Open Board and Annual Member Meetings in 2021 Take Planning

Annual meetings are on the horizon again, but Covid restrictions are still in place. Without implementation of certain measures for open meetings and social distancing compliance, 2020 made it nearly impossible for hundreds of housing cooperatives to operate, both at a board level with open meeting requirements and at the membership meeting level. If you are one of the hundreds of housing cooperative boards that either delayed annual member meetings or board meetings in order to avoid violation of health and gubernatorial mandates, you are now in a position to start planning now for 2021 having the experience of 2020 behind you.

While housing cooperative governance documents vary from cooperative to cooperative, so do state laws that cover corporate operations. While no two cooperatives or states are identical, there are ways to implement member meeting procedures on a temporary basis if your bylaws do not already provide some latitude. By way of example, Michigan permits several options without a member meeting, so long as those options are provided for under the bylaws.

Additionally, nearly every state has some provision governing virtual meetings without the need for specific language in the bylaws and, like Michigan, may require a written virtual meeting policy to be in place in order to use a virtual member meeting option. But what if you do not have the exact language necessary to hold a member vote without a meeting in your documents? First, contact your cooperative’s attorney and then discuss with him or her whether the following options could work for you.

  • Virtual meetings and virtual balloting platforms are a permissible option so long as there is a written policy in place with guidelines for use in order to maintain the meeting and voting integrity. Your meeting policy should, at a minimum, identify (1) how voting will take place; (2) who will be the IT moderator and offer live support to online users; (3) how you will register your members for attendance; (4) what time voting will begin and end; (5) parliamentary procedure; (6) proxies; (7) nominations from the floor; and (8) distribution of information.
  • Absentee ballots may be a permissible option so long as there is an established policy for board, management and membership to follow. Your policy should, at a minimum, identify (1) proxy and ballot timelines; (2) registration; (3) nomination process; (4) timeline of events; (5) what will constitute a quorum for purposes of counting absentee ballots; (6) how are ballots distributed and then how are they collected; (7) who counts the ballots and who selects those persons (alternatively select a neutral third party outside of the organization such as the League of Women Voters or the National Association of Parliamentarians to open and count the ballots); and (8) if ballots are spoiled, what constitutes spoliation.
  • A hybrid of a virtual meeting and absentee balloting with a hybrid policy outlining, again at a minimum, those items identified above.
  • Adjournment of the annual meeting for a period not to exceed statutory timelines for holding annual membership meetings. For example, in Michigan, annual meetings must be held within 90 days of the date in which they are to be held under the bylaws.
  • Polling the membership or obtaining written consents about the annual meeting in advance of the annual meeting in order get the members’ input as to how and when they want their annual meeting held.

Regardless of the measures you adopt for your cooperative, always engage your cooperative’s attorney to issue a proper legal opinion to the board as to the pros and cons of the measures sought. Always have your cooperative’s attorney assist you with preparation of written, that’s right, written resolutions that outline and detail the board’s decision including the basis for that decision. Both are necessary in the event a member challenges your decision in court so as to establish your decision under the business judgment rule. Courts are less likely to overturn any decision by a board or otherwise interfere with a decision that is based on due diligence and implemented in good faith.

Cooperatives located in states with open meeting requirements were left at a particular disadvantage because many members either do not have a computer or smart device, or they were too unfamiliar with technology to try. Unfortunately for these cooperatives, there was no other option but to hold virtual meetings either through telephone conference or Zoom. We advised many of our clients to start test-runs amongst board members to become acclimated to Zoom functions and features. We then suggested that the board expand those test runs into “informational” member meetings solely for the purpose of getting members acclimated to the process.

Zoom is a great platform for open board meetings because it gives the board the ability to mute all participants except board members so business can be conducted as usual and then to unmute those participants who raise their hands to be recognized during appropriate designated times on the agenda. It also gives the board the ability to move to a break-out room for closed sessions where sensitive and confidential information must be discussed, leaving non-board members in the meeting until the board members return from closed session. Because of the nature of an open board meeting, a virtual platform is the only way to hold such meetings while adhering to social distancing and group gathering restrictions during this age of Covid. The best thing is that while some measures may require a bylaw amendment, not all measures will require a bylaw amendment. Again, it will depend entirely on the contents of your documents and your applicable state laws, but, with the help of your cooperative’s attorney, you can make your next open board meeting or annual member meeting successful.

