WHY AMEND DOCUMENTS?
By Neal McCulloh, Esq. and Kenneth M. Clayton, Esq.
By choosing to live in an association development, community association residents have the unique ability to restrict certain types of behavior and, more importantly, to require certain standards of property upkeep. The description of those restrictions and standards is contained in the association's documents which can be amended from time to time to conform to the wishes of the association members.
Amendments to documents can be drafted for a whole range of purposes.
In addition to increasing restrictions, amendments can be used to eliminate unreasonable and overly restrictive provisions in association documents. Amendments can be used to provide the board with greater ability to deal with future problems, especially where the composition of the occupants is changing. Amendments can also be used to ensure that a quality of a common area cannot be changed.
An association of primarily investors may want to protect their investments against future leasing and renting restrictions. In such a case, an amendment might be drafted to require 100 percent approval of the unit-owners before any leasing restriction can be placed on units or unit sale or transfer. Conversely, in an association where units are primarily used as residences, the association never develops a transient nature by requiring 100 percent unit-owner approval before any leasing restrictions are relaxed. With a little creative thinking, amendments can be drafted to achieve a host of goals and to tailor the association to the needs and dictates of its unit-owners.
A word of caution before amending to insert the super majority or 100 percent approval requirement - it is imperative that the amendments and their future consequences be carefully thought out. Some associations are prevented from solving serious problems because they cannot get the percentage of unit-owner approval required by their documents for amending the problem provisions. To the degree that unit-owners have faith that their boards are acting in their best interests and will continue to do so in the future, they may want to give the board broader powers, using documents which are easily amended, so that future problems can be effectively solved.
One means of accomplishing broader board power is with empowering clauses. These clauses give the board power to regulate an area, but neither force regulation nor prescribe the method of regulation. For example, the power to regulate the use of skateboards and bicycles on the common elements might be provided for use in the event that the skateboards and bicycles become a problem.
Fix Errors. While a majority of amendments may deal with the rules and regulations, there are many other circumstances which make amendments necessary. Condominium documents are complex by their very nature, and errors are not uncommon. Frequently, documents must be amended to correct unintentional errors. Sometimes the problem is simply a scrivener's error (or drafter's mistake), for which some states have a statutory remedy.
Make More Reasonable. A common problem in documents is provisions which are totally unreasonable and/or infeasible. In these instances, the board may determine that it is necessary to rewrite the documents to correct the situation. Or some provisions may be unintelligible: the board in this case may decide to amend these provisions to either delete the problem wording or to re-write it so it makes sense.
Improve Wording. Definitions contained in a condominium document must be worded to avoid misunderstanding and potential litigation. Consider the familiar single-family residence requirement. What does single-family mean today? Do two non-related individuals occupying the same unit meet this definition and requirement? How about "extended families"? Do they? Without defining the terms further, litigation would certainly arise. However, even the most carefully drafted amendment cannot anticipate every eventuality. But with a clear understanding of the association's goals, language can be implemented to greatly decrease the possibility of misconception.
The term "family" for instance, could be clarified, by defining it is as "a number of persons, related by blood, adoption or marriage, or not more than two unrelated persons living as a single housekeeping unit." Other terms typically requiring refined definition include "tenant," "occupant" and "vehicle."
Change Amendment Process. The association may want to be able to more effectively deal with amendment provisions in the future by reducing the percentage of approving unit-owners required to amend the documents or by simplifying the procedures involved.
Developer Needs. Developers generally need powers to amend documents to respond to changing market conditions. For example, the documents may need to comply with requirements of the secondary mortgage market - FNMA, FHLMC- or mortgage insurers, such as VA and FHA. And if the buying market is changing, developers may want to amend to take advantage of the changing conditions.
Change Developer Orientation. It is important to remember that typically the developers interest is substantially different from the later unit-owners. Many associations may want to preclude the use of units for business purposes. But the developer may have utilized association property for exactly that purpose during the sales period. Or the unit-owners may want to restrict the age group of individuals living in the community, but the developer may have wanted to keep his market broad as possible and have few, if any, restrictions which may preclude a sale.
SHOULD WE AMEND?
Amending documents is generally not a simple matter. It takes time, personal commitment, money, skillful communication and a good understanding of the needs of the community. While some amendments are proposed by attorneys to solve problems or errors within the documents, generally amendments are the result of problems which have arisen in the community. Since the purpose of an amendment will be to eliminate a problem, it is imperative that both the board and the drafter of the amendment closely understand the problem before drafting begins. The method used to correct the problem must be sufficient, reasonable and not overly burdensome.
To properly draft amendments takes time and an attention to detail, but the chore does not end there. In drafting the amendment, the documents should be examined to ensure that an amendment and its requirements will not conflict with any provision within the overall document or with a superior document. Special care should also be taken to see that words used in the amendment are consistent with those in the parent document. Words such as "paragraph", "section" and "articles" should be consistent.
Special care should be taken to see that the amendment does not cause a violation of public policy or statute. Restriction of occupants on the basis of sex or race would be such a violation. Moreover, poorly worded restrictions on leasing units might be unreasonable or amount to a restraint on alienation.
A determination must be made as to where the amendment should be inserted. If the amendment deals with a topic which is not dealt with in the existing documents or if the topic is already located in a document, a determination will have to be made regarding which document should contain the amendment-the declaration, the bylaws, the articles of incorporation or possibly even the rules and regulations. The amendment's exact placement within the individual document will have to be made.
Your association's attorney should prove helpful in making these determinations, as well as examining the amendment for conflicts with state, federal, county or municipal codes.
Obtaining the required approval for the amendment may certainly be one of the toughest tasks facing a board of directors. It is seldom, if ever, that you can satisfy everyone, but to the degree that amendments are sought to solve problems, they are generally well received by the interested owners.
Neal McCulloh is an attorney specializing in the field of real estate and condominium law with the law offices of Kenneth M. Clayton in Orlando, Florida. He is a member of the American Bar Association, Orange County Bar Association and Florida Bar. Kenneth M. Clayton is an attorney specializing in the field of real estate and condominium law in Orlando, Florida. He is a member of the Orange County Bar Association, Florida Bar and American Bar Association. He is president and a founding member of the Mid-Florida Chapter of CAI.