MEMORANDUM TO: Members of Bridgeview Condominium Homeowners’ Association From: Association Board of Directors Date: January 25, 2018 Re: FREQUENTLY ASKED QUESTIONS
The following are responses to frequently asked questions about the Bridgeview Condominium Homeowners’ Association and its governance. In searching the Internet or other resources, you may find material that answers these FAQs in a different way or with a different result. Keep in mind that every owner association has its own unique set of governing documents, and that the laws governing owner associations differ (i) as among the 50 states, and (ii) within each state [including Texas] depending on the type of owner association involved. These answers are all with reference only to the Bridgeview Condominiums Homeowners’ Association. References to the Bylaws and Declaration in this Memorandum refer to the recorded 2014 Amended and Restated Bylaws and the 2014 Restatement of Declaration. 1. Is the Association governed by the Texas Open Meetings Act? No. There are some homeowner associations that are governed by the Texas Open Meetings Act or similar statutes; however, those are mostly non-condominium owner associations located primarily in the larger metropolitan areas (e.g., Houston, Dallas). The Bridgeview Condominium Homeowners’ Association is not subject to the Texas Open Meetings Act. Meetings of the Association and the Board must be open, however, to unit owners,1 subject to the right of the Board of Directors to adjourn and reconvene in closed executive session to consider actions involving personnel, pending litigation, contract negotiations, enforcement actions, matters involving the invasion of privacy of individual unit owners, or matters that are to remain confidential by request of the affected parties and agreement of the Board.2 Because the Association is not subject to the Texas Open Meetings Act,3 there is no prohibition against two or more Association Directors from meeting or otherwise discussing possible Association or Board action to be taken either (i) at a Regular or Special Meeting, or (ii) pursuant to a Unanimous Written Consent in lieu of a meeting. Even the entire Board could meet to, e.g., develop an agenda for an upcoming Regular or Special Meeting, discuss possible committees to be formed or Association issues to be discussed at an upcoming Regular or Special Meeting, hash out the terms of a Unanimous Written Consent for action to be taken in lieu of a meeting, etc. The Board and its members are simply prohibited from taking any formal Association action in the absence of either (i) a duly noticed and convened meeting ; or (ii) a Unanimous Written Consent in 1 Bylaw 5.8 2 Texas Property Code §82.108(b) 3 which – in certain state and local government contexts – prohibits a majority of persons on a governing authority panel from even just meeting to discuss governmental business in the absence of a duly-noticed meeting open to the public lieu of a meeting. The Board and its members are free to discuss Association issues and develop ideas outside the context of a duly noticed and convened meeting so long as they do not take any Association action at these informal meetings. Because these are simply informal meetings for discussions, with no formal action to be taken by the Board, no notice to members is required for these meetings The Board can take Association action, however, if such an informal meeting leads to a Unanimous Written Consent that otherwise complies with the law as set forth in the answer to the next question. 2. What, if any, notice does the Association need to give to the Association members (unit owners) regarding Board of Directors meetings? Notice of a meeting of an owner association must be given as provided by the bylaws or, if no such provisions are in the bylaws, then to each unit owner in the same manner in which notice is given to members of a nonprofit corporation under what is now the Texas Business Organizations Code.4 The member notice provisions for Bridgeview Association Board meetings and action are different depending on whether the Board has (i) a Regular Meeting, (ii) taken Action Without a Meeting, or (iii) called a Special Meeting. (i) The Bridgeview Association Board provides notices of its Regular Meetings (held quarterly) by posting the date and time of the meeting on the Association’s website in accordance with Bylaw 5.8. At a Regular Meeting (in contrast to a Special Meeting ) the Board can usually take action on any matter for which the Board otherwise has authority. The notice of a Regular Meeting does not need to specify what action the Board might consider taking at the Regular Meeting.5 (ii) The Board can also take Action Without a Meeting in most circumstances through Board members signing a Unanimous Written Consent. That Unanimous Written Consent must be signed by all of the Board members, and a record of the Board Action Without a Meeting must filed with the Board meeting minutes. The Board cannot act without a meeting if the Board action involves voting on a fine, damage assessment, or suspension of a right of a particular owner before the owner has an opportunity to attend a Board meeting to present the member’s position on the issue underlying suspension.6 There is no requirement that the Association give any notice – either to the Directors or to the owners – with respect to Action Without a Meeting7 