Conditions could very well abate this year, and meetings may then be held in the fashion prescribed under your bylaws. The wise cooperative board, however, will begin planning now and simply hope that it will not be necessary to implement such a plan.

This article was featured in the Spring issue of CHQ. Click here to read the PDF newsletter.

April Knoch is an associate attorney with Pentiuk, Couvreur & Kobiljak, P.C., in Wyandotte, Mich.

Covid-19 – Which Emergency Orders Do I Follow?

With the Coronavirus (Covid-19) pandemic, new rules and regulations concerning public health are being disseminated weekly by federal, state and local authorities. These new rules typically concern crowd size, masks mandates, restrictions on essential and non-essential employees, evictions and how businesses, such as a housing cooperative, are to maintain public spaces and working conditions for its employees and members. It can be confusing to determine which rules and regulations, federal, state or local, apply to your housing cooperative and what to do if there is a conflict between Covid-19 mandates

Hierarchy of Authority

When determining which rules and regulations apply to your cooperative, it is helpful to understand the hierarchy of laws. There is an established hierarchy of authority for laws, rules and regulations that cooperatives and other businesses and people must follow. This hierarchy is not just for Covid-19 and extends to all laws, rules and regulations. Laws from highest to lowest in authority are: 1) federal law, 2) state law and 3) local county or municipal laws. After these laws, a cooperative’s governing documents rank in authority from highest to lowest as follows: 1) articles of incorporation, 2) bylaws, 3) subscription agreement, 4) occupancy agreement and 5) any rules, regulations or resolutions of the cooperative’s board of directors.

Courts interpret the hierarchy of authority to mean that a federal law will control over any contradicting state law or local law. Similarly, a state law will control over any local law or cooperative governing document such as the bylaws or occupancy agreement and so on down the line of authority with each lower in authority rule or law, subservient to any higher in authority.

In practice this means that when the Centers for Disease Control (CDC), a federal agency, bans certain evictions, the CDC’s federal ban will control over any lower state or local laws or rules that may permit those banned evictions. However, when the CDC’s federal ban is lifted or expires, so long as there are no other state or local laws or regulations that ban evictions, the eviction can proceed.

For example, at the time this article was written (and this may be subject to change), Virginia has no state-level ban on evictions. As a result, when the CDC eviction ban is lifted or expires, Virginia cooperatives will be able to evict members.

In contrast, in my firm’s local jurisdiction of Washington, D.C., the D.C. Council banned evictions prior to the CDC’s federal order, and the council will likely keep its ban on evictions after the CDC’s federal order is lifted or expired. As a result, the removal of the CDC’s federal ban will not allow evictions in Washington, D.C., to proceed since the local law will then apply. Similarly, if your state’s governor has banned evictions, the lifting or expiration of the CDC’s federal order will not permit evictions to proceed until the governor’s ban is lifted or expires.

Which State Law Controls?

What if your cooperative is a Delaware corporation but is located in another state? Which governors’ orders control? A cooperative or other business incorporated in Delaware only becomes subject to Delaware’s rules as it relates to the corporate structure and governance of the corporate entity. Therefore, issues related to interpretation of the articles of incorporation and corporate reporting requirements will be governed by Delaware corporate law. Being incorporated in Delaware does not necessarily mean that other Delaware laws or regulations will apply.

If your cooperative is a Delaware corporation operating in another state, it is likely that your cooperative is registered as a foreign corporate entity doing business in the state of its physical location. This physical presence and registration as a foreign entity within the state will make your cooperative subject to the state and local laws of the state that it is located in. Thus, a Delaware cooperative doing business and located in Washington, D.C., will seek eviction in a Washington, D.C., court and be subject to the District of Columbia’s ban on evictions regardless if Delaware permits evictions at the time.

