Author: Bobby Nails

Finding a Better Framework for Decision-Making by a Board of Directors.

Homeowners and condominium associations in Georgia are usually established as nonprofit corporations pursuant to the Georgia Nonprofit Corporation Code (“Nonprofit Code”). The board of directors is the decision-making body of any community association and must manage and operate the association and all of its assets and enforce any applicable covenants. The governing documents of any community, such as the declaration of covenants and the bylaws of the association, usually allow the board of directors some amount of discretion in making the various decisions that arise. These decisions may involve consideration of whether to approve proposed exterior modifications in the community, how association money is spent, how certain common expenses are allocated among the members, whether and how to enforce covenants in certain situations, whether to allow exceptions to a leasing cap contained in a declaration of covenants, and when and how to perform the association’s maintenance obligations. With each decision of the board comes the potential for challenge by a homeowner who may be adversely affected or who otherwise disagrees with the decision. Although a community’s governing documents may allow discretion in decision-making, they do not address the standard by which a decision would be judged should their decisions be challenged. Fortunately, Georgia statutes and case law give some guidance into this process.

Section 14-3-830 of the Nonprofit Code sets forth the general framework for a director’s actions: “A director shall discharge his or her duties as a director, including his or her duties as a member of a committee: (A) In a manner the director believes in good faith to be in the best interests of the corporation; and (B) With the care an ordinarily prudent person in a like position would exercise under similar circumstances.” Board members of homeowner-controlled community associations are volunteers with other obligations and generally have a finite amount of time and energy they are able to dedicate to their duties. The Nonprofit Code authorizes directors to rely on information, opinions, reports, or statements, including financial statements, in coming to decisions, if prepared or presented by officers or employees of the association or by professionals engaged by the association, such as legal counsel or a certified public accountant. In relying on information and/or documents given by individuals who are not on the board, a director must believe such individuals to be reliable and competent and must not have knowledge contradictory to the information presented.

The standard for judicial review for any discretionary action taken by a board of directors pursuant to a declaration of restrictive covenants, that is, whether a court will allow challenges to such an action to be considered by a jury, was established by the Georgia Supreme Court in the context of a homeowners association: “Where… the declaration delegates decision-making authority to a group and that group acts, the only judicial issues are whether the exercise of that authority was procedurally fair and reasonable, and whether the substantive decision was made in good faith, and is reasonable and not arbitrary and capricious.” Saunders v. Thorn Woode Partnership, 265 Ga. 703, 704 (1995). This standard has also been applied by the Georgia Courts in the context of condominium associations. See Atlanta Georgetown Condo. Assoc., Inc. v. Chaplin, 235 Ga. App. 460, 461 (1998).

Since the standard for review for discretionary action taken by a board of directors was first articulated, Georgia courts have allowed homeowners to challenge decisions made by a board of directors where the homeowners offer evidence that the decision is “procedurally unfair and substantively arbitrary and capricious”, for example if an association is not enforcing its covenants uniformly throughout the community, and the homeowners association offers no evidence to the contrary. See Southland Owners Assoc., Inc. V. Myles, 252 Ga. App. 522 (2001). Although there is no method of predicting whether a court in Georgia would find a particular decision made by a board of directors to a proper exercise of discretion or an “unreasonable, arbitrary, and capricious” decision subject to challenge, a homeowners association will not be able to adequately defend a decision made by its board of directors unless it offers some kind of evidence supporting the board’s decision. See King v. Chism, 279 Ga. App. 712 (2006) and Wright v. Piedmont Prop. Owners Assoc. Inc., 288 Ga. App. 261 (2007). Therefore, it is critical to keep good minutes of meetings at which decisions are made. The minutes should reflect the various points of view expressed and show that a vote was taken.

In conclusion, the governing documents of homeowners and condominium associations usually grant the board of directors discretion in how the association and the community are operated and managed. In coming to decisions regarding the community, board members may rely on outside information and documentation. For any decision made by a board of directors pursuant to discretionary authority granted under a community’s governing documents, the board should examine why it is coming to its decision and should record its reasoning in well documented minutes so that, in the event that challenge is made, there is sufficient evidence to defend the board’s actions. Of course, each decision of the board is distinct and may present unique challenges. A board of directors may want to consult with the association’s legal counsel for assistance in establishing a general procedure the board can follow when coming to decisions regarding the community and reflecting those decisions in the association’s records.es.

What the Criminal Justice System Can Offer to Community Associations

Last year a developer built a new subdivision in the once beautiful field adjoining your association’s recreational facility. All of the sudden there are lots of people at your pool who you do not recognize. You’ve asked them nicely to leave, now what?

Every time you walk to your mailbox your next door neighbor opens her door and screams at you claiming that the new bushes you planted are over the property line. You are afraid that she will run out and hurt you. She screams at your children that they’re noisy. She throws rocks at your dog when she thinks you’re not home. The Association tells you it’s a personal problem between the two of you. Now what?

Several of the boys in the neighborhood got their drivers licenses last winter. The first time your mailbox was smashed you thought it had been hit by a meteor, now that it has happened a second time you wonder if there’s a connection. Now what?

