If you live in a condo or a co-op, you’ve probably noticed that your building has at least one annual shareholders’ or unit owners’ meeting each year.
It’s not random. The annual meeting is actually an Illinois state-mandated law that requires cooperative corporations and condominium associations to meet one a year to do their annual public elections. It’s incredibly important that all buildings follow this rule— so that every owner and board member has a say and a vote and can control what happens in their building.
Since the meeting is mandated by the state, there are many rules that have to be upheld, but there are also ways to make it run smoothly and efficiently to avoid conflicts and problems.
The entire purpose of the meeting is to elect directors, which must be chosen at large from amongst the owners. Further, the terms of at least 1/3 of the directors must expire annually, says Kerry Bartell, a principal with the Buffalo Grove-based law firm of Kovitz Shifrin Nesbit, with locations throughout the Midwest.
In Illinois, the governing authority that mandates an annual meeting for condo buildings is section 18 of the Illinois Condominium Property Act, which is an Illinois-state law. For co-ops, the governing authority is simply their shareholder’s agreement and their own bylaws, says Mark Pearlstein, partner in the Community Associations Service Group, chairman of the Illinois Legislative Action Committee of the Community Associations Institute (CAI-IL) and a partner with the law firm of Levenfeld Pearlstein LLC in Chicago.
Once the meeting is scheduled, you may postpone it but you can only hold it for a maximum of six months, the law says.
There are also rules dictating how the owners are informed of the annual meetings. Each owner must receive a notice 10 to 30 days before the meeting by mail or personal delivery.
That means that simply posting the notice in the mailroom or in the lobby isn’t sufficient, Pearlstein said.
While there are strict rules about the annual meeting, there aren’t many repercussions for the boards, which break the rules and don’t hold meetings each year.
“There are no specific penalties,” Pearlstein says. “The owners can petition for an annual meeting or file a lawsuit against the board for failing to hold the meeting. Owners can also hold a meeting themselves if the board doesn’t do it.”
The owners can only hold the meeting themselves, however, if they own 20 percent of the votes. Alternatively, they can follow their bylaws to seek removal of the board members who have failed to organize a meeting, and they can call for a special election to fill the vacancies.
Once the meeting is arranged, the board members need to figure out who should attend. Of course, the board members themselves and anyone up for election should plan on being there. But should the building’s accountant and attorney be there? What about the building’s manager?
Each building operates differently, and there are no requirements as to who specifically needs to attend the annual meeting.
“It is ultimately up to the board, and they need to decide if the expense is worth it,” Bartell says. “If you have a contested election, it is a good idea to have an outside party—either your attorney and/ or your accountant to oversee the process and the counting of the ballots.”
Andrea Sorgani, president of the Illinois chapter of CAI in Roselle, suggests that the management company and the board be there. If there are financial issues which the treasurer or other board members are not well-versed in, then the association’s accountant should also plan on attending the meeting.
“There are also times when the association hires either their auditing firm or attorney to run the meeting and oversee the ballot counting,” Sorgani says. “This is not mandated but a matter of choice, and depends on the tone of the association. But typically, the management company can run the meeting.”
Voting by Proxy
While the law doesn’t require specific people to attend the meeting, it does mandate how many people have to be there in order for it to be official. In fact, if there aren’t enough people there, votes can’t be taken, and issues can’t be resolved via voting.
There has to be a quorum, Pearlstein says. Most condo documents have a quorum requirement of 20 percent of the owners if the condo association has more than 20 units.
That 20 percent has to be present in person or by proxy, and if there isn’t a quorum, then no action can be taken. If that percentage isn’t reached, then the meeting has to be postponed to another day, when the board will be able to get its quorum.
For the non-condos and the condos that have fewer than 20 units, the quorum is dictated by the association’s bylaws, Bartell says.
If an owner can’t make it to the meeting, they may still be able to cast their vote, however. You may be able to do it by proxy, or some associations will conduct elections where a ballot is mailed to everyone, and there are no proxies used. The owner simply fills out the ballot and sends it back, and then doesn’t need to attend the meeting.
When you can’t attend the meeting, you can still find out everything that happened, and there are various ways of doing that. You can request minutes from the meeting to find out the motions, Sorgani says. Or, you can look for a newsletter which may highlight the key points of the meeting.
Some newer buildings—or those with high-tech board members—may even record the meeting so you can hear or see it over the Internet in real time or a few days after it’s concluded.
You may also make a request in writing to the board to get a copy of the minutes, which they’re required to share.
In those minutes, owners can expect to see the results of the mandated election. But they meeting may cover more than the elections.
Since the annual meeting is the time when the majority of the building is gathered together, it’s also the perfect time to discuss big issues. The financial status of the association may be on the agenda, as well as an overview of the major projects accomplished that year and planned for the following year, Sorgani says.
There may be a roll over provision for excess funds in the operating budget for the next year, and there should be a time reserved at the end of the meeting for questions and answers.
If there are any new association vendors—landscapers, pools, hall cleaners, painters, etc.—this could be a good time to have them meet the buildings and introduce them during the open-floor time for a Q&A, Sorgani says.
Typically, a building will take advantage of the annual meeting, and use it for a state of the building and state of the finances address, Pearlstein says.
And while the meeting may be long, and will probably cover various issues, it’s rarely disorganized because the annual meeting follows an agenda similar to a modified Robert’s Rules of Order.
“Generally, the attendees call the meeting to order, confirm that a quorum is taking place, conduct the election by announcing the candidates—some allow the candidates to give a brief statement—conduct the vote, receive an address from the president and listen to a financial report from the treasurer,” Pearlstein summarizes. “If there aren’t a lot of arguments about votes, then the votes are announced and the meeting is adjourned.”
It may seem hectic, but board members and owners can prepare for the meeting prior to the actual time to familiarize themselves with what will happen. The agenda will be mailed out ahead of time, so you’ll know the order of events and the planned discussions.
Since the purpose of the meeting is an election, the best step that the board can take is to allow people sufficient time to submit their nominations, and have the nominees submit a form outlining their qualifications in advance so owners can have a good idea as to the candidates and their qualifications, Pearlstein says.
Read the material that’s been submitted about the candidates running for office, and you’ll be prepared to place your vote at the meeting.
Sometimes, however, meetings will take place behind closed doors. The annual meeting will always be public, but there are four subjects that can be discussed privately: rule violations, assessment delinquencies, pending or threatened litigation or employment issues.
For those topics, boards have a right to meet privately, and all they have to tell the owners is that they are going to meet in a closed session to discuss a private matter.
The main protection for non-board members is knowing that most decisions—and all elections—are made in an open session.
If they want, the owners also have the right to call a special meeting to talk about whatever they want to discuss. They simply have to submit a petition signed by 20 percent of the owners.
Once the percentage requirement is met, the owners can have as many meetings as their hearts and their schedules desire.
Danielle Braff is a Chicago-based freelance writer and a frequent contributor to The Chicagoland Cooperator.