Improper Association Governing Document Amendments – How Expensive Is It When You Do It Wrong? VERY

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Summary

Not following ALL of the required procedures when preparing amendments to your association governing documents can be VERY expensive. Take the time, money and effort to do it right.

The Facts

In 2015 the board for Forest Lakes Master Association distributed notice that it would be holding a vote to amend its voting procedure at its annual meeting. The board and property manager alleged that they had received the required votes for the amendment. Because of some interesting counting techniques, the number of votes in favor of the amendment kept rising. One owner, Johnson, emailed the board and stated that he believed the board failed to follow proper voting procedures and that the amendment did not pass. After counting the votes, Johnson confirmed his belief that the board had violated the voting procedures in their documents. Johnson demanded that the Board find the voting procedure void. When the board refused Johnson filed suit. Both parties moved for summary judgment and the association also asked for attorney fees.

Trial Court

The opinion of the court of appeals relating to the trial court decision is less than flattering, which I quote below:

“The trial court held a hearing on the parties’ summary judgment motions. At the beginning of the hearing, the trial court stated that it had not reviewed all the documents filed in the case. The trial court continued that it “doubt[ed] judges review every single page that is—don’t commonly review every single page of all of the exhibits submitted ….” Later, the trial court also admitted that it had not counted the ballots. After the parties presented their arguments, the trial court granted the Board’s motion for summary judgment from the bench…. The trial court [essentially] adopted each of the Board’s arguments. The trial court ruled that Johnson lacked common-law standing because he had not suffered a cognizable injury. The trial court then ruled that Johnson had misinterpreted the Association’s declaration and bylaws in making his arguments. Next, the trial court concluded that the Board had received the requisite affirmative votes to pass the amendment: “whether it was 380 or 403 or 411 or 417 [votes].” Last, the trial court determined that the Board was entitled to attorney fees in the amount of $50,000, which would accrue interest from the date it filed the journal entry. The trial court ordered the Board to write the journal entry of judgment and submit it to the trial court for its signature.”

Not surprisingly, Johnson appealed.

Court of Appeals

Reversed and remanded the decision of the trial court finding:

  1. Johnson did have standing;
  2. The trial court erred in granting the Board’s motion for summary judgment;
  3. Post meeting votes were invalid;
  4. The Board was not entitled to any attorney fees; and
  5. Johnson also could not recover attorney fees, but only because he did not ask for them timely or properly.

Lessons Learned

  1. If you are looking to amend your documents, take the time to do it right;
  2. When threatened with a lawsuit, make sure you speak with an experienced association lawyer, so that you don’t spend $50,000 – $100,000 in attorney fees before finding out that you did everything wrong;
  3. If you are in a suit involving community association law, make sure you at least consult with an experienced association attorney, so that you get everything you have coming or can stop the bleeding before you have incurred significant fees.

Johnson v. Board of Directors of Forest Lakes Master Association, 454 P.3d 623 (2019) unpublished (Kansas).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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