All of the behavior described above is prohibited by your Declaration of Protective Covenants, but are there remedies for these problems outside of your Covenants? Of course there are, and this article will address some ways that the criminal justice system may provide a faster and more economical solution to the problem. Of course seeking a warrant for someone’s arrest is not a process that should be entered into lightly. Even the prospect of depriving someone of their liberty and/or having an arrest on their criminal history is something which should be approached with extreme seriousness of purpose and after all other options have been exhausted.

Most of the crimes that are committed in communities such as the situations above, are misdemeanor offenses. Misdemeanors in Georgia are punishable by UP TO a sentence of one year in jail and/or UP TO a $1,000 fine. Misdemeanors are distinguishable from felonies, which are more serious crimes. To begin, below is a summary of what I believe are the most common offenses encountered:

Criminal Trespass O.C.G.A. § 16-7-21

There are two types of criminal trespass: Damage to property where the damage is under $500; (When the damage exceeds $500, the felony statute, Criminal Damage to Property O.C.G.A. §16-7-23, would apply.) and the more common offense, entering property after receiving notice that such entry is forbidden, or refusing to leave after having been asked to do so.

Simple Assault O.C.G.A. § 16-5-20

Again, there are two ways this crime can be committed: Attempt to commit a violent injury to the person of another; or commission of an act which places another in reasonable apprehension of immediately receiving a violent injury.

Simple Battery O.C.G.A. §16-5-23

Intentionally making physical contact of an insulting provoking nature with the person of another OR intentionally causes physical harm to another.

Harassing Phone Calls O.C.G.A. § 16-11-39.1

Telephones another person repeatedly, whether or not conversation ensues, for the purpose of annoying, harassing, or molesting another person; uses over the telephone language threatening bodily harm; telephones and intentionally fails to hang up or disengage the connection.

Disorderly conduct O.C.G.A. § 16-11-39

Acts in a violent or tumultuous manner toward another person whereby such person is placed in reasonable fear of the safety of such person’s life, limb, or health; or acts in a violent or tumultuous manner toward another person whereby the property of such person is placed in danger of being damaged or destroyed; or without provocation, uses to or of another person in such other person’s presence, opprobrious or abusive words which by their very utterance tend to incite to an immediate breach of the peace: “fighting words.”

Deposit Account Fraud O.C.G.A. § 16-9-20

A person commits the offense of deposit account fraud when such person makes, draws, utters, executes, or delivers an instrument . . . for present consideration or wages knowing that it will not be honored by the drawee. This is more commonly called “bad check.” I put this crime in here to throw you a curve ball. This offense is not available for checks written for payment of assessments because the services provided by the association are not exchanged at nearly the same point in time.

Simple Stalking O.C.G.A. § 16-5-90

This offense was changed in 1998 when the legislature modified the statute to read: “A person commits the offense of stalking when he or she follows, places under surveillance, or contacts another person at or about a place or places without the consent of the other person for the purpose of harassing and intimidating the other person.” It can be a misdemeanor or a felony depending on a variety of circumstances.

Sex Crimes:

Are you still reading? I thought so. Several crimes of a sexual nature constitute misdemeanors, as you can well imagine there are more felony offenses in this category. They include:

Public Indecency O.C.G.A. § 16-6-8

There are several ways this crime can be committed. It is defined as the performance of any of the following acts in public: an act of sexual intercourse; a lewd exposure of the sexual organs; a lewd appearance in a state of partial or complete nudity; or a lewd caress or indecent fondling of the body of another person. Urinating in public may be prosecuted under this statute.

Sexual Battery O.C.G.A. § 16-6-22.1

A person commits the offense of sexual battery when (s)he intentionally makes physical contact with the intimate parts of the body of another person without the consent of that person. If the victim is under 16, this offense is a felony.

It is easy to jump to the conclusion that many of the activities of our neighbors may constitute one or more of these offenses. Remember that the criminal justice system punishes past behavior, which may incidentally deter future bad behavior. Criminal prosecution is a very serious matter and should NEVER be taken lightly. In addition to potentially escalating the situation to a boiling point, which could result in physical harm, there is also exposure for being sued civilly for malicious prosecution. If your intent is “just to make them stop” you may be able to seek a Restraining Order or in some counties, a Peace Bond. Those procedures go beyond the scope of this article. If you conclude, however, that there is no other way to resolve the problem you may want to pursue criminal charges. Procedures vary from county to county in the metropolitan Atlanta area but there are general rules/procedures which should apply everywhere.

