Typically in the spring or fall, Michigan condominium associations hold annual meetings to elect directors, distribute financial statements to the Co-owners and otherwise provide an update to the membership regarding the status of the condominium. All too often, the annual meeting is sparsely attended due to Co-owner apathy, which may result in your condominium failing to meet quorum requirements. This article explores the definition of quorum, why quorum matters and some practical solutions if your association cannot meet quorum.
Quorum: Definition
Interestingly, neither the Michigan Nonprofit Corporation Act, MCL 450.2101, et seq. nor the Michigan Condominium Act, MCL 559.101, et seq. specifically define the term quorum. According to Black’s Law Dictionary, the term “quorum” is defined as the “minimum number of members who must be present for a deliberative assembly to legally transact business.” As an example, most Condominium Bylaws[1] contain a provision similar to the following:
The presence in person or by proxy of twenty-five (25%) percent in number of the Co-owners qualified to vote will constitute a quorum for holding a meeting of the members of the Association.
In our experience, most condominium documents contain a quorum percentage between 20% and 35% in order to transact business. If for some reason your condominium documents do not contain a quorum requirement, the Michigan Nonprofit Corporation Act provides a default quorum requirement in MCL 450.2415(1):
Unless a greater or lesser quorum is provided in the articles of incorporation, in a bylaw adopted by the shareholders, members, or incorporators, or in this act, shares or members entitled to cast a majority of the votes at a meeting constitute a quorum at the meeting. If the withdrawal of shareholders or members leaves less than a quorum before adjournment, the remaining shareholders or members present in person or by proxy at the meeting may continue to do business until adjournment. Whether or not a quorum is present, a meeting may be adjourned by a vote of the shareholders or members present.
Why Quorum Matters
Obtaining quorum is very important for Michigan condominium associations because if the condominium association does not meet quorum, no legal business may take place at the meeting. Often condominium associations fail to meet quorum and inappropriately decide to proceed with purportedly ‘electing directors’ and taking other corporate actions without legal authority to do so. Unfortunately, this often leads to extensive litigation and arguments over the appropriate composition of the Board of Directors.
Practical Solutions if an Association Cannot Meet Quorum: How to Obtain Quorum and Reduced Quorum Requirements
Our office often recommends to our clients a few practical solutions in order to obtain quorum. Numerous options are discussed below:
First, the condominium association may wish to send out a self-addressed proxy with the notice of the annual meeting. The proxy gives a particular director or officer (usually the President) the ability to utilize the proxy to count towards the quorum requirement.
Second, if the Board of Directors is aware of the possibility of failing to meet quorum, the Board of Directors may wish to go ‘house-to-house’ and obtain proxies prior to the meeting.
Third, if quorum cannot be met at a meeting, we often recommend that the Board of Directors adjourn the meeting for lack of quorum. This normally entails the Board of Directors or property manager mailing out a new notice and meeting date with an explanation that quorum was not met. During that time period between the initial meeting and the adjourned meeting, the Board of Directors may wish to utilize the first two recommendations above.
Fourth, the condominium association may wish to amend the Condominium Bylaws to reduce the percentage required for quorum. For example, if the current quorum requirement is 35%, then perhaps 20% is more manageable and realistic. However, determining what an appropriate percentage is for your condominium association is truly case specific. Also, amending the Condominium Bylaws to reduce the percentage required for quorum may not be realistic due to Co-owner apathy.
Fifth, your condominium association may wish to include a reduced quorum requirement in the Condominium Bylaws. A sample provision may include, “If any meeting of Co-owners cannot be held because a quorum is not in attendance, the Co-owners who are present may adjourn the meeting to a later date. The quorum for each subsequent meeting will be reduced by one-half from the quorum requirement of the previously scheduled meeting.” Again, amending the Condominium Bylaws to reduce the percentage required for quorum may not be realistic due to Co-owner apathy.
Conclusion
Given that quorum is a perennial issue here in Michigan, the Michigan Legislature should consider amending the Condominium Act or the Nonprofit Corporation Act to address quorum issues in condominiums, homeowners associations and other community property entities. Given the numerous issues with the current Condominium Act, this author recommends a major overhaul to the Condominium Act itself with a provision that addresses quorum problems often experienced by Michigan condominiums. Specifically, the Michigan Legislature should consider a reduced quorum requirement for adjourned meetings due to the lack of quorum. In the meantime, condominium associations faced with current quorum issues may wish to utilize some of the practical solutions discussed above. If you or your condominium association have any questions regarding quorum issues or issues relating to condominiums, in general, please contact our office.
The team at Hirzel Law, PLC is composed of award-winning real estate attorneys that can offer quality representation for Michigan clients. Regardless of if you are a commercial real estate developer or individual homeowner, our real estate attorneys can help. We fully understand how unique and complex the challenges that our clients may face, and our real estate attorneys are prepared to help in whatever way necessary. Contact Hirzel Law online or call 248-986-2921 (Farmington) or 231-486-5600 (Traverse City) or 616-319-9964 (Grand Rapids) to learn how our Michigan real estate lawyers can help protect your Michigan real estate investment today.
[1] Historically, quorum was defined in the Association Bylaws, which were separate from the Condominium Bylaws. Given the two sets of bylaws, many Co-owners were confused regarding the difference between Association Bylaws and Condominium Bylaws. Most contemporary lawyers in Michigan combine the Association Bylaws and Condominium Bylaws into just the Condominium Bylaws. Thus, for purposes of this article, the quorum requirement will be included in the Condominium Bylaws, which may not be true for your particular association.
