Community Associations Newsletter - Fall 2020
Date: October 15, 2020
We're All in This Together
This year has provided unprecedented challenges for community associations. Between deciding how to safely operate their amenities and how to run their annual meetings, volunteer boards and management have been strained coming up with creative solutions to new problems. Added to these difficulties has been an increase in conflicts arising from the disruptions and mental and financial stress that are affecting all of us as a result of the pandemic.
No easy solutions are available to many of these difficulties and the burden placed on boards and management are, in many cases, far beyond what any of them expected or have the capacity to bear. While there is no way to insist that owners treat boards and management respectfully and patiently, steps can be taken to try and ease some of the frustration and hostility we are seeing from owners. This year, transparency and communication with members are more important than ever. By sharing with owners the breadth of issues faced by the association and the establishing of reasonable expectations regarding a community associations’ ability to address them, the boards and management can hopefully convince most, if not all, owners that they are operating the business of the association as best they can during this challenging time.
In this newsletter, we’ve address two significant issues currently facing community associations: political signs and conducting virtual annual meetings. Both issues have the potential to create significant problems for community associations. But, as discussed in the articles, if community associations carefully consider how they will address the problems, set reasonable expectations, and then transparently share this information with their owners, objections can be avoided. Nothing is going to be easy this year, but advanced planning and communication with owners will allow community associations to weather it.
Annual Meetings During Covid-19
The COVID-19 pandemic and its social distancing mandates have imposed multiple challenging issues for our community association clients. One of the pandemic’s most significant side effects for community associations has been the move towards a virtual platform for meetings. Many of our community association clients are facing the logistical challenge of conducting these remote meetings by electronic means in order to conduct their business while also minimizing their legal and health risks. Certainly, a virtual meeting will make it easier for the members to participate, but if the substantive and procedural requirements of the associations’ governing documents and the legal mandates of the states’ statutes are not satisfied, then the meetings may be invalid and any actions taken during the meetings may be void. Community association board members should consult with their legal counsel on how to best prepare for and handle their annual virtual meetings.
Many of our community association clients have been asking whether virtual meetings are allowed and if so, what procedures should be followed. Whether annual meetings can be held virtually and their mandates can be best determined by carefully reviewing states’ statutes and the associations’ governing documents. In light of the pandemic, certain states, such as Maryland, have amended their community association statutes while others have not with respect to holding virtual membership meetings. Maryland has amended its community association statute to authorize virtual meeting participation that would allow for electronic voting, proxies and telephone/video-conference participation. In the District of Columbia, the Condominium Act authorizes electronic participation in board meetings, but it does not expressly authorize annual unit owners’ meetings to be conducted electronically. Similarly, the Virginia General Assembly has not provided an exemption for membership meetings, as it has for board meetings, to allow them to be conducted virtually. In Delaware, if the association is a corporation, then the state’s corporate statute has express language that allows boards to choose the location of their meetings and that the location can be no location. In the states that do not have express statutory authorization for virtual meetings, given the limitations on public gatherings in the midst of the COVID-19 pandemic, it is appropriate for the associations’ annual meetings of the membership to be conducted virtually. However, in doing so, the validity of the meetings should be ensured by careful planning in order to address critical issues such as taking nominations from the floor, proper voting, and ensuring that all members can attend the virtual meeting.
Prior to having a virtual meeting, the Board of Directors and management should consider how they will handle nominations of the candidates for the board of directors, proxies, and voting procedures during the meeting. As early as the call for candidates, owners should be put on notice that the meeting will be conducted virtually and that, if they are interested in running for the Board, they should submit their application early enough to allow inclusion in the proxies to be sent out with the notice of meeting.
The notice of meeting should advise owners of the social distancing mandates and strongly encourage participation by proxy only. If the association has the ability to conduct voting by ballot, the association should give consideration to setting up electronic or remote balloting systems to allow voting before the meeting. Proxies should be prepared and sent to the members, which include designation of a proxy holder who will be one of the few people physically present at the meeting and should include clear instructions to the proxy holder as to how to vote on behalf of the owner.
Associations should establish a proper meeting policy. Prior to which, associations should carefully review their governing documents to confirm and verify the procedures required for a valid virtual meeting. As part of the policy, associations must determine the requirements for the date of the annual meeting and for providing notice of the annual meeting. Associations should confirm their nomination process, available voting methods and quorum requirements. It is crucial for the associations to confirm that quorum is present in person or proxy in order for the meeting to be valid. An important agenda item for an annual meeting is the nominations of the candidates for the board of directors, which may be different this year given that nominations on the floor may be difficult during a virtual meeting. The meeting policy and the procedural planning should also include a system to allow the board members to preside over the meeting and to ensure that if there is an in-person meeting, COVID-19 restrictions are enforced (i.e. prescreening, temperature taking, mask wearing, room limitations on attendance, etc.)