because, by definition, there is no “meeting” to be noticed. Because the Association is not subject to the Texas Open Meetings Act,8 there is no prohibition on two or more Association Directors from meeting or 4 Texas Property Code §82.108(d) 5 Texas Business Organizations Code §22.217(c), 6 Texas Property Code §82.108(c)(2) 7 except as noted above, the “after the fact” notice by filing a record of the action taken without a meeting in the Association’s minutes, as required by Texas Property Code §82.108(c)(2)(B) 8 which – in certain state and local government contexts – prohibits a majority of persons on a governing authority panel from even discussing governmental business in the absence of a duly-noticed and open meeting otherwise discussing possible Association or Board action to be taken pursuant to a Unanimous Written Consent in lieu of a meeting. (iii) The provisions for notice of Special Meetings in Bylaw 5.9 mention only prior notice to be given to the Directors, not to the owners. As with Regular Meetings, however, Special Meetings must be open to all owners (except for the Board’s right to convene in executive session as noted above). 9 Under Bylaw 5.9, the content of the notice to Directors must specifically state the business to be transacted at the Special Meeting because “no business shall be transacted at a special meeting except as stated in the notice.” Without a provision in the Bylaws for notice of Special Meetings of the Board other than stating the nature of the business to be transacted at the Special Meeting, the “default” provisions under the Texas Business Organizations Code apply. Under Business Organizations Code §6.051, notice is to “be given in the manner determined by [the Board, including stating] the date and time of the meeting,” and certain other information if telephonic systems are used. Both owners and members of the Board can waive any required notice of a meeting (whether Regular or Special) by either signing such a waiver or by attending the meeting without stating that the person’s attendance is solely for the purpose of objecting to business transacted at the meeting.10 Also, the Association must inform an “owner of the time and place of the next regular or special meeting of the board” if the owner makes a written request to the Association for that information. 3. What is the President’s role in the Association? Can the President vote at Board meetings, or only in the event of a tie? Bylaw 6.4 describes the role of the President. That includes acting as the “chief executive officer of the Association,” presiding at all member and Board meetings, appointing committees from among the owners, and acting as the representative of the Association. The President does not have the authority to make decisions or take action without approval from the Board of Directors. The President, as the chief executive officer, has authority to execute the Board of Directors’ decisions. The Board of Directors acts either under (i) a Unanimous Written Consent of the Board members, or (ii) a majority or greater vote of the Board members at a duly called meeting at which a quorum is present. The President is chosen from among the elected Directors. The President’s vote is thus counted just like the vote of any other Director. Some presidents choose to vote after all the other present Board members have voted. Then, if the President does not want to break a tie, s/he can abstain from the vote just as any other Director can abstain. 9 Bylaw 5.9 and Texas Property Code §82.108(b) 10 Bylaw 5.10, Business Organizations Code §22.217 and §6.052 4. What are the boundaries between (i) the individual condominium units, and (ii) the common areas (including limited common areas)? Who is responsible for the repair, maintenance and replacement of each of these? Boundaries: Individual Units. Bridgeview Declaration Section 6.B. defines the individual condominium unit boundaries as follows: Each Unit shall consist of the following portions of the Building in which it is located: i. the interior surface of each wall; ii. the interior surface of the roof; iii. the upper surface of the concrete floor; iv. the interior surface (including all glass or glass substitute) of the windows and doors set in the walls; v. the air space enclosed within the area described and delimited in (i) through (iv) above; vi. any and all walls, ceilings, floors, partitions and dividers wholly within such air space (but excluding any pipes, ducts, wires, cables, conduits, beams or supports contained within such walls, ceilings, floors, partitions and dividers or within such air space); and vii. all plumbing heating, ventilation, air conditioning, lighting, cooking, and other fixtures and equipment located in such air space including the elevator in each Unit but exclusive of pipes, ducts, wires, cables or conduits located wholly or partly within such air space. General Common Elements. Declaration Section 3.A. defines the General Common Elements as the following: i. The foundations, walls and columns (including any windows, doors and chimneys therein), roofs, awnings, ceilings, floors and any other portion of either of the Buildings located on the Property which is not included within any Unit; ii. The premises and facilities used for the common storage, maintenance, operation or repair of the Condominium Project. iii. All common recreational facilities, including, without