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07/23/07: Amending Your Association Legal Documents

HOUSING COUNSEL

By Benny L. Kass

Q: Recently, the developer of our Homeowner Association turned over the development to the owners. We have discovered many conflicts between the Declaration of Covenants and the Bylaws and we would like to correct this problem.

Our Declaration says we can change the language by a two-thirds vote of the owners by an instrument in writing. What does this mean? Do we need to get the signatures of all owners on a particular document or can we just do a vote with each lot getting one vote? Do the signatures have to be notarized? If we are not successful, does the Declaration control in cases of conflict between the Declaration and the Bylaws?

Is this an impossible task?

A: There are two things you should do immediately.

First, you should retain legal counsel who is familiar with community associations. Your lawyer will guide you on this matter, and on the many other issues involved when there is transition between developer and owners.

Then, if your attorney agrees that there are conflicts between the two documents, the developer should be advised of your concerns. A reputable developer should be prepared - at its cost - to make the corrections. It may be necessary to get the two-thirds vote of the owners, but the expense in making the amendments should be borne by your developer.

In any community association, there is what we call the "hierarchy of power". The absolute power authority is your state statute. Although most such statutes allow great flexibility for the drafters of the legal documents, some things are carved in the legislative stone. Regardless of what your legal documents say, if they conflict with the state statute, the latter prevails.

The next level of authority in a Home Owner Association (HOA)is the Declaration of Covenants, Conditions and Restrictions (known as CC&Rs). In a condominium, it is the Declaration. Once again, if your state statute is silent, these documents control your association.

The next level are the Bylaws, which are found in both HOAs and condominium associations. Finally, any Rules and Regulations promulgated by the Board of Directors must be complied with, so long as they do not conflict with any higher authority.

Let's look at this example. Pets are always a hotly debated topic in community associations. To my knowledge, no state statute addresses this issue. And typically, any pet restrictions are found in the association bylaws.

If the Bylaws prohibit pets in your community association, the Board of Directors cannot by rule or regulation permit any deviation from this requirement. If a majority of owners want to permit pets, they will have to mount a campaign to amend the legal documents. And as you noted in your question, usually to amend those documents requires a super majority of owners, and not just a simple majority.

On the other hand, if your bylaws permit pets, the board can adopt reasonable rules regarding how pets must be kept on common elements - such as all pets must be on a leash, or that unit owners must clean up after their dog.

So before you approach the developer about changing the legal documents, the Board and its attorney should decide whether you really need to correct any discrepancies. Since your CCNR's control, you may just want to live with these inconsistencies, especially if you think it will be difficult to muster the requisite supermajority required to amend your documents.

It is not easy to amend community association documents. Indeed, legislative bodies throughout this country have purposely required a super majority so as to protect the minority from potential abuse. When you buy into a community association, you are bound by the existing legal documents and any amendments which are validly enacted. Clearly, every owner is entitled be assured that these important documents cannot be changed by a mere simple majority.

How do you go about amending your documents? You should be able to get guidance from the documents yourself. The board has to properly notice a special (or regular) meeting for the purpose of voting on the amendments. But before this, a draft of the proposed amendments should be circulated to all owners, so that they will not be surprised when they are called on to vote.

Typically, many associations schedule a meeting solely for the purpose of debating and voting on the proposals. This way, complete focus is on the proposed changes.

Read your documents. Can owners vote by proxy, and if so are there any restrictions on the number of proxies that another owner can hold and vote?

As for the vote itself, usually it is by written ballot at the meeting. And it is my experience that the votes do not have to be notarized.

You suggested that each lot owner would have one vote. Again, you have to read your documents. Does every owner have but one vote, or do you vote based on your percentage interest in the association? If the latter, someone has to count the votes to make sure that a requisite majority is in fact met. You may have a situation where a majority of owners have voted in favor of the proposal, but a small minority - with larger units and larger percentage votes - can block the proposal.

Finally, if the amendment is enacted, the Board will sign a document which states that the amendment was enacted, when it passed and by what percentage. This document - and the amendment itself - is then recorded among the land records where your association is located.

Amending documents is sometimes very important for the survival of an association. However, it is a time-consuming and often frustrating process. Supporters of the proposal must mount a major political campaign, often going door to door to explain the reason for the proposal and to obtain proxies, just in case that owner decides not to attend the meeting when the vote will take place.

No, its not an impossible task, but it ain't easy.

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