Real Property Notes Blog

Significant Changes to the MI Nonprofit Corporation Act will affect community associations

Public Act 557 of 2014, which took effect January 15, 2015, provides some changes to the Nonprofit Corporation Act which will have significant implications for condominiums and homeowners associations.  The next few blog posts will address these changes.

Probably the most dramatic change is participation in membership meetings.  Formerly, a member of an association could participate in a membership meeting (annual or special) by conference telephone or other electronic means only to the extent that the articles of incorporation or bylaws expressly so provided.  However, this provision has been amended to provide that members may participate in membership meetings by conference call or other means of remote communication unless the right is specifically restricted by the article of incorporation or the bylaws.

In other words, allowing participation by teleconference in a membership meeting has gone from permissive to mandatory, unless the association amends its articles of incorporation or bylaws to restrict such participation. Implicit in the requirement for notice of the means of remote communication is that the association must make arrangements, and provide notice of the arrangements in the meeting notice.  The burden is on the association either to amend its documents to restrict participation by conference call or other remote communication, or to provide a method of doing so.

The requirements for reasonable measures to verify that persons participating by remote communication are members means that associations will need to re-think notice procedures, such as including a passcode to log into the teleconference, or some other identifier known only to the association and the owner.

Voting measures will need to be changed; written ballots are no longer sufficient for those participating by teleconference; they will need to vote by roll call vote, or by using some web site updated in real time.

The full text of the provision is reproduced below.

Sec. 405. (1) Unless otherwise restricted by the articles of incorporation or bylaws, a shareholder, member, or proxy holder may participate in a meeting of shareholders or members by a conference telephone or other means of remote communication that permits all persons that participate in the meeting to communicate with all the other participants. All participants shall be advised of the means of remote communication.

(2) Participation in a meeting under this section constitutes presence in person at the meeting.

(3) Unless otherwise restricted by any provisions of the articles of incorporation or bylaws, the board of directors may hold a meeting of shareholders or members that is conducted solely by means of remote communication.

(4) Subject to any guidelines and procedures adopted by the board of directors, shareholders, members, and proxy holders that are not physically present at a meeting of shareholders or members may participate in the meeting by a means of remote communication and are considered present in person and may vote at the meeting if all of the following are met:

(a) The corporation implements reasonable measures to verify that each person that is considered present and permitted to vote at the meeting by means of remote communication is a shareholder, member, or proxy holder.

(b) The corporation implements reasonable measures to provide each shareholder, member, or proxy holder a reasonable opportunity to participate in the meeting and to vote on matters submitted to the shareholders or members, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with the proceedings.

(c) If any shareholder, member, or proxy holder votes or takes other action at the meeting by a means of remote communication, a record of the vote or other action is maintained by the corporation.

Court affirms right of association to deny fence request for purely aesthetic reasons

In Brock v Winding Creek HOA, an unpublished Michigan Court of Appeals opinion, the homeowner sought approval to install a fence around her swimming pool.  The association denied the request on aesthetic reasons.  The homeowner filed suit challenging the decision.  The court held that language in the covenants, conditions, and restrictions allowing the association sole discretion to approve or deny fences for aesthetic reasons grants broad discretion to the association.  The court did approve the trial court’s ruling that, to the extent that the association’s fence restrictions contradicted local ordinances requiring fences and describing acceptable height requirements, the restrictions must give way before the local ordinance.

© Steve Sowell 2018