The Force of the New Board of Directors Awakens

Anyone who’s lived in or worked with a community association knows that the end of the calendar year usually brings a new board. The annual meeting is almost always the setting for a vote on new directors. This vote typically takes place just before the winter holidays set in with the new board taking the reins of authority sometime in the New Year. Because of the holidays, the moment of transition of authority from old board to new board is rarely an issue, as no one is eager to start work before the holidays are over. However, in certain instances, knowing the exact moment that transition occurs can be critical since only a legally seated board can make decisions on behalf of its association. This past year saw a board with two weighty decisions pending as the annual meeting approached. First, a decision was needed regarding an ongoing covenant violation that involved the operation of a business on common property. Second, an association loan was needed to cover the cost of a massive maintenance project to fix a water intrusion issue. The association’s annual meeting took place in early December and decisions on both issues needed to be made before the end of the year. Further complicating matters, both issues were hot topics in the community and several new directors had been elected at the annual meeting because of their vocal opposition to the current board’s position on those same two issues. The question presented to me: when does the new board of directors gain authority to make decisions on those two issues? Of course the first place to look (as is almost always the case) is the governing documents for an association. Generally, the provisions regarding election of directors can be found in the bylaws (although not always!). Sometimes the answer to the question is clear: the new board takes control immediately after the election or on the first day of the new calendar year. In this particular instance the language was unclear – the relevant provision only providing that the board would be elected at an annual meeting and that each director would serve for a year with no clarification as to when the term actually began. Nor was Georgia law much help: there appears to be no relevant case law and the Georgia Nonprofit Corporation Code specifies a timeframe for when the first board of directors for a nonprofit corporation begins to serve. The beginning of a term for successor directors following an election is not contemplated. See O.C.G.A. § 14-3-805. In the situation described above, the property manager and 2015 board said that the  practice of the association had been to turn over authority at the first of the calendar year. Since the governing documents and Georgia law provided no further direction, I advised them to continue the practice of having the new board take power on January 1, 2016. Since the term for a director was clearly one year, if the 2015 board had not taken power until January 1, 2015 then  their term would not be up until December 31, 2015 regardless of when the new board’s election took place. While this appears to be an untested issue in Georgia, in this instance that approach was consistent with the law in place regarding a director’s term of office. Luckily, in the association I describe above, the old and new board channeled the light side of the force to amicably settle the issues and ended up agreeing on how to handle both the violation enforcement and association loan. In coming to an agreement, they avoided the whole issue of legal authority. However, if either board had given in to the dark side and not agreed on a course of action the situation could have devolved into a board v. board lawsuit that would have been expensive and destructive to the morale of the community. If your association’s governing documents do not specify when a newly elected board actually takes power, it is a good idea to amend the documents or create a clarifying policy before the transition date becomes an issue and the association finds itself with a costly mess on its hands.