Status
As most of you know, I and others asked the Board to use its authority to limit the LLCs voting power. The Board was already seeking legal advice for a number of issues related to the LLC, so it asked its attorney for advise regarding the authority we claimed it has. The LLC was doing the same thing in parallel.
Both of their attorneys effectively concluded that the Board did not have the authority and/or business justification to limit the LLCs voting power based on a percentage of its acreage owned. I've argued that the acreage allotted to the LLCs voting power should be reasonably aligned with the percentage of dues it pays into the community association.
It's reasonable for the CA Board to act within the legal advice it received; however, their attorney hasn't addressed all of the pertinent questions. So I've been working with an attorney to assess the Board's authority, and its responsibility to interpret the governing documents. Until all of the questions are answered, I will continue to argue that the current voting power interpretation can be legally corrected by the CA Board.
Let's Review the Legal Opinions
The LLCs attorney has said that our covenants are clear that voting power is based on all acreage owned, and this determination is "unambiguous." But this attorney didn't read the Covenants carefully, because there is a case where some property owned and taxed is exempted from the owners' voting power. What this means is that the Covenants currently support the principle that an owners voting power can be based on a fraction of their total acreage owned. As an example, consider the following diagram:
Steve owns a condo and a garage. Despite the fact that he owns the garage, and that it is real property on a platted lot, and that he pays taxes on it, it is excluded from his voting power. In this case, exclusion of the garage can reduce a condo owner's voting power by 15-20%. So not every acre owned by every community member is included in their voting power. i.e. there's room for interpretation.
Now let's look at the key points from the Board's attorney. He said that "dues are mostly based on services received", and that there is no relationship between dues and acreage owned. The question he didn't answer is this:
Is there a relationship between dues and voting power?
His determination that dues are mostly based on "services received" is perfectly consistent with everything I've read. It explains why the LLC pays higher dues (because it consumes more), and it partially explains why dues aren't assessed on a condo garage. i.e. they don't use septic or water.
But this doesn't explain why garage acreage is excluded from the owners voting power! Clearly, a garage could be exempted from dues without reducing the total acreage applied to the owner's voting power, and there's nothing in the governing documents to explain why garages are excluded. It's logical, however, to determine that voting power is exempted from garages because the owners don't pay dues for them.
In Steve's case, his actual voting power is correlated to his dues, but this voting power excludes some of his acreage owned. i.e. there is an implied relationship between dues and voting power, but this relationship is not defined.
How does this apply to the LLC?
Let's examine the 10 CA dues that the LLC pays. Let's first acknowledge that the number 10 is arbitrary. It's not related to platted lots, or a measurable quantity of service, or total acreage. It's just a mutually agreed number that represents the services it consumes.
Like Steve, the LLC is not guaranteed to have all of its acreage included in its voting power. Because its dues contribution is only a small percentage of total dues, the Board can justify adjusting the LLCs voting power so it reasonably represents its CA dues; in fact, the Board is obligated to do this because of its fiduciary duty to all members. Therefore, it is the Board's responsibility to determine how much of the LLCs acreage should be reasonably included in its voting power.
At this point, this determination will be deferred to the next Board. It's worth noting that the CA Board has broad authority for interpreting the governing documents, and it has a duty to enforce the documents in the best interests of community members. Because of the implicit relationship between dues and voting power, I remain convinced that it's perfectly fair and reasonable to allocate the LLCs acreage based on a percentage of dues paid, thus resulting in proportional powers. Most of the community would probably agree that this is fair and reasonable.
Upcoming Vote for the Annual Meeting
Let us not forget that the Board has authorized a community vote for the annual meeting in May. This vote determines whether or not the governing docs are amended, which would change our voting basis from acreage to number of dues paid. The LLC has made it clear that it will use its super-majority vote to reject this measure. If it does, it will be the first time the LLC goes on record for using its excessive voting power on behalf of its own self-interests.
Conclusion
Given how much the LLC has resisted democracy at KG, you'd think having excessive voting powers actually has some financial or other negative impact on the business. But I can't see that it does. Exercising its overwhelming voting power potentially makes the LLC vulnerable to lawsuits, so this power must be used with great caution. Given the constraints and the PR cost (i.e. loss of community support) of clinging to its interpretation of voting power, one has to wonder why the LLC hasn't been more pragmatic in managing this issue. Of course, the next Board might solve this problem for them.
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