Forbes Bender & Paolino P.C.

The Demystification of the Proxy Vote

By Alexander D. DiSanti, Esq.

Introduction

Both the Uniform Planned Community Act and Uniform Condominium Act contain provisions, relating to the use of proxies.  The statutory language is substantially similar, and Section 3310 of the Uniform Condominium Act provides:

(b) Proxies.  Votes allocated to a unit may be cast pursuant to a proxy duly executed by a unit owner.  If a unit is owned by more than one person, each owner of the unit may vote or register protest to the casting of votes by the other owners of the unit through a duly executed proxy.  A unit owner may not revoke a proxy given pursuant to this section except by actual notice of revocation to the person presiding over the meeting of the association.  A proxy is void if it is not dated or purports to be revocable without notice.  A proxy terminates one year after its date unless it specifies a shorter term.

There is confusion about what is a proxy and how is it used.  Some association members confuse a proxy with a ballot.  Sometimes, a proxy is identified as a proxy ballot.  A proxy is not an absentee ballot.  In states where mail-in ballots are permitted in a political election, a member may receive a proxy and think that he has received a ballot.  The member specifies his voting preferences and mails the proxy back to the sender.  The member believes that his votes will count.  Typically, they will not.  This raises interesting issues.  This article will attempt to demystify the use of proxies and provide useful information to homeowner and condominium associations, concerning this important and sometimes troubling methodology.

Proxy Basics

Homeowner and condominium association boards have a fiduciary duty to provide voting opportunities to all those entitled to vote on the business of the association.  Member participation at meetings should be encouraged.  Inability to attend a meeting should not result in the waiver of the right to vote.  Absentee members may vote by proxy.  Importantly, proxy votes may be necessary to establish quorum requirements.

What exactly is a proxy?  Simply, a proxy is a written document whereby a unit owner appoints someone else, a proxy holder, to represent him at a meeting and to vote on behalf of the proxy giver.  A proxy creates an agency relationship between the absentee voter and the proxy holder.  This typically happens when a member cannot attend a meeting.  The proxy holder must appear at the meeting to cast a ballot on behalf of the proxy giver.  The proxy giver should trust that the proxy holder will attend the meeting and exercise the proxy power in accordance with the wishes of the proxy giver.  A vote by a proxy holder has the same force and effect as a vote by the proxy giver.

There are two types of proxies: 1) general and 2) limited or directed.  A general proxy allows the proxy holder to vote without restriction, allowing the proxy bolder to exercise his discretion.  A limited or directed proxy restricts the voting power of the proxy holder.  The restriction may relate to voting at a specific event or on a specific issue or may direct how the proxy holder must vote.

There are certain requirements of a valid proxy.  It must be in writing, dated and signed by the proxy giver.  The proxy giver must give his authority freely and without coercion or duress.  A proxy is not transferable to another proxy holder.  A proxy must be given to a specific individual, who must be named in the proxy or be identifiable by title or description, such as president of an association.

A proxy may identify a secondary proxy holder in the event the primary proxy holder fails to attend the meeting.  Generally, if a proxy giver attends the meeting or revokes the proxy in writing to the board before the meeting, the power of the proxy terminates.

The governing documents of an association should be examined to determine if there is a restriction concerning who may act as a proxy holder.  For example, a proxy holder is generally required to be a member of the association and entitled to attend the meeting of the association.  A non-member of the association will generally have no right to attend a meeting of an association.

One of the mistakes to avoid in an association election is failing to send proxies to the members of the association before the meeting occurs.  This can happen by mere inadvertence.  Commentators recommend sending proxy forms with the notice of the meeting.  Extra proxy forms should be brought to the meeting in the event that solicitation of association members is required to secure additional proxies to establish a quorum for voting.

Include as much information as possible on the proxy.  Include the names of all candidates for the positions involved in the voting and include a space for write-in candidates.  Be sure to identify how many people can receive a vote for a particular position.  Votes for too many candidates void a proxy.