The most significant piece of business at the annual meeting will be the election of directors and the boards should give some careful consideration to how they will handle the election and the counting of the votes. Therefore, it is important to plan for and confirm available voting methods in advance of the meetings. In light of the COVID-19 pandemic, the Office of the Attorney General of Maryland has provided certain helpful guidelines that include appointing inspectors of election in advance of the annual meeting and sending proxies and ballots to the inspectors. Associations may also have the option of electronic voting through a web-based voting system. Our clients have used different services but they do require some time to customize in order to comply with each association’s governing documents. Third party assistance with the election this year may be helpful as associations are forced to make drastic changes to their annual meeting plans. Another alternative voting method is to have owners drop paper ballots in ballot boxes during the meeting and/or allow owners to email scanned or photographed ballots during the meeting. A plan that encourages less in-person appearances is preferred at this time.
In conclusion, virtual meetings during the pandemic can have various pitfalls, but they can be effective as long as thoughtful planning is given to ensure that the meetings comply with the states’ applicable laws and the associations’ governing documents. Before transitioning into virtual annual meetings, community associations need to discuss the issues with their legal counsel and with their counsel’s help, develop a workable plan that ensures the validity of the annual meetings.
Community Association Restrictions on Political Signs
Election season is officially upon us, which means political signs are cropping up on neighborhood lawns all across the country. As the 2020 presidential election draws near, community associations can expect a burst of political sign activity by homeowners. This seems especially true in today’s political climate. Partisan fervor has risen to new heights and with millions confined to their homes amid a historic pandemic, political signage has become a substitute for other ways of showing support for a candidate (e.g., attending a rally, marching in a parade).
Accordingly, under current law, it is unlikely that a community association’s restrictions on signage would be considered a violation of free speech. A caveat to this general rule is that state courts are free to interpret the free-speech provisions contained in their individual constitutions more broadly than federal courts interpret the First Amendment. For instance, in 2012, the New Jersey Supreme Court ruled that an association’s policy banning all signs, including political signs, violated the free-speech clause of the New Jersey State Constitution. Notably, the large majority of jurisdictions (including Maryland, Virginia, Delaware, and the District of Columbia) have not addressed this issue with regard to their individual constitutional protections. Another caveat to the general rule is found in the “judicial enforcement” theory of state action. Under this theory, a community association’s conduct may constitute “state action” sufficient to invoke constitutional protections of free speech when judicial enforcement of an association’s restrictions results in harm to a homeowner’s constitutional free-speech rights. This theory, however, has not been tested in most jurisdictions (including Maryland, Virginia, Delaware, and the District of Columbia).
Applying the general principles, federal law does not govern the issue; rather, relevant state law and local ordinances govern. Community associations, as private non-governmental entities, are allowed to restrict the display of signage in the community, including political signs, in accordance with the corresponding state and local law. Some states have enacted legislation specifically addressing the issue of sign restriction within a community association. Indeed, certain state legislatures have passed laws that protect the right of citizens to display political signs on their property even if they live in a community association. For example, under Maryland law, a community association may not implement an outright ban on political signs on a homeowner’s property (see § 11B-111.2 of Maryland Homeowners Association Act and § 11-111.2 of the Maryland Condominium Act). Instead, the association may put in place limitations as to when such signs may be displayed. These time limits must correlate with any limitations set forth in the applicable local ordinances to the extent that such ordinances exist. If there is no local ordinance on point, the association may restrict the display of political signs to a period spanning from not less than thirty days before an election to seven days after the election.
Like Maryland, Delaware also limits a community association’s ability to regulate political displays. Delaware law provides that a community association may not prohibit political signs altogether, but the association may impose limitations on the time, place, size, number, and manner of those signs.
Contrastingly, the legislatures in Virginia and the District of Columbia have refrained from circumscribing the ability of community associations to restrict political signage. Community associations in these jurisdictions are therefore free to adopt and enforce provisions banning the display of all signs, including political signs, on their property. On a separate but related issue, the Virginia General Assembly recently amended its Property Owners’ Association Act to include new language requiring the association disclosure packet to contain a statement setting forth any restrictions on the size, place, duration, or manner of placement of political signs by lot owners on their respective lots. Previously in Virginia, potential buyers could have presumably obtained this information by reviewing the association’s governing documents, but this information will now be more readily apparent to a buyer.
In summary, notwithstanding the free-expression protections afforded by the United States Constitution and individual state constitutions, a community association is generally permitted to impose restrictions on the display of political signs within the community so long as those restrictions appear in the association’s governing documents and do not run afoul of the applicable state and local law.
As the state of the law concerning sign restrictions continues to evolve, each association must pay close attention to its own governing documents and associations should contact legal counsel to discuss potential issues and obtain advice on navigating the best course forward for its community. Please contact us with any questions regarding your particular community.