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Minnesota Community Living July/August 2012

Ask the Attorney

By Nigel H. Mendez, ESQ., Carlson & Associates, LTD.

This column is comprised of questions that have been posed to me by homeowners, property managers and related professionals regarding legal issues they have encountered with respect to their associations.

Are electronic signatures acceptable for proxy forms, ballots, etc., from members of homeowner associations? If so, what are the restrictions such as they apply to annual meetings versus amendments to declarations, bylaws, etc.?

My answer to this question would have been no until a 2010 amendment to the Minnesota Common Interest Ownership Act (MCIOA), which is found at Chapter 515B of Minnesota Statutes. This amendment leads me to interpret Minnesota law as permitting the acceptance of electronic proxies and votes as long as your governing documents do not restrict that ability.

Minnesota community associations usually are subject to MCIOA, and are almost always non-profit corporations formed under the Minnesota Nonprofit Corporation Act (Chapter 317A, or "Nonprofit Act”). I will assume both of these authorities apply to the association in question.

Proxies:
Under the Nonprofit Act, so long as your governing documents allow the use of proxies, a proxy form may be submitted as a "nonelectronic written appointment . . . signed by the member,” or as an "authenticated electronic communication.” Minn. Stat. § 317A.453, Subd 1. A communication is "authenticated” if it contains information from which the association "can reasonably conclude that the communication was sent by the [owner in question].” Minn. Stat. § 317A.011, Subd. 3a.

MCIOA is much less clear in its intent. It states only that a proxy must be "executed by the unit owner. . . .” Minn. Stat. § 515B.3-110(b) (emphasis added), but does go on to allow the board to specify the "form of proxy and proxy rules, consistent with law.” Id.

Caselaw exists that has interpreted the term "executed” to mean "signed,” which in general might require a hand-written signature. See, e.g., Minn. Stat. 645.44, Subd. 14 (stating that a "signature” must be in writing). However, for purposes of the Nonprofit Act, "if a provision requires a signature, an electronic signature satisfies the requirement.” Minn. Stat. § 317A.015.

As discussed below, a 2010 amendment to MCIOA signaled the Minnesota legislature’s apparent intent to allow community associations to transact business electronically. So, it would presumably be "consistent with law” (and therefore within the board’s discretion) to accept electronically-signed proxies pursuant to the Nonprofit Act.

Ballots and Voting:
Where MCIOA applies, it permits voting "on any issue” by electronic means (and mailed ballots too), if that option is "authorized by the statute under which the association is created,” is "not limited or prohibited by the articles of incorporation, bylaws, or declaration” and as long as the vote is held "in compliance with the applicable statute.” Minn. Stat. § 515B.3-110(c). The "statute under which the association is created” refers in almost every case to the Nonprofit Act, which authorizes electronic notice and balloting "unless prohibited or limited by the articles or bylaws,” and so long as each member participating electronically has consented to use that method. See, e.g., Minn. Stat. §§ 317A.447 and 317A.450.

When read together, this means your association can vote electronically on any issue unless your articles, bylaws, or declaration say otherwise. But you cannot use mailed or electronic ballots "in combination with a vote taken at a meeting of the unit owners.” Minn. Stat. § 515B.3-110(c). If your association wishes to accept mailed or electronic votes on a particular item of business, then it cannot allow votes on the same business at a member meeting. "However, voting by electronic means and by mailed ballot may be combined.” Id.

Also, be aware your existing documents might not permit electronic ballots, and may still require that board elections be conducted at owner meetings. Until the 2010 amendment, MCIOA required in-person votes for the election of board members. Most governing documents written prior to 2010 followed form with that requirement. This means your governing documents may very well contain a provision stating that member votes on any matter, except the election of directors, may be by mailed ballot. If this is the case, you will not be permitted to accept electronic votes at all, and not even mailed ballots may be accepted for the election of directors. If this is the case, and you believe your association would achieve greater member involvement by permitting electronic voting, your association must amend its declaration before entering the electronic age.

This answer was provided by Matt Drewes, Shareholder, Thomsen Nybeck, Attorneys | (952) 835-7000 or mdrewes@tn-law.com.

To have a question answered in a future article, please email it to me at nmendez@carlsonassoc.com with the subject line of "Ask the Attorney.” While I can’t promise that all questions will be answered, I will do my best to include questions that have a broad appeal. Questions will also be answered by other attorneys practicing in this area of law. The answers are intended to give the reader a good understanding of the issue raised by the question but are not a substitute for acquiring an opinion from your legal counsel.

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