Using Your Cooperative’s Rules and Regulations

While low in the hierarchy, the cooperative’s rules, regulations and board resolutions can provide clarity and assist during these times. For example, your state or local government has issued rules stating that only essential businesses are permitted to be open and has included housing as an essential business. In response, the board can resolve that as a housing cooperative, its staff and other employees are essential and provide a copy of the resolution to its employees as proof that they are essential. The resolution can be used as proof to any challenge that the employee is permitted to conduct business on behalf of the cooperative including traveling to work.

If your state has banned the issuance of late fees for delinquent carrying charges, the cooperative’s board of directors can adopt a resolution to suspend the collection of late fees. Also, if within your state, gatherings or crowds of people are banned, the board of directors can resolve that community areas, gyms, playgrounds, club houses or any other place where residents congregate be closed. Before taking such actions, be certain to consult with your cooperative’s attorney. Some states may require that if you close certain community areas that the residents be reimbursed a portion of their carrying charges used to operate those facilities.

Just remember, when evaluating a rule or law, look towards the hierarchy – first federal, then state, followed by local regulations for any rule or law that may contradict. If so, the rule or law higher in authority will control.

This content is for your information only and is not intended to constitute legal advice. Please consult your attorney before acting on any information contained here.


Daniel Costello practices real estate law at Costello, P.C. in Washington, D.C., working with condominiums, cooperatives, and homeowner associations in Virginia, Maryland and the District of Columbia.

Can Employers Require the COVID Vaccine?

As the first Covid-19 inoculations to the first round of recipients begins, many employers who are battling to stay open, stay functioning and keep from going out of business are asking themselves if they can require their employees to get Covid-19 inoculation. The short answer is: YES.  However, as with most things related to employment law, the answer is actually more complicated than a simple yes or no and requires a deeper analysis by employers.

Employers can require employees to get the vaccine if they want to continue to be employed. Most states, including Massachusetts and the surrounding New England states, are “employment at will” states. This means that employers have a right to set working conditions. The Occupational Safety and Health Administration (OSHA) actually requires employers to provide their employees with safe and healthy working conditions. However, there are significant exceptions to making this type of job condition that employers must be aware of.

Employees have a right to seek an exemption from an employer’s vaccine mandate if they have medical grounds for doing so or if they have sincerely held religious beliefs. Workers can ask for alternative accommodations, such as use of personal protective equipment, working separately, or working from home. These restrictions flow from the Americans with Disabilities Act (ADA) and Title VII of the Civil Rights Act of 1964. If an employee seeks an exemption for medical reasons, employers must engage in “the interactive process” with the employee to determine what, if any, reasonable accommodations can be made to keep the employee working productively while keeping the workplace and the employee safe. This means thinking about personal protective equipment, social distancing, changing work hours, remote working, etc.

These are just two of the factors that employers must consider when determining whether they should institute a vaccine mandate. There is the potential for significant liability concerns in mandating the vaccine, other than those related to the ADA and Title VII. What if an employee who did not request an exemption has a severe allergic reaction to the vaccine, causing significant illness and only got the vaccine because it was mandated by the employer? This scenario raises the specter of protracted litigation where early reports from the medical field are noting that while rare, adverse reactions in people who have a history of allergies are occurring.

What is an employer to do? Employers should weigh carefully the risks versus the rewards. There are certain industries that will make the vaccine a requirement due to the high risk or essential nature of the business, such as health care workers and first responders or grocery store workers and manufacturing employees. Instead of mandating vaccinations, consider “strongly recommending” that employees get vaccinated. As long as all employees are treated equally, consider offering incentives to employees who agree to get vaccinated. Provide your employees with available information from the medical field to help address their concerns regarding the safety of the vaccine. Remind employees that getting the vaccine is not an attempt to limit their rights, or autonomy, but rather provides them with more freedom of movement and a safer workplace from the virus.

Reprinted with permission from Marcus, Errico, Emmer & Brooks, P.C. Copyright © 2020

 

Dawn McDonald is a partner at Marcus, Errico, Emmer & Brooks, P.C. in Boston, Mass.

Member Associations React to COVID-19

In March, I contacted each region and shared what cooperatives in the Potomac Association of Housing Cooperatives were doing to handle COVID-19 issues/concerns and asked the regional representatives to do the same. Below is the feedback I received.