limitation, the planters, the swimming pool, the grounds, yards and walkways (including the boardwalk), except those walkways hereinafter designated as Limited Common Elements, and all lighting facilities serving same; iv. Parking spaces which are designated with the words “Visitor’s Parking” on the plat; v. All other elements reasonably necessary for common use (including those portions of the property not designated for exclusive use by an Owner) or necessary to the existence, upkeep and safety of the Condominium Project; vi. All benefits, right, title and interest of the Owners or the Association in and to those easements set forth in Section 5.A [of the Declaration]. Limited Common Elements. Declaration Section 3.B. defines the Limited Common Elements as “being those Common Elements reserved for the use of Specified Unit Owners to the exclusion of others, [which] shall consist of: i. Compartments or installations of central services such as power, light, electricity, telephone, cable television, security, gas, cold and hot water, plumbing, reservoirs, water tanks and pumps, incinerators, and all similarly devises and installations; ii. The patios, balconies (including all railings installed thereon) assigned to the respective units as reflected on the plat; iii. Entrances, stairways and open areas appurtenant to one or more Unit(s) as set forth and depicted on the plat;” Responsibility for the Cost of Repair, Maintenance and Replacement: There are some exceptions to the provisions in the Declaration referenced in these FAQs answers.11 As a general rule, however: Under Declaration Section 4, Owners are responsible for the costs related to (i) their individual units, and (ii) the Limited Common Elements appurtenant (generally adjacent) to or serving their respective units. This includes (i) everything inside the individual condominium unit including the interior surfaces of the walls, floors and ceilings; (ii) HVAC equipment serving the unit even if located outside of the unit; (iii) interior and exterior doors and window panes even if located outside of the unit;12 and (iv) patios, balconies and railings, entrances, stairways and open areas appurtenant to one or more units as depicted on the condominium plat.13 Throughout the Declaration, there are provisions under which all owners are assessed their respective pro-rata shares of the Common Expenses, which are paid by the Association. Declaration Section 1.F, in its definition of Common Expenses includes “all sums lawfully assessed against the General Common Elements by the Board of Directors of the Association.” 14 There is not similar language allowing the Association to assess all owners for the costs of repairing, maintaining and replacing the Limited Common Elements. In maintaining, repairing and replacing such Limited Common Elements as balconies, railings, patios, exterior doors and window panes, etc.,, the individual unit owner’s responsibility for the cost of that work does not give the individual unit owner the right to alter the exterior appearance of the condominium buildings; rather, such external elements can, e.g., be painted and/or decorated only in accordance with rules promulgated by the Association.15 This is to protect the condominium community’s interest in maintaining a uniform appearance and quality of materials on these exterior elements. Consistent with the Association’s interest in assuring that these Limited Common Elements are maintained, repaired and replaced in a manner that preserves and enhances the appearance of the condominium regime, there are provisions in the Declaration that, e.g., (i) provide for the Association to take the necessary steps to do this work if any Owner fails to do so, and (ii) give Owners the right to 11 For example, (1) although the Association is usually responsible for the cost of repair, maintenance and replacement of the General Common Elements, if an individual owner’s negligence or misuse causes damage to the General Common Elements, the individual owner is responsible (Declaration Section 4.D.); (2) if there is blanket coverage for repair or replacement under casualty insurance policies maintained by the Association, the Association will generally be responsible for the cost, etc. 12 Declaration Section 4.A. 13 Declaration Section 3.B. 14 emphasis not in original Declaration 15 Declaration Section 4. retain the Association to perform this work.16 These Declaration provisions not only better assure that the exterior work is done with materials of consistent quality and appearance, it also can give the Owners who will be charged for the Limited Common Elements work the benefits of efficiency and economies of scale by having the Association do the work. 6. The Association has an on-site manager who is a licensed real estate agent who also manages and sells condominium units for individual owners. In addition, licensed real estate agents who sell or manage condominium units for individual owners have served on the Board of Directors from time to time. Isn’t this a conflict of interest that should be prohibited? No. The questions of (i) whether there is a conflict of interest, and (ii) if so, what should be done about the conflict of interest, is not something that can be broadly determined merely based on an individual’s status as a real estate agent, or as a manager or director in a condominium. Each situation for which there is a