What Every Board Should Know Before Amending Governing Documents

[vc_row][vc_column][vc_column_text]

Clear instructions make for great outcomes and end products, as anyone who has put together “some assembly required” furniture can tell you. The same goes for governing documents and HOAs: comprehensive documents set the stage for awesome communities. So, what should an HOA board do if its governing documents are missing needed regulations, are worded ambiguously, or contain discriminatory rules?

These issues, among others, may be resolved with an amendment to the governing documents.

If your association’s governing documents could use some updating, here are some things to consider before beginning the process of amending your governing documents, as well as some tips for making that process easier.

What to Consider Before Amending

First, let’s review what amending the governing documents can entail. Below are seven considerations that may impact how your board confronts a governing documents amendment.

Consideration One: Laws for amending governing documents vary by state, and each individual set of governing documents may have its own rules for amendment. This is why it’s important for the board of directors to review all applicable laws, as well as what their governing documents say about making amendments. Remember that state law (as well as federal and local law) trumps an association’s governing documents, so if the amendment process outlined in the governing documents conflicts with state law, the law should be followed.

Consideration Two: A vote of the membership may be required to amend governing documents. And, sometimes, a vote to amend governing documents may require a large percentage of homeowners to vote in favor, such as 67% or 75%. If an association has trouble passing lower percentage membership votes or making quorum at membership meetings, the board will need a solid plan in place to successfully amend the governing documents.

To help the HOA achieve the required number of homeowner votes, multiple voting options can be offered, depending on what state law allows. Such voting options may include absentee ballots, online voting, and proxy voting.

However, in other cases, the board may have the authority to make certain amendments to the governing documents. The HOA’s attorney will be able to help board members ascertain when they can vote on needed amendments themselves (without member approval).

Consideration Three: The HOA should hire an attorney to draft the amendments to the governing documents. To ensure the governing documents will be enforceable and comply with state and local laws once amended, an attorney with experience in HOA law and amending community governing documents should write the amendments and make any other updates to the governing documents.

Consideration Four: The process of amending governing documents and acquiring a vote from the membership can take several months. The process may even take longer if the board requests multiple rounds of changes or if the HOA has trouble acquiring enough ballots from the membership to decide the vote.

Consideration Five: Amending the governing documents can be expensive. A few small changes probably won’t be a burden to the HOA, but updating all the community’s documents could turn out to be a costly investment. The current market and the state where the association is located also affect costs.

Individual attorneys will offer different prices and pricing methods, but as with hiring any other professional to complete work for the community, the board should look for a candidate with experience, a good reputation, and a reasonable price, as compared with candidates with similar qualifications.

Consideration Six: Identifying all needed amendments and completing them at the same time will help the HOA save on the money, effort, and time spent overall on document amendments.

Sections that may need to be amended could include:

• • temporary rules pertaining solely to the development period of the association,
  • missing sections that need to be added (such as an indemnification provision, pet policy, or parking restrictions),
  • outdated rules (such as one requiring notice for board meetings to be sent by telegram),
  • the association’s meeting requirements (to allow the HOA to hold virtual meetings and conduct online voting for those meetings),
  • conflicting sections between governing documents or within the same governing document,
  • a too-high membership vote needed to amend governing documents,
  • a too-high percentage of homeowners needed to reach quorum during membership meetings,
  • vague rules that are not enforceable,
  • discriminatory rules, or
  • rules that conflict with the state, local, or county laws.

Consideration Seven: Bodies outside of the community association may need to approve governing document amendments, such as the HOA’s lenders or local government. Depending on the types of rules being amended and the state where the HOA is located, the HOA may need to send proposed amendments to a bank that has loaned the HOA money or to local governing bodies for their approval. An experienced attorney will be able to ensure that all concerned parties are contacted.

Tips for a Smooth Amendment Process

Now that we’ve covered some of the main issues the board should address when planning to make amendments to the community’s governing documents, let’s cover some suggestions to make the typically complex process of amending documents more efficient:

Communicate changes to homeowners and explain why they are important. An effective way to achieve the needed percentage of votes in favor of the amendment(s) from the membership is to take the time to explain what changes the board seeks to make to the governing documents and why. The board may do this through articles in the community newsletter, e-blasts, or town hall meetings, which will allow homeowners to ask the board questions and have their concerns addressed.

Allow homeowners to vote on different amendments separately. Otherwise, if too many homeowners choose to vote “no” for the amendments simply because they are against one change, all the amendments will fail. On the other hand, if homeowners can vote on amendments separately, the board will have a better chance of getting individual amendments approved.

If several amendments are needed, have them all done at once to save time and money. If the board works to identify all the required updates at the beginning of the project, the attorney will be able to provide a more accurate estimate. Additionally, the board will not need to go through the process of amending the documents each time they happen upon another rule that needs to be updated.

Budget for document amendments, and put more money aside than it seems the project will need. This way, if the attorney hired to draft the amendments discovers a discriminatory or unenforceable rule in one of the documents, or if the amendment project experiences an unexpected setback or additional expense, the HOA will be prepared to handle it.

That concludes our overview of considerations and tips for the governing documents amendment process. We hope this information will help guide you through possible complications and challenges you may face when attempting to update community documents. Be sure to check out our online HOA board member training classes to make sure you maximize your potential as an HOA board member.
Related: Are you looking for Better HOA Management? We got you covered! Visit Spectrum Association Management to learn more!

[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

[/vc_column_text][/vc_column][/vc_row]