HOUSE ENROLLED ACT 1074 BRINGS PROXY CHANGES AND EASES ADMINISTRATION FOR HOMEOWNERS ASSOCIATIONS
On April 12, 2017, the Governor signed the House Enrolled Act 1074 into law. This new law makes changes to the Indiana Code that will aid homeowners associations in administration by making the process of sending in proxies easier as well as providing a method for a Board of Directors to continue to operate in the absence of quorum. These new changes to the Indiana Code are mandatory for all homeowners associations regardless of when the association was formed or established.
This legislative session brought more changes to the proxy requirements set forth in the statute, Indiana Code 32-25.5-3-10. The new law adds that the members signature that is required on the proxy can be executed by hand or by electronic signature. It also provides that members can submit proxies to the Association by submitting them by US mail, hand delivery, fax, electronic mail or other electronic means. This change allowing proxies to be submitted by fax and electronic mail eliminates the need for all proxies to contain an original signature. The additional methods of submission will greatly assist the Association in boosting numbers for quorum for meetings, so they can hold elections, vote on changes to the governing documents, approve budgets, and conduct any other business required to be done at a meeting of the members.
The second part of the House Enrolled Act 1074 created an entirely new section of the Indiana Code, specifically IC 32-25.5-3-11. The purpose of this section is to give the Association the ability to function and operate where there is no quorum present at the meetings where elections are to take place. When quorum is not met, elections to the Board of Directors cannot occur, and recently there have been several cases brought before the Court asserting that the Board had no authority or power to take actions they took because the Board was not properly elected. For several of these Associations, quorum had not been met at a meeting in years; therefore, elections had not taken place for the same duration. This new section of the Indiana Code resolves these types of assertions in favor of the Board.
If a meeting is called according to the provisions set forth in the Association’s governing documents; and, if the purpose of the meeting is for the election of members of the Board of Directors; and, if the number of members in attendance fails to meet a quorum as defined by the governing documents; then, the members of the Board serving at the time of the meeting may continue to serve until their successors are elected or appointed. The length of time the member has already served and the number of terms already served is irrelevant. The Board member may continue until an election can be held or a replacement is appointed.
According to the new statute, failure to meet quorum at a meeting does not exempt a member of the association from meeting his or her obligations under the documents, or from the requirement to abide by the covenants regarding use of the real estate or payment of assessments. Failure to meet quorum also does not create a defense for a member who fails to pay assessments, violates the covenants or fails to maintain their property or abide by their obligations under the documents. The statute also provides that the Board may continue to enforce the governing documents of the Association. The Association will maintain the status quo and continue on with operations where there is an Association with poor member participation.