Potomac Association of Housing Cooperatives

ANNE HILL: Some cooperatives in the Washington, D.C., Maryland, and Virginia area have implemented the following:

  • Closed the office to the public or with limited access to load laundry cards
  • Sent COVID-19 Fact Sheet/Information to each member, as well as posted it in each building
  • Closed community rooms except for the food Share program but serving one member at a time
  • Increased disinfecting of common areas to twice a day making it mandatory that staff wears mask and gloves
  • Restricted repairs/work orders to emergencies only.

Cooperative Housing Association of New England

KIMALEE WILLIAMS, president of CHANE, located in East Hartford, Conn., said the following changes have occurred:

  • Closed all site offices to the public, permitting only the site manager and maintenance occupy that space. This arrangement required the office staff to set up drop boxes in outer lobbies and vestibules large enough for packets to fit (certification paperwork, applications, etc.). Staff also placed applications in those areas next to the drop box for pick up.
  • Closed community rooms. In order to ensure access to the laundry machines, vendors removed the token machines temporarily from the community rooms and into the laundry rooms or vestibules outside the community room or office.
  • Maintenance only performs emergency and health and safety repairs, and all other time is spent making ready vacant units. Increased cleaning of handrails, doorknobs, etc., in common areas by maintenance that provides comfort to the residents and also supports full-time pay for staff as it supplements their time lost not doing routine repairs.
  • Our resident service coordinators are providing limited access to the community room on days where Share or Meals on Wheels delivers so that residents can continue to eat. Drivers leave the food in a separate room and require the residents to go in one at a time to pick up the meal and immediately leave.
  • At this point our staff has does not have in-person contact with anyone, including vendors, unless absolutely essential.

Marcus Management, Inc. (Midwest)

KIM MARCUS, chief operating officer and regional property manager of Marcus Management, based in Farmington Hills, Mich., said when maintenance staff receives work order requests that they go through the following protocols before considering entering a member’s unit:

  • Is the work order an emergency? If not, then it should be recorded for future repairs. Have you travelled outside of state within last 60 days?
  • Have you had a temperature in last 30 days?
  • Have you had a cough, respiratory issue or other immune diagnosis in last 30 days?
  • If any responses are “yes,” report any illnesses to the office when submitting an emergency work order.
  • Management also provides staff that is required on property a letter of authority based on the functions they perform as an essential service.

Federation of New York Housing Cooperatives and Condominiums (The Federation)

GREG CARLSON, executive director of the Federation, said:

  • In New York State both residential building management and staff are deemed as an essential service. This requirement will vary from state to state and locality to locality.
  • We are working with the union to develop a plan to prevent more doormen from becoming ill. Ideas include installing a barrier so residents stay 6 feet apart, reducing the days the doormen work but increase the hours for those days and changing staff hours to nighttime to reduce contact with the residents.

This article was featured in CHQ fall 2020 issue. Click here to read the PDF newsletter.

 

Anne Hill is president of the Potomac Association of Housing Cooperatives

Working From Home and Residential Use Restrictions

How Effects from the Covid-19/Coronavirus and Resulting Changes in Industry May Require Housing Cooperatives to Re-Assess their “Residential Purposes Only” Use Restrictions.

The fallout from the Covid-19/Coronavirus pandemic has resulted in a significant shift in the working environments for those still employed. From the onset of the pandemic and the responsive efforts of our government and private industries, many working Americans are now finding themselves working from home. Whether people are working from home for the first time, or are working from home more often than before, this change has a potential impact on cooperatives with certain use restrictions, or “residential purposes only” provisions in governing documents.

It is not uncommon for housing cooperatives to have Bylaws and Occupancy Agreement that contain provisions restricting the use of the cooperative dwelling unit to that of “residential purposes only.” These provisions may not contain language or support for what happens wide-spread crisis, pandemics, or government restrictions, changes in industry, and the conditions in which general workforces perform their jobs and functions. This begs the question: How should a Cooperative approach enforcement of these use restrictions (i.e., “Residential Purposes Only” clauses)? Should these provisions be strictly enforced, or should they be relaxed due to the widespread change in the world we now find ourselves in? Will revisions or amendments to these restrictions and provisions provide relief?

