business at an owners meeting except, of course, where otherwise specified. When more than a simple majority (50% plus 1) is required, we refer to that as a “super majority.” Typically, a super majority is required to amend the declaration and bylaws, dissolve the association, remove a director, sell part of the property, and so on.
This is governed by the declaration and bylaws and the Illinois Condominium Property Act for condominiums. Sometimes different super majorities are required for different issues; e.g., 2/3rds of the owners to merge or consolidate with another association, 75% of the owners to amend the declaration and 100% of the owners to change the percentages of ownership.
Boards of directors also have different voting percentages such as a 2/3 majority of the board can vote to fill a vacancy on the board or seek a reduction for all unit owners of real estate taxes.
Percentages of Ownership
Voting percentages sometimes get very complicated for condominium associations, particularly when there are multiple percentages. Homeowner associations vote on a “per capita” basis, one vote per lot, all equal. [Exception – developers sometimes have different classes of votes while in control of an association.) Condominium votes are counted on the basis of percentage of ownership (Section 18(b)(7) of the Illinois Condominium Property Act). This is easy when there are four different percentages in a small association. Picture if you will counting the ballots in a heavily contested election in a 500 unit association with 35 different percentages of ownership (you better bring a sleeping bag).
The percentage of ownership is originally calculated by the developer based upon the “value” of the units at that time. Since “value” is a subjective determination, it can be based upon purchase price, location, square footage, view, etc. So long as the total adds up to 100% it is largely within the developer’s discretion. However, some developers instead of setting a standard for the A, B. C and D units have decided to arbitrarily modify percentages with each phase, as prices go up. This creates a bookkeeping nightmare for the property manager and in this instance, thank God for computers.
Removal of Directors
However, consider a removal meeting where a petition has been filed to remove a director. The bylaws require the affirmative vote of 2/3rds of the owners and voting is by percentage of ownership. The bylaws require cumulative voting (you can “cumulate” all of your votes for one candidate). The Illinois General Not For Profit Corporation Act 805 ILCS 105/108.35(c)(3) states: “In the case of a corporation having cumulative voting, if less than the entire board is to be removed, no director may be removed, with or without cause, if the votes cast against his or her removal would be sufficient to elect him or her if then cumulatively voted at an election of the entire board of directors.” Okay, you do the math!
Finally, the wording of the bylaws must be reviewed carefully to determine whether a quorum and a super majority vote is created from the entire membership or merely those present at a meeting. The presence or omission of a comma can make all the difference.
On a final note to all my readers, at this time of year it is always a good time to count our blessings. The health and safety of our friends and family, our prosperity relative to other parts of the world and our universal desire for peace and happiness. On behalf of myself, my family, the members of my firm, may these gifts be with you throughout all of the days of the year. Peace and best wishes. Jordan. (P.S.…and don’t forget to take down those holiday decorations so you don’t get fined!)