Articles

Client Alert: Virginia's Uniform Electronic Transaction Act: Conducting Association Business Electronically During and Post COVID-19 Pandemic

By: Chad Rinard, Matthew Devendorf*, Kathryn Murphy, Nasim Saeidi and Kara Tappan 

The pandemic has foisted upon us a reality in which a virtual meeting is a necessary expediency to conduct the business of community associations.  The Governor’s Executive Orders have waived the statutory requirement that board meetings have at least two of an association’s directors physically present at the place of the meeting. [i] When the pandemic mercifully subsides and consequently the Governor’s Executive Orders expire, his waiver of the physical presence requirement is due to expire too.  However, several useful parts of a virtual meeting, as we now know them, will remain.     

The Uniform Electronic Transactions Act (“UETA”) is tucked into both the Property Owners’ Association Act and the Condominium Act. [ii] Used correctly, it authorizes an association to use electronic means as a substitute for any of its paper communications. [iii] The dream of replacing the production of paper notices, proxies and more with electronic versions creates a tantalizing method of efficiency for any association’s manager.  The UETA however is not a substitute for a recorded covenant that mandates notice be sent via first-class mail or some other mode that printed documents still travel (at great cost to an association for postage). [iv]  If an association retains this antiquated language, that covenant unfortunately prevails and still applies before the UETA can be used.

But, if the covenants allow the use of the UETA, then...

HAVE A PROCEDURE IN PLACE TO DETERMINE THE VALIDITY OF A SIGNATURE TO WHOM IT IS ATTRIBUTED

It is obvious the best practice for an association is to have a procedure in place to determine any owner who signs anything electronically is in fact the act of that person. [v] The UETA gives a broad array of choices regarding that procedure.  Any electronic process, sound or symbol associated with the person who is signing electronically may suffice. [vi]

This is not to say caution should be thrown to the wind, as an association may stumble into a position of counting, for example, a vote that an owner later says (s)he did not cast.  That said, an electronic voting resolution should be adopted far in advance of any election using electronic proxies or ballots.  That resolution should further cover how the association will verify an owner’s information with an identifier unique to him or her. [vii] Creativity may be key, as a number assigned to an owner or an email address to which that owner has sole access, may well suffice among other methods not thought of here.  At the same time, the level of security used reduces the chances the electronic signature can be changed or erroneously transmitted, permitting it to be voided. [viii] So it is best to identify in a resolution the choice of algorithms or other codes, identifying words or numbers, encryption, or callback or other acknowledgment procedures the association will use for verification. [ix]

PERMIT RECIPIENT TO PRINT OR KEEP

Any document sent by electronic means must be able to be retained by the recipient. [x]  Metadata and other settings should be checked before sending a document electronically to ensure it can be printed and/or saved. 

HAVE CONSENT 

It is important to keep in mind too that any transaction conducted by electronic means requires the consent of all the parties involved to the use of those means. [xi] There is no current case that establishes the contours of what constitutes consent so any guidance in this area will have some modicum of risk. [xii] For example, a written acknowledgement by an owner to receive notices electronically has to constitute that person’s consent but other practices will be more nebulous such as sending notice to an email address previously provided by the owner to the association. [xiii] Careful minute taking or a resolution will always be helpful.

Two affirmative steps must also be taken by an association upon request by an owner.  First, an owner may both give consent and take it away, a request which the association must honor. [xiv] For example, it is fine for an owner to acknowledge receipt of electronic notice, but ask for a paper proxy.  And second, if an owner cannot or does not want to use electronic means, the association, if asked, must make reasonable accommodation, at its expense, for such person to use the traditional paper notice, proxy, etc. [xv]

KEEP ANY RECORD SENT ELECTRONICALLY IF IT WOULD BE KEPT WHEN SENT IN PAPER FORM

The UETA does not affect the retention of records by an association required by statute.  It admittedly is difficult to sort those documents statutorily required to be kept, [xvi] opposed to those kept as a best practice.  However, this may be a distinction of no consequence if the UETA is used.  It is clear all electronic documents should be kept in a like manner.  One, the electronic record must accurately reflect the information in the original document. [xvii]  Secondly, it must remain accessible for later reference.[xviii] 

A board may utilize third party storage providers to retain electronic records, [xix] however, it is important to regularly verify that your association can access its records through the third party provider.  Further, this is not an invitation to delegate any fiduciary duty about record retention.  If an association is to rely on the UETA, a records retention resolution should be adopted or updated to reflect the UETA’s requirements.

In the end, the UETA may never eliminate the need for a paper based operation, but it can significantly reduce it.  Feel free to work with your association’s attorney to use the UETA advantageously for your association.