Condo talk: Taking the 'secret' out of a closed session
One of the most common cries of homeowners who are unhappy with their board of directors is that they are conducting "secret meetings." What are the proper procedures for a board of directors to meet in executive session?
By law, meetings of the board of directors of an association (cooperative, common interest communities and condominium associations) are subject to a minimum of 48 hours advance notice and must be open to any owner unless the meeting is to discuss pending or probable litigation, to consider information regarding employment or dismissal of an employee or to discuss violations of the rules and regulations or unpaid common expenses owed to the master association. It is my opinion, based upon a review of the case law, that the term "employees" would also include contractors.
A board meeting is defined as any time a quorum of the board gathers to conduct board business. Most association bylaws establish that a quorum of the board is generally a majority of the board.
Periodically, the board of directors of an association or cooperative wishes to meet in executive or closed session to discuss matters such as those mentioned. For example, what if the board meets in a closed session to discuss the performance of its manager and whether he or she should be terminated? It is my opinion that the board's act of meeting in executive session is in compliance with state law in discussing the removal or termination of an employee/contractor. However, under the open meetings requirements of both acts, any action taken by the board in executive session must then be voted on at an open meeting of the board of directors and incorporated into the minutes of the open meeting -- this is known as "ratification".
The question then arises regarding whether minutes of executive sessions should be transcribed. The minutes or notes taken by a board at an executive session are "discoverable" in litigation, which circumvents the whole issue of confidentiality. That is why I advise that no minutes should be taken.
However, many boards have a practice of holding informal board meetings from time to time (workshops or meetings of the committee of the whole) to discuss future agendas and issues to be brought up at formal board meetings. This could be viewed as a violation of the strict reading of the statute, because a board meeting is defined as "any gathering" of a quorum of the members of the board of directors.
However, in practice, this is not feasible. The key phrase here is "board business," which is any matter that must be voted upon. If no vote is forthcoming, the board may meet informally as a "committee of the whole" before an open meeting to discuss the agenda for the meeting so long as no votes are taken. This can lead to more efficient and productive board meetings. However, the board members must remember that no business can be conducted.
What the board should keep in mind is that in the event it must handle an emergency between meetings or by the same token, must take action on a matter without a vote at an open meeting, there are several options available by law:
• Informal action by the board can be taken when consented to in writing and signed by all of the directors.
• Unless prohibited by the bylaws, directors may participate in any meeting of the board through the use of a conference telephone or other means where all members can participate together. This can save the board a great amount of time and provides a convenient way to meet when it is difficult to establish a quorum when a director is home ill or out of town.
• Lastly, and most important, so long as any action taken at an executive session or without an open meeting constitutes a legal act of the association (something it could or should do), then the board can ratify this action at the next opportunity, i.e., regular or special meeting and it relates back to the date in which it took effect.
A board must be very cautious, however, in not abusing "ratification" by creating an appearance of constantly taking actions without open meetings or by acting illegally and then trying to ratify it at an open meeting. In those instances, the individual directors could be viewed to be acting outside the scope of their authority and could be liable for any damages suffered by approving an illegal act. However, as an occasional means of dealing with emergencies or irregular type situations, this procedure is provided for by law.
• Jordan Shifrin is an attorney with Kovitz Shifrin Nesbit in Buffalo Grove. Send questions for the column to him at email@example.com. This column is not a substitute for consultation with legal counsel. Past columns can be read at www.ksnlaw.com.