risk of a potential conflict of interest – or an actual conflict of interest – must be assessed within the context of the particular facts under which the potential for or actual conflict of interest arises. In the case of Bridgeview, assessing whether there is a potential or actual conflict of interest in any given situation – and what to do about it if there is a conflict -- depends on a number of factors, including in what role the individual who has the alleged conflict of interest is acting and has authority to act. Certain – but not all -- provisions in Texas Property Code §82.102 set forth the powers that an association for a pre-January 1, 1994 condominium regime (like Bridgeview) has. The Bridgeview Association’s powers are exercised through its Board of Directors.17 The Board of Directors can hire managing agents, employees, independent contractors and others to assist in the management of the condominium regime.18 Most all of the applicable enumerated Association powers – both in §82.102 and in the Bridgeview Declaration -- relate to the directors’ and manager’s roles in dealing with the common elements or the Association itself. Except in some limited circumstances,19 the directors’ and manager’s roles do not relate to actions or management of individual units. Conversely, the real estate agent’s activities in selling or managing an individual unit do not generally involve managing the condominium common elements or the Association itself. So for a great many activities, there is no conflict of interest. At the same time, there is a potential for conflict of interest and perhaps actual conflicts of interest that may arise if there is some overlap of activities in certain circumstances. Again, whether there is a potential for conflict or an actual conflict depends on the particular circumstances in any given situation. The real estate agent may be able to minimize the potential for conflict by setting certain parameters on the relationship between the owner and the real 16 Declaration 4.B. 17 Texas Property Code §82.102(a) 18 Texas Property Code §82.102(a)(1) 19 e.g., when an individual owner or tenant is in violation of Association rules or other governing documents estate agent.20 But there is not categorically a conflict of interest merely because of an individual’s status as both a real estate agent and as a director or the manager for the condominium. When a conflict of interest does arise, the parties involved in the conflict (i.e., the real estate agent, the owner of the individual unit managed or being sold by the real estate agent, and/or the Board of Directors) need to decide – on a case by case basis – what (if anything) to do about the conflict. Bridgeview’s governing documents do not provide any particular guidance on this issue; however, Business Organizations Code §22.230 provides a considerable amount of guidance.21 Generally speaking, so long as (i) the material facts about the relationships or interests that give rise to the conflict of interest are either disclosed to or known by the other parties involved (i.e., the real estate agent, the Board of Directors, and as applicable, the individual unit owner involved in the situation), and (ii) the Board of Directors acting in good faith and using ordinary care nonetheless approves of particular actions, or (iii) at the time the actions are approved or ratified by the Board of Directors, the transactions or actions are fair to the Association, the law will not second-guess the decisions made or question the wisdom of the transaction or actions. This is true even though the person with the conflict of interest (e.g., a Director) does not abstain from either (1) voting on the matter or (2) participating in a discussion on the matter. The law will respect the business judgment of the Board members, who are the persons with authority to weigh competing factors and make decisions when there is a conflict of interest, so long as the Board members are aware of the conflict. Categorically prohibiting a real estate agent from acting as a director or a managing agent of the Association merely because that person might also play a role in managing or selling individual units is probably unwise. Condominium association governance requires knowledge of both real estate and business organization dynamics. A real estate agent is thus uniquely qualified to assume the role of a director or managing agent. In some instances, a manager of condominium units is required to be licensed as a real estate agent. Conflicts of interest may arise from time to time, but those conflicts are better addressed on a case-by-case basis when they do arise, rather than categorically excluding persons whose expertise can benefit the Association in its governance. 20 e.g., by limiting the scope of the agent’s duties or the authority the individual unit owner gives the real estate agent in managing or selling the property or in dealing with the Association on common element issue. 21 Business Organizations Code §22.230 addresses the conflict of interest issue in the context of whether a contract or transaction involving persons with a conflict of interest can be declared void or voidable, or form the basis of a claim against the association or its directors. This statute reflects the general common law on the issue involving other conflict of interest situations for non-profit corporations like the Association.