These questions are just one aspect of how the change in times impacts the function and governance of housing cooperatives. Especially, how emerging and significant current events, such as all that has been brought on by the coronavirus pandemic, effects long-standing principles of cooperative living. This blog will focus on the specific “use restriction” noted above, a provision that restricts the “use” of the cooperative dwelling units for residential purposes only.

The short answer to these questions (should “Residential Purpose Only” use restrictions be strictly enforced against members/residents ​working from home during the ​pandemic and stay home orders?) is no. However, this does not suggest that ​these use restrictions be ignored. Rather, a case-by-case approach to enforcement is warranted. Neither is a complete or temporary cessation of enforcement of these restrictions recommended. Cooperatives should continue to assess these matters on a case-by-case basis, consulting its legal counsel when appropriate. In addition, now may be an appropriate time for Cooperatives to assess their policies to due to possible increases (whether temporary or long-standing) in members working from home.

One of the fundamental purposes behind the “Residential Purposes Only” use restrictions in housing cooperative governing documents goes to the foundational purpose of the cooperative corporation: to provide residential housing for its members. Although many ​ types of cooperative’s exist (i.e., farming cooperatives, workers cooperatives, banking cooperatives, etc.) housing cooperatives are unique. ​A housing cooperative’s Articles of Incorporation and Bylaws should state the intent, or purpose, in which the corporation was formed. Most commonly, these provisions state that the corporation’s purpose is to provide residential housing on a cooperative basis. The purpose of the corporation is a founding principle and building block of housing cooperatives, and should be lost or suffer due to economic changes from the coronavirus pandemic or changes in workforce industry standards.

With an understanding of the intent of the cooperative’s foundational and governing documents, ​the residential purpose of the cooperative corporation is furthered by certain use restrictions, commonly referred to as “Residential Purposes Only” clauses. These provisions bolster and support the corporation’s foundational intent. They are typically found in the Bylaws, Occupancy Agreements, and Policies, whereby additional covenants exist that prevent or prohibit members and authorized residents from using cooperative property and dwelling units for any reason other than residential purposes, such as running a business, or using the unit as one’s corporate address. Another reason for these restriction is tax related. The United States Internal Revenue Service “Tax Code” (see 26 U.S.C. § 1 et seq.) allows certain deductions for each member’s share of mortgage interest and/or real estate taxes. (see 26 U.S.C. §  216). ​The tax code’s allowable deduction distinctively applies to “cooperative housing corporations.” As part of the I.R.S.’ definition of “cooperative housing corporation” the code states that “each of the stockholders of which is entitled, solely by reason of his ownership of stock in the corporation, to occupy for dwelling purposes a house, or an apartment in a building, owned or leased by such corporation.” 26 U.S.C. § 216(b)(1)(B). Therefore, even the tax code incorporates a residential purpose context into its definition of cooperative housing corporation. As explained herein, ​the ​residential “use restriction” is entwined with other areas of the law that impact housing cooperatives.

While these use restrictions exist for a reason, we do find ourselves in unprecedented times. Many people have been required to work from home during the ​pandemic, and some have chosen to work from home for health and safety reasons. Depending on the State you reside, there may have been, or still in effect, executive orders restricting travel, restricting business, trade and commerce, defining what is an “essential function” or “essential service.” These restrictions have ​affected how we regularly conduct and approach the performance and function of our employment, our work and our jobs. If a cooperative takes a “strict enforcement” approach to these cases (i.e., finding that working from home violates these use restrictions), when the matter eventually gets into a court of law, a judge or jury may find that such action goes against higher governmental orders, is against new public policy, or is unjust under the circumstances. While this approach may all but unearth an ugly but inherent conflict between the functions of our government and a private housing cooperative corporation’s (and its members ability) to lawfully self-govern themselves, govern and restrict, where deemed appropriate, the corporation’s property and its allowable uses, ​ and the operation of the corporation, such strict enforcement is likely not the answer. Finding a member-resident in violation of a “Residential Purpose Only” use restriction for merely working from the confines of their cooperative unit, may not rise to a significant violation of the restriction. Under the current climate, such finding may not even rise to the level of a violation. Again, the main purpose of these use provisions is to maintain the purpose of the cooperative for “residential use” so as members and residents are not running a business out of their dwelling units.

