Bar News - May 17, 2017
Real Property Law: Condo Act Changes Target Condo Association Governance
By: Kelly Ovitt Puc and Nathan R. Deleault
New Hampshireís Condominium Act, NH RSA Chapter 356-B, has provided significant regulation of condominium development, but less regulation in terms of condominium association governance Ė frequently a problem area.
Associations often operate informally and consult an attorney only when problems arise. Elected (or sometimes de facto) board members may not have reviewed their condominium instruments in over a decade. The condominium instruments, prepared by the original developer, may provide insufficient guidance or may no longer fit the associationís needs.
In 2016, the New Hampshire Legislature passed HB 353, effective last August, to provide more structured governance and greater protection for condominium owners once the condominium has been established.
Shifting Control from
The amendments provide stronger rules for the transfer of control of the association from the declarant to the owners. Declarant control terminates upon: 1) 60 days after the declarant transfers at least 60 percent of the units; 2) two years after the declarant ceases sale of units; 3) two years after the declarant last exercises the right to add new units; or 4) voluntary surrender of control by the declarant. If 25 percent or more units are transferred, the owners must elect at least one member or 25 percent of the board; if 50 percent or more units are transferred, then the owners must elect at least 50 percent of the board.
Required Bylaw Provisions
Under the prior version of the Act, a board was optional, and mandatory bylaw provisions were sparse. The amendments mandate that, upon termination of declarant control, the owners must elect a board of at least three members, a majority of which must be unit owners. In addition, the association must adopt bylaw provisions addressing the following:
- The means for election of directors
- Powers and responsibilities of directors
- The number and terms of office of the directors
- The election of a President, Treasurer, and Secretary
- Officer qualifications, powers and duties, and terms of office
- Procedures for election and removal of directors and officers
- Which officers may file amendments to the declaration
- The method for owners to amend the bylaws
Association Meetings, Board
Meetings, and Notice
As before, the Act requires annual association meetings, but now also allows for special meetings of owners upon request of the president, a majority of the board, or 33 percent of owners, who may notice the meeting if the secretary fails to do so within 30 days. The association may reduce or waive the notice requirements for holding a meeting to address an emergency. Roberts Rules of Order Newly Revised are now the default procedural rules.
New section RSA 356-B:37-c requires quarterly board meetings and allows closed meetings only if the meeting is recorded and the recording is subsequently made available to owners. Boards may not use social meetings to evade the open meeting requirements. However, boards may hold executive sessions for the purpose of: 1) meeting with the boardís attorney; 2) discussing existing or potential legal actions; 3) discussing labor or personnel matters; or 4) discussing contracts under negotiation, where the association would be commercially disadvantaged or if necessary to protect individual privacy rights. However, no final action may be taken at an executive session.
The Act now expressly allows for electronic noticing and meeting. An owner may designate either a mailing address or electronic address for notices. Otherwise, the association must deliver notices by hand delivery, United States mail postage paid, or any commercially reasonable delivery service to the unitís mailing address. The association may provide in its declaration or bylaws for telephonic or video conference meetings. Finally, copies of meeting minutes may be made available to members electronically or posted on the associationís website.
Quorums and Voting
The default quorum requirement for association meetings remains 33 1/3 percent. Under the amendments, the quorum requirement may only be increased for associations with fewer than 25 units. Whenever a quorum is not met for an associationís annual meeting, the board must reschedule the meeting to a date within 60 days.
The new default rule for jointly held units is that a majority of the owners of a unit determine the vote for that unit. No person may cast undirected proxies representing more than 10 percent of the association votes. The option of collecting signed proxies at the meeting and then verifying 10 percent following the meeting has been eliminated. The board must now send proxy forms with control numbers assigned to each owner. If one owner holds 50 percent or more of the votes, then a 2/3 majority is needed to change bylaws, budgets, and property management.
New section RSA 356-B:39-a expressly permits voting without a meeting through the use of a paper or electronic ballot. The ballot must include the action to be taken, the number of votes needed to satisfy the quorum requirement, the number of votes needed for approval, the deadline for submission (not sooner than 10 days), and the process for owners to circulate related documents to other owners.
Standards Governing Directors
Directors and officers now have a fiduciary relationship with owners. If appointed by the declarant, they must exercise care and loyalty of a trustee. Otherwise, they must exercise care and loyalty of officers and directors of a voluntary nonprofit corporation and are subject to the same conflict of interest rules. In addition, the Act now prohibits certain board actions: 1) amending the declaration, 2) amending bylaws, 3) terminating the association, 4) electing board members (except to fill vacancies) and 5) determining director qualifications, powers, and duties, or terms. Unless waived by a 2/3 vote, officers may not be paid or otherwise benefit financially from the association.
Boards must now adopt annual budgets and provide owners with a budget summary within 30 days of adoption. The association must meet to ratify the budget within 10 to 60 days after the summary is provided, and a 2/3 vote is required to reject the budget. Boards must generally follow the same ratification procedures for special assessments.
|Kelly Ovitt Puc
Kelly Ovitt Puc is a member of Sulloway & Hollis and chair of the firmís Real Estate, Environmental and Development Practice Group. She serves on the Title Standards Committee of the NH Bar Associationís Real Property Law Section.
Nate Deleault joined Sulloway & Hollis in 2014 after spending almost a decade as a researcher with the Biochemistry Department at Dartmouth Medical School.†He serves clients on a wide range of litigation and transactional matters.