Avoid annual meeting pitfalls

Annual meeting season for many Illinois associations will occur over the balance of the year. The annual meeting may be the most important event for an association, yet there are numerous potential pitfalls that can raise legal challenges (or create political havoc) if the process is not conducted properly.

Today’s column addresses issues particular to preparing for and conducting association annual meetings.

Q. What is the purpose of the association’s annual meeting?

A. The primary purpose of the annual meeting of the owners is the election of directors from among the owners. The board of the association may also provide a “state of the association” update. It isn’t uncommon to include an owners’ forum to permit owners to ask question and make comments about association operations.

The annual meeting is also a good platform to conduct an owner vote on other matters that require a vote of the ownership. For example, owner vote may be required to amend the association’s governing documents, or to pledge assets as collateral for a loan, and the annual meeting could produce a higher turnout than if a separate meeting were called to address these other votes.

Q. What is the quorum requirement for the annual meeting?

A. In a condominium association with 20 or more units, the quorum is 20 percent of the unit owners. This quorum is applicable even if the association’s declaration calls for a higher quorum. If the condominium has less than 20 units, the quorum is whatever is set forth in the association’s bylaws. Quorum is based on the percentage of ownership in the common elements, not the raw number of units. Owners present in person or by proxy are counted toward the quorum.

Q. How can our association make sure a candidate for the board is an owner?

A. All associations should confirm that a candidate is an owner. This should be done before the notice of annual meeting is distributed to owners, and immediately after persons have submitted themselves as candidates.

Ownership can be confirmed by having the association’s counsel obtain a tract book search for the unit of each candidate. This will identify the owner of record of the unit. If the unit is owned by an individual or individuals, determining ownership will be easy. Additional investigation will be required if the search indicates that the unit is owned by a trust or other legal entity. If a unit is owned by a trust, then the trustee or the current beneficiary of the trust are deemed the owner. This information can be gleaned from the trust agreement, which should be provided by the candidate.

The association’s declaration and bylaws need to be reviewed if a unit is owned by a corporation or limited liability company. The governing documents should indicate who is eligible to serve on the board under such ownership.

Q. How can an association solicit candidates for the board?

A. The board (or a nominating committee if the declaration or bylaws provide for such a committee), should mail a solicitation for candidates to all owners in the association. The solicitation should identify the number of seats that are up for election and the term of office for each. The solicitation should also include a standard candidate form that provides a candidate the opportunity to answer a set of questions about their qualifications and experience.

Importantly, the solicitation of candidates should include a deadline by which time completed candidate forms must be returned to the association.

Q. What is a candidates’ forum, and when is it generally held?

A. A candidates’ forum provides an opportunity for the candidates to the board to inform the members of the association of their qualifications, in an in-person setting. This supplements information that might be included on a candidate form. Most often, the candidates’ forum is held during the annual meeting; before the voting begins. To keep the meeting moving, candidates are typically given only a brief time in which to address the owners at the annual meeting

Some associations conduct a candidates’ forum in advance of the annual meeting, and in a more social setting. For example, a “meet the candidates night” may be held offering an extended opportunity for the candidates to introduce themselves to the owners, and for the owners to engage in a dialogue with the candidates.

The candidates’ forum is not required and whether to hold one, or the format, is strictly a personal preference of the association.

Ÿ David M. Bendoff is an attorney with Kovitz Shifrin Nesbit in Buffalo Grove. Send questions for the column to him at CondoTalk@ksnlaw.com. The firm provides legal service to condominium, townhouse, homeowner associations and housing cooperatives. This column is not a substitute for consultation with legal counsel.