It’s been a while since the infamous Palm II case came down and caused chaos in the Illinois association world. Because it’s been a couple of years, and as we have encountered situations where board members seem to have become lax on following corporate formalities or careful about meeting with other board members outside of formal board meetings, it appears that a quick refresher on the law is in order.
Condominium and homeowner associations are not-for-profit corporations that are required to act through their duly elected board via the formalities provided by Illinois law and the Association’s governing documents (Declaration, By-Laws and Rules and Regulations). But many board members, in an attempt to get things done, fail to follow the formalities and place themselves and the rest of the board at risk of breaching their fiduciary duties.
The Illinois Appellate Court in Palm II held that a quorum of board members should not engage in private discussion of board matters, whether by email or by a meeting in passing on the property. The Illinois Appellate Court reasoned that that private meetings of board members, workshops or email exchanges between board members constituted “conducting board business” and were thus improper outside of a duly-noticed open board meeting. Private meetings and workshops are not the same as closed/executive board meetings which are permissible under certain circumstances (to discuss litigation, to discuss the appointment, employment, engagement, or dismissal of an employee, independent contractor, agent, or other provider of goods and services, to interview a potential employee, independent contractor, agent, or other provider of goods and services, to discuss violations or unit owner’s unpaid assessments or to consult with legal counsel). It is worth noting, however, that no voting can occur in closed/executive board meetings. Closed/executive board meetings can be held for discussion purposes only and any final decision/vote must be conducted at a duly-noticed open board meeting.
So what must board members do? Board members should consider delegating more authority to their property managers or simply hold more open meetings to comply with Illinois law.
Please contact one of Tressler’s HOA attorneys for additional information to ensure compliance with Palm II.