With the considerations notes above, cooperatives should review these matters, both their current policies and any potential violations, on a case-by-case approach. These use restriction provisions may still be enforced ​where the intent and spirit of the use restriction is clearly being ​ violated. For example, if a member of a cooperative housing corporation is using their dwelling unit as to run a yoga studio, to run a hair and nail salon, or to run a shop or store providing other goods or services, ​surely those uses would violate residential use restrictions, even absent ​covid-19/coronavirus pandemic issues. However, it would be unjust to punish a member-resident who is required to temporarily work from home, by no choice of their own, or due to current public health and safety reasons brough upon by the current pandemic.

Middle ground may also be found, in limited circumstances, where a cooperative wants to allow for limited home occupation of dwelling units in addition to residential use. However, any policy should focus on maintaining residential use as the predominate use so as not to allow any occupational use dominate or conflict with the corporation’s purpose. This may require, at a minimum, a policy, in which case the cooperative should consult with its attorneys to examine state and local law pertaining to any ​“occupational-use” of the cooperative property. Conceptually, policies of this nature would require consideration of many factors, including:

  • Limiting the ability to conduct work or business being conducted within the unit, to that of the member of record only.
  • Maintaining the purpose of the cooperative (i.e., for residential purposes) and limiting the amount of space that a dwelling unit could be used for in-home work or business activity.
  • Limiting and restricting the storage of materials and goods used in the conducting of work or business within the unit.
  • Prohibiting any changes to the exterior or interior appearance of the dwelling units so they maintain consistent with their residential purpose.
  • Prohibiting of visuals, such as signage, advertisements, etc. regarding operating an in-home business or occupation, that indicate business use.
  • Prohibiting or restricting the sale of offering of goods or services within the dwelling unit.
  • Maintaining normal levels of traffic consistent with that which would be incident to residential purposes.
  • Prohibiting, restricting or limiting the types of equipment that can be stored, located or used within the dwelling unit.
  • Prohibiting anything that creates noise, vibration, glare, fumes, odor or electrical interference with other members in the cooperative.
  • Prohibiting outdoor displays or storage materials, supplies or equipment used in the business.

While these points do not constitute an exhaustive list of considerations that a cooperative would otherwise be required to consider when deciding on whether a limited “home occupation” use of the property may be extended to its members, it shows that there are many pieces to the puzzle.  Every cooperative is different. Locations, areas of industry that may employ a large group of members (i.e., automotive, farming and agriculture, pharma, big tech, etc.), and state and local law all play into the equation.

Times like this also remind us why governing documents should be regularly reviewed for needed updates and amendments to make sure they are fluid with unforeseen circumstances and changing of the times. Given that the effects of the covid-19/coronavirus pandemic are likely to remain to be seen for time to come, it is very possible this event may re-shape the work environment of many industries and businesses. There very well may be a shift in the number and types of employees who will continue to work from home. The fallout of this pandemic remains to be seen. Therefore, cooperatives should look to creating well-thought of resolutions with the insight of their management and legal counsel. Cooperatives should consult with their legal counsel and assess whether amendments or revisions to the corporation’s governing documents (Bylaws, Occupancy Agreements and Policies) can lay the foundation for resolving these issues and disparities due to changes in industries, practices and environments. While the pandemic alone, may not be reason for a complete overhaul of changes to a cooperative’s use restrictions, it does serve as an excellent opportunity for the cooperative to show that it can adapt to the changing of times, and provide its members with a sense of ease, communal living and understanding.

Matthew T. Nicols
Attorney at Pentiuk, Couvreur & Kobiljak, P.C.

Matthew T. Nicols is an associate attorney at the Pentiuk, Couvreur & Kobiljak, P.C., with offices in Wyandotte, Michigan and Chicago, Illinois.  Mr. Nicols focuses his practice primarily in the areas of cooperative housing law, and other community and condominium association law. He is licensed to practice law in the states of Michigan and Illinois.

Please note this content is provided to our readers for educational purposes but it is not intended and should not be regarded as legal advice. Readers are encouraged to consult with competent legal counsel for personalized guidance.