Board Business That May Be Done Behind Closed Doors

Owners who attend a board meeting and watch the directors leave the room for forty minutes usually assume something is being hidden. Sometimes it is. More often the board is doing exactly what the statute contemplates, because a short list of matters cannot sensibly be discussed in front of the people they concern.

Open is the default, and it reaches further than the boardroom

Statutes start from openness. A representative provision states that all meetings of the board of directors, including any subcommittee or other committee of the board, where the business of the association is discussed or transacted, are open to all members of record, and that the board may not use work sessions or other informal gatherings to circumvent the requirement.

Notice supports the rule. Members are entitled to notice of the time, date and place of each meeting, given in the manner and within the period the statute or the bylaws prescribe, and to an agenda where one is required. Several statutes also give members the right to speak on agenda items and to record the meeting.

The reason the default matters is evidentiary. A decision taken outside a properly noticed open meeting is vulnerable, and the association usually has to redo it. Boards that discover this after signing a contract find themselves ratifying it in public with an unhappy audience.

The list of matters that may be closed

One statute permits the board to adjourn to, or meet solely in, executive session to consider litigation, matters relating to the formation of contracts with third parties, member discipline, personnel matters, or to meet with a member at the member's request regarding that member's payment of assessments.

Another state lists five categories a closed portion must be limited to: legal advice from an attorney for the board or the association; pending or contemplated litigation; personal, health or financial information about an individual member or an individual employee, including association records directly related to it; matters relating to the job performance, compensation or health records of, or specific complaints against, an individual employee or a contractor's employee working under the association's direction; and discussion of a member's appeal of a violation or penalty, except on that member's request that it be heard in open session.

Two features are constant. The list is exhaustive, so a matter not on it may not be closed. And the closure is of the portion of the meeting dealing with that matter, not of the whole meeting.

Entering and leaving the session correctly

The mechanics are simple and frequently botched. The board convenes in open session, states on the record that it is adjourning to executive session, identifies the general subject by reference to the statutory ground, and returns to open session before adjourning the meeting. Anything voted on comes back to the open portion where the vote is recorded.

Attendance should be limited to directors and the people whose presence the subject requires: counsel, the manager, an employee whose performance is under discussion where the statute contemplates it, or the member who requested the closed discussion of their own discipline. Inviting a favored owner into a closed session is a common and avoidable error, since it defeats any later claim that confidentiality justified the closure.

Separate minutes are kept for the session, and they are ordinarily short. Because those minutes are outside the general inspection right, a board that records the substance of legal advice in them is creating a document that will be fought over if privilege is ever waived.

The trace that has to appear in the open minutes

Closure is not erasure. A common provision requires that any matter discussed in executive session be generally noted in the minutes of the immediately following meeting that is open to the entire membership. The note is deliberately general: it establishes that a subject was considered without disclosing what was said.

That entry is more useful than it looks. It gives members a dated record of when a topic first arose, which is often the only way to reconstruct how long a board knew about a problem. It also constrains the board, because a decision that never appears in any minutes is difficult to defend later as a considered exercise of judgment under the standard in the article on the standard a volunteer board is held to.

Executive session minutes themselves are ordinarily outside a member's inspection right, which is one of the enumerated grounds for withholding described in the article on inspecting association records. That is why the general note in the open minutes is the only visible record for most members.

Remedies, and what a member can realistically get

Where a board closes a meeting on a ground not on the list, the usual remedy is an action to invalidate the action taken or to compel compliance, sometimes with fees. Some statutes give members a route to petition a court for an order requiring the association to follow the meeting rules. Others rely on the general enforcement provision for the governing documents, which typically awards fees to the prevailing party.

Practically, the most effective step is contemporaneous. A member who states an objection during the meeting, and follows it with a written request that the minutes reflect the ground claimed for closure, creates a record that is worth far more than a complaint made months later.

The subjects that most often trigger improper closure are the contentious ones: a large contract, a decision not to enforce a covenant, and anything to do with assessments. The approval rules for the last of those are covered in the article on the vote threshold for an assessment outside the budget, and where a closed discussion leads to a recorded lien, the priority questions in the article on assessment liens against a mortgage follow.