6 BIG REASONS WHY YOUR ASSOCIATION SHOULD CONSIDER AMENDING ITS GOVERNING DOCUMENTS (OR, 6 BIG REASONS WHY YOUR BYLAWS ARE PROBABLY TERRIBLE)

By Gregory J. Fioritto

There are a myriad of reasons why it may be in the best interests of an Association to amend its governing documents, which include the Association’s Articles of Incorporation, Master Deed, Condominium Bylaws, Subdivision Plans, as well as any Board-adopted Rules and Regulation.

Here are six of the biggest reasons why Associations usually amend (in no particular order of importance, and with all due respect to Developer attorneys and Co-owner Landlords alike):

 

1. PURGE ALL UNNECESSARY DEVELOPER TEXT:

If your governing documents date back to the Carter Administration, there’s a good chance that they have never been amended and are still rife with Developer-related terms and provisions. Many Associations can greatly simplify (and shorten) their Master Deeds and Bylaws by simply removing all Developer-related terms.

Readers of your documents will thank you when they no longer have to slog through 3 Articles of intricate Expansion/Contraction/Conversion paragraphs in your Master Deed for no reason, or wade laboriously through provisions of your Bylaws addressing the transition of control of your Condominium from the Developer to the Co-owners (which may have happened for your community in 1982).

2. CONSOLIDATION & PRESERVATION:

An Association can benefit from consolidating all previous amendments into a single, comprehensive document.   For example, an Association that has six previous Bylaw amendments can combine all of them into a single set of Amended and Restated Bylaws.  This enables to reader to be able to quickly review the entire set of Bylaws, rather than forcing the reader to perform the torturous task of trying to assemble multiple pieces of a “Bylaws Puzzle” every time a question about Bylaws interpretation or enforcement arises.

If your Association has a separate set of Association (or Corporate) Bylaws apart from its Condominium Bylaws, you can benefit from combing both sets of Bylaws into a single set of Condominium Bylaws.  This ensures that all of your Bylaws are “preserved” as a matter of public record (since Condominium Bylaws, unlike Association Bylaws, must be recorded with the County Register of Deeds).  Also this prevents the Association Bylaws from ever being lost or misplaced by the Board of Directors, as extremely unlikely as that occurrence might be.

3. FIX EGREGIOUS/CARELESS/BRAINLESS DEVELOPER DRAFTING ERRORS: 

Though this may come as a shock to the average Condominium owner, Developer attorneys make mistakes when drafting Condominium Documents for new communities, sometimes VERY BIG mistakes.  For example, an attached Condominium may suddenly realize after many years of operation that its Documents refer to the Condominium as being a “Site Condominium” (i.e., the Document references separate, detached dwellings built upon each “Unit” when in reality the Condominium contains 2 Units per building).  Such major drafting mistakes can have potentially disastrous consequences for the Condominium (e.g., the document contains the wrong types of insurance provisions, mortgage financing is jeopardized because the wrong terms are included in the Bylaws, etc.).  Associations can certainly benefit from correcting major Developer-drafting mistakes before they explode in the face of the Co-owners and/or the Board.

4. CUSTOMIZATION – ONE SIZE NEVER FITS ALL:

Board members should be aware the most Developer-drafted documents are created from the same, standard (and fairly dull and unimaginative) templates.  The Developer’s attorney is not necessarily thinking of the unique attributes of the community or its long-term best interests when he puts together the initial drafts of the governing documents (indeed, one wonders whether the Developer’s attorney was thinking of anything at all in reviewing some sets of Condominium Documents for more unfortunate communities).

Does the community want to allow one dog per unit, or two?  Does it want the Co-owners to maintain and repair their own windows and doors, instead of the Association?  Does it want to change the Association property insurance coverage from “single-entity” (Common Elements plus standard interior fixtures, equipment and trim) to “bare walls” (Common Elements only) in order to save money on insurance premiums?  These are the types of issues that Boards can address as part of a comprehensive document amendment project.

Indeed, Condominium Boards of Directors and the members of the community have a key role to play in the amendment process, as they are in the best position to help the attorney tailor the documents to better fit the community’s unique wants and needs.

5. ADDRESS THOSE PESKY RENTALS:

Even though the Great Recession is now a memory, rental issues remain a very hot topic for many Associations.  The “Evils of Renting” may be real or imagined, depending on the community (landlord-heavy communities may certainly have a different take on the matter).  Nevertheless, Associations continue to seek new ways to control the problems that having an excessive number of renters can present for communities, such as mortgage financing difficulties, higher insurance premiums and increased levels of Bylaw violations.

Many Boards now seek to “build a wall” around their communities to prevent investors from buying up units solely for investment/rental purposes.  There are many ways to do this, such as by adopting rental caps, rental bans and “seasoning provisions” (e.g., the owner must live in the unit for at least one year before renting it out).  Such provisions must always be drafted with the unique attributes of the particular Condominium in mind (e.g., landlord-heavy communities may require more excessive “grandfathering” in order for the proposal to obtain the necessary two-thirds consent of the membership).

6. HELP CONTROL INSURANCE COSTS (POST-HURRICANE SEASON):

It is a near certainty that there will be a substantial increase in property coverage insurance rates.  The continuing catastrophic losses resulting from this year’s hurricanes will certainly impact insurance rates nationwide, not just in those states where the storms occurred.

Many potential insurance claims simply are not filed by Associations as they adopt higher and higher deductibles in order to avoid the huge (i.e., Bigly) rate increases that results from having multiple claims on the Association’s loss run.

The prudent Association may wish to endure the slings and arrows of reviewing and revising the impenetrable maze of its Bylaw insurance provisions in order to reduce and/or control insurance costs.  For example, the Association could re-assign insurance duties from the Association to the Co-owner, or it could increase (or create) the ability of the Association to shift its deductible to the Co-owner in a larger number of casualty loss situations (e.g., beyond just those situations involving Co-owner negligence).

The above 6 items are some of the biggest reasons why Associations can and should amend their governing documents, though there are certainly others.  If you happen to be a Board member and the content of this Article keeps you up at night, it might just be that your unconscious is telling you that it’s time to consider a document amendment project.

Gregory J. Fioritto is a partner with the firm.  He has extensive experience in community association law and has been with the firm since 2003.  Greg’s particular expertise in community association law includes document amendments, collections, parliamentary procedure, corporate governance, developer disputes, insurance duties, and intellectual property matters.

You can reach Greg at our Plymouth office at 734-459-0062 or via email at gfioritto@zdfattorneys.com.

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