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Legal Q & A with Dan Greenstein Dan Greenstein, Esq., Bernick, Lifson, Greenstein, Greene & Liszt, PA; writes a column in CIC Midwest News called Legal Q & A. We have excerpted portions of his column below. If you would like to submit a question for possible inclusion in his column, please email it to: information@cicmidwest.com CIC Midwest members can read his column in every issue of CIC Midwest News, and can get copies of his past columns via email. Go to Archive Articles to see the list of topics Dan has addressed. Changing Governing Documents Q: I'm confused about the way our board of directors can change the different documents for our association. Can you review with me the different parts of our governing documents and the procedures for updating or making changes to each of them? How often do you recommend that these things be updated? Also, when do we need to include the homeowners in a vote on a change, and when do we need to file changes with the state? Thank you.
A: Unless you have been through this before, it is easy to understand why you are confused. The typical governing documents for a residential condominium or townhome association are:
The articles of incorporation are filed with the Secretary of State and are required to form a legal entity known as the Association. It is very rare that an association will need to review and/or amend the articles of incorporation.
The declaration is the most important single document for governance of an association. The declaration contains the covenants and restrictions which controls all members and property rights of the association. The declaration is recorded against all of the real property in the association and should be reviewed by the board of directors anytime it is considering revising or drafting a rule.
The by-laws contain the procedures to be followed in running the association. The by-laws typically contain the requirements for quorums, elections, amending documents and voting requirements. The articles, declaration, and by-laws are drafted by the developer.
The rules and regulations are drafted by the board of directors and require only a majority vote. The rules and regulations are the only document which may be amended by the board of directors without a vote of the homeowners. To amend the declaration or by-laws typically requires 67% of the members’ approval and sometimes the approval of 51% of first mortgage holders against the units. Each of your documents should be carefully reviewed for the precise voting requirements for amending the documents.
It is important to also remember that no rule or regulation may contradict any provision in the by-laws or declaration. As an example, if the declaration allows homeowners to rent their units, the board would not be allowed to pass a rule which prohibited the renting of units. In that instance, a vote would need to be taken to amend the declaration and the vote would need to comply with the specific amendment requirements found in the declaration. The only time that the changes need to be recorded would be if the association amended the declaration. In that case, the amendment, or an entirely new declaration which included the amendment, would need to be recorded against all of the units and common elements in the association. This recording would be done through the county recorder or registrar of titles in the county where the association is located.
Who Can Contact the Association's Attorney?
Q: We need advice on how to create a policy about who can contact our association's attorney. Several board members, who disagree with each other, call the attorney and rack up fees. If we only allow certain people to contact the attorney, we are accused of taking "sides" on issues. The ones who can't contact the attorney feel they are not getting the advice they need to make their case. How do other associations deal with this?
A: Believe it or not, this is a fairly common issue in condominium and townhome associations. Often, it can be solved if the board makes a written presentation to the attorney and includes the positions and/or facts which various members of the board feel are relevant. Other times, a conference call maybe used to solve this problem; however, in my experience, a conference call tends to significantly increase the amount of time that the attorney spends on the issue and thus the costs are quickly multiplied. My suggestion is to try to fairly present the issues in an impartial manner and to include the facts or verbiage that various board members feel are important. The attorney can then respond to all questions and issues raised at once, rather than repeating the same information to each board member.
Renters in Townhome Don't Follow Association Rules
Q: How do we deal with a renter in our townhome community who does not follow the association's rules and regulations? The owner of the unit lives out of state and is not helpful when we contact him. A: As more and more investors purchase townhome and condominium units, this type of question is frequently being asked. Depending upon the language in your declaration, or in rules governing rentals, the owner of the unit can be fined and/or penalized for the tenant’s violations of the association’s rules and regulations. It is often helpful to have a requirement in your declaration or rules that require the governing documents of the association, including the rules and regulations, to be incorporated into the lease and attached to the lease as an exhibit. This certainly gives fair notice to the tenant of the standard of conduct required by the association and serves to protect the owner of the unit, who can evict the tenant for violating the rules. Generally speaking, once you begin fining the owner for the tenants’ violations, the owner will take the action required to insure that the tenant complies with the association’s rules and regulations.
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