Proxy Problems and Abuse

Proxies can cause problems and abuse.  There are issues relating to whether the governing documents limit the number of proxies that a proxy holder can vote, the related issue of proxy-hoarding, whether the proxy holder votes in a manner consistent with the wishes of the proxy giver and the validity of a proffered proxy.  To amplify the first two issues above, let us imagine an overly ambitious candidate soliciting proxies from unit owners for the purpose of obtaining additional votes.  It is wise to use a management company to send proxies to unit owners prior to the meeting with instructions to return completed proxies to the management company in an effort to avoid this type of problem.  The problem is more difficult to handle in the event that solicitation of proxies is sought at the time of a meeting to establish a quorum.  A person soliciting proxies can handpick whose proxies are being sought.  This can affect the results of the voting process.

There is a delicate balance.  Limiting the number of proxies that an individual can have may complicate or defeat the establishment of a quorum for the meeting in the event of insufficient turnout.  Yet, the board must be sure that unit owners believe that the election process has credibility.  Striking this balance may be achieved by allowing proxies to be used only for the purpose of establishing a quorum if the association has an insufficient number of votes to elect a candidate without counting the proxy votes.

Other potential problems include a proxy giver issuing more than one proxy, which implicates issues of error or fraud.  A challenge to the voting results at a meeting may be mounted if a disgruntled voter determines that confusing or misleading information was contained in the proxy document.  There may be restrictions to the right of one to give another a proxy, such as a member of the board granting proxy power to another member of the board or to another person.  This attempted transfer by a member of the board represents an impermissible delegation of power.

Proxy disputes should be resolved by election inspectors appointed by the board.  Commentators generally recommend that inspectors err on the side of validity of the proxy to avoid the disenfranchisement of a unit owner.  If it is determined that the proxy was invalid, the vote should be nullified.

As always, when dealing with community association issues, the governing documents of the association and the laws of the state of the association must be analyzed.

New Laws in the State of Florida

Florida has recently undergone a significant rewriting of laws governing community associations of that state.  These changes were made because of concerns about the way these associations were run and complaints by association members.  In some respects, these changes were designed to create greater transparency and accountability.  Proxy voting was addressed in these laws.

Commentators from that state say that a homeowner association is permitted to use proxies in the election of directors and to establish a quorum.  Proxies may be general or limited.  The law specifies the elements of a valid proxy.

However, these commentators say that the use of proxies in condominium associations is generally prohibited.  Proxies are not permitted to be used in the election of board of directors, unless otherwise provided in the governing documents of an association.  General proxies are generally not allowed.   Proxies may be used to establish a quorum or to address administrative issues at board meetings.   If the matter at issue relates to an issue of substance, only limited proxies are permitted.

Conclusion

The right to vote with respect to matters affecting a community association should be encouraged.    Impediments to this right should be addressed to ensure the involvement of all association members in the voting process.  Proxies are an important tool to achieve this goal and are oftentimes necessary to establish a quorum, allowing an annual meeting to proceed with the power to decide issues of critical importance to the future success of a community association.

Alexander D. DiSanti, Esq., is an officer of Forbes Bender Paolino & DiSanti, P.C.  Forbes Bender Paolino & DiSanti, P.C., is a full service law firm with offices located in Delaware County (Media) and Chester County (West Chester), Pennsylvania.  Alex has been representing condominium and homeowner associations for over 25 years.  He has the highest lawyer rating given by Martindale-Hubbell of AV Preeminent.  Alex was selected for inclusion in Pennsylvania’s Legal Leaders Presenting Top Rated Lawyers for year 2013.  At the request of the National Business Institute, he has served as a faculty member and instructor of Legal Aspects of Condominium Development and Homeowners’ Associations, a legal education seminar for lawyers.  Alex can be reached at (610) 627-1700 or adisanti@fbpdlaw.com.  Visit his website at www.fbpdlaw.com.