1. Call the police and have them make a police report. If the police officer did not see a crime occur (s)he generally will not make an arrest without a warrant. Officers are supposed to make a report for every call they respond to, but they get busy and occasionally do not. Emphasize to the officer that you want a report prepared, even if no arrest is made. You will then have to go to the records desk and get a copy of the report, which will be available within a few days. Sometimes having the police come to interview the perpetrator will convince them that you are serious and the behavior will stop.
2. Call the magistrate court in the county in which the crime occurred and ask them where to go to apply for a warrant. DO NOT WAIT TO DO THIS UNTIL THE POLICE REPORT IS AVAILABLE. If you apply for a warrant some days or a week after the incident, the court may conclude that the incident was not really very important to you and will deny your application.
3. When you get to the magistrate court you will be asked to fill out an application for an arrest warrant. You will have to identify yourself as the prosecutor, list any witnesses to the offense and describe in detail what happened. You may be asked to provide a copy of the police report.
4. You will then have an opportunity to speak with a magistrate. Three things may happen: 1) The magistrate may offer to send a letter to the offender informing him/her that an application for an arrest warrant has been made and that so long as the behavior ceases no further action will be taken; 2) In most cases the magistrate will set the matter down for a probable cause hearing to hear evidence from both sides and witnesses in order to determine whether “a reasonable person would believe that a crime had been committed and the defendant is the person who committed the crime.” At the hearing, if the magistrate determines that probable cause exists, and that there is no other way to resolve the matter (and magistrates can be fairly creative here) a warrant will be issued. If the magistrate does not find probable cause, the matter will be dismissed. 3) The magistrate may, under a few set of facts, immediately issue a warrant based on the evidence presented by the victim without setting the matter down for the hearing. If the Judge issues a warrant, either when you first speak to her/him or at the hearing, you may ask the judge for special conditions on the bond. These conditions can require someone to stay off the property or to have no further contact with you or your family.
5. If a warrant is issued, you will then be contacted by solicitor’s office with a court date. Be prepared to go to trial to testify.

Hopefully the information contained in this article was informative and helpful, I did not intended to suggest that criminal prosecution is the best possible solution, but to acquaint you with procedures which are available to all citizens and may be appropriate in certain circumstances. Of course seeking advice from legal counsel before undertaking these remedies may be advisable.

For several years your community has been considering a controversial amendment which would limit the percentage of units which could be leased. A previous Board of Directors asked the Association’s attorney to draft the amendment to the Declaration which would accomplish this goal. A special meeting was scheduled for July 15, 2005 and proper notice was sent to all of the Owners in the community. Along with the timely notice of the meeting which stated the time, place and purpose of the meeting, the Board of Directors sent a Proxy and a Ballot for the Amendment. Across the ballot, in bold, capitalized letters, were the words: “BALLOT TO BE RETURNED BY JULY 15, 2005.”

Despite offering door prizes, only the members of the Board of Directors and a handful of Owners showed up for the meeting. Together with the Proxies which had been given to the Secretary of the Association there was one person over the quorum requirement. The President was elated. It would be easy to get an affirmative vote of two thirds of the Owners present at the meeting to vote in favor of the leasing amendment! However, the Secretary, who had carefully reviewed the amendment provision of the Declaration, pointed out that an amendment required the affirmative vote of two-thirds of the Total Association Vote. Total Association Vote was a defined term. It meant “the votes attributable to the entire membership of the Association as of the record date for such action, whether or not such members are present or represented at the meeting, if any, where such votes are to be cast.” Clearly the turnout was a fraction of the two-thirds of the Total Association Vote. Disappointed, but ever hopeful, the Association President turned to the Secretary and asked what could be done. Without pausing, the Secretary suggested that a provision of the Association’s well-drafted Bylaws contained a provision which stated that that any action which could be taken at the meeting could also be taken outside of a meeting. The President, emulating General Eisenhower’s organization for D-Day, divided the community into sections and dispatched the Board Members and other volunteers, ballots in hand.

The summer was hot. The Board Members and volunteers were busy. The kids had soccer camp. Families took their annual trips to Panama City and to visit to the Grandparents. Because the Board of Directors had hired good landscapers and enforced the covenants so well, many homes sold over the summer and new families moved in. At the September meeting of the Board of Directors, the President asked for all of the completed Ballots. They were still fifty votes short of the requisite two-thirds of the Total Association Vote. Undaunted, the President urged the Board Members to go forth and collect the necessary remaining votes. The new Owners were particularly enthusiastic about the amendment and by the end of the year, the President had enough votes to pass the amendment.

In January 2006, the President called the attorney and told her that they had enough affirmative votes for the leasing amendment and to please record the Amendment. She would forward all of the Ballots to the law firm. When the ballots arrived, the attorney saw that many of them were dated after July 15, 2006.

Although it was terrible news to the Board of Directors and the volunteers who had worked so hard, the attorney had to tell them that the election was invalid. The ballots specified that they had to be returned by July 15, 2005. When that date came . . . and went, that election on the leasing amendment was over. The Georgia non-profit corporations code specifies that “All solicitation for votes taken by written ballot shall . . . specify the time by which a ballot must be received by the corporation in order to be counted.” O.C.G.A. § 14-3-08 (d) (3). The ballot itself complied with the code, as to form; but the Association erred when it continued to solicit votes after the due date.

Of course the Board of Directors can place the amendment on the agenda for the next annual meeting, or conduct another form of vote on the amendment which is authorized by their Declaration. This year, however, the Board will give itself a little more leeway on the date by which the votes need to be returned!