In addition to their boards, common interest communities are governed by a set of foundational documents. In a condominium, those documents are the declaration and bylaws; co-ops also have bylaws, as well as a unique document called a proprietary lease. In addition, both condos and co-ops have a set of house rules that can vary somewhat from community to community.
Occasionally, either because of changing times, demographics, or some other reason, a community may need to take a critical look at their governing documents, and may decide that an adjustment is called for. Perhaps a house rule is deeply unpopular with residents, or the bylaws—which may have been unchanged since the building was built or converted to cooperative ownership—need to be updated to reflect current realities. Whatever the reason, there are specific steps to legally amending these key documents, and it’s important for both boards and residents to know what those steps are.
The procedure that must be followed to amend a community association’s governing documents depends on the type of community association and the document to be amended.
“Generally,” says Kristofer Kasten, a partner with Chicago-based law firm Bartzen Rosenlund Kasten LLC, “an amendment to an association’s declaration must be approved by a supermajority of owners and often requires notice to mortgagees. By contrast, a change to an association’s rules and regulations can usually be accomplished by the board alone, without owner approval. In the case of cooperatives, amending the proprietary lease usually must be approved by members, while again, the rules can be changed by the board alone. Of course, the governing documents of a specific association or cooperative and any applicable statute must be reviewed to make sure there are no exceptions to that general rule. In some instances, rules may be required to be submitted to the vote of the owners.”
That said, the Illinois Condominium Property Act (CPA) does set forth some specific rulemaking procedures that a board must follow. For example, a copy of the proposed rules or amended rules must be given to all owners. Also, a properly noticed meeting of the owners must be held for the purpose of discussing (but not voting on) the proposed rules or amendments. Kasten cautions, though, “The Illinois Common Interest Community Association Act does not include a provision like the CPA expressly granting the board authority to adopt or amend rules and setting forth certain rulemaking procedures. Accordingly, a common interest community association needs to refer to its governing documents for the scope of the board’s rulemaking authority and rulemaking procedures.”
From a legal standpoint, house rules are somewhat less rigid than bylaws, declarations, and proprietary leases, in that they are generally more easily amended. House rules are designed to be more responsive to changing environments, to be responsive to the everyday life of the community—so often these kinds of changes to rules can be made by the board without the entire community voting on them.
William McCracken, a partner with Ganfer Shore Leeds & Zauderer in New York City, adds that, “typically the process for amending the house rules—or the ‘rules and regulations,’ as they’re commonly referred to—merely involves passing a simple majority of the board of managers, which can be done at any duly noticed board meeting. That’s true as long as the condominium’s bylaws give the board the power to adopt and amend rules in the first place. The trick is that in doing so, the board has to be careful not to interfere with or unreasonably impair any rights that the unit owners have under the condominium’s declaration and bylaws.”
If a board wishes to amend its other governing documents, rather than just its house rules, the legal requirements for doing so change. According to Mark Hakim, an attorney with Schwartz Sladkus Reich Greenberg Atlas, also in New York City, “The first item of business should be to determine what is necessary to amend each document. Generally, we see the requirement that 66% or 2/3 of the unit owners or shareholders, respectively, are required to make a change. Before proceeding any further, we always ask the board if they believe they can obtain the requisite number of votes to enact the amendment. If that’s a virtual impossibility, there is no need to waste time or effort. For example, if a building has 300 units, it will take over 200 affirmative votes to approve any proposed amendment; if there are numerous absentee owners, or the owners are not actively involved with the building’s day-to-day matters, achieving that may be quite unlikely.” Therefore, a board might be better advised to try to make any necessary updates through the house rules, if possible.
In New Jersey, house rules may be amended by the board of directors of the condominium or homeowners’ association, but amendment of other, more formal documents is a bit more complicated. Steven Mlenak, a partner with Greenbaum Rowe Smith & Davis in Roseland, New Jersey, explains that “in a condominium or homeowners’ association, bylaws may be amended either in accordance with the express terms of the bylaws themselves, which usually require an affirmative vote of a majority or two-thirds of the members in good standing at a special meeting, or by the Radburn method.
“The Radburn method,” Mlenak continues, “which derives from the 2017 law colloquially known as the ‘Radburn law,’ allows the board to propose amendments by mailing a copy to the owners with a rejection ballot. If, after 30 days from the mailing, less than 10% of the members have rejected the proposed amendment, the board can then vote to approve the amendment at an open meeting. After such approval, the amendment would be recorded with the county clerk, and a copy of the recorded version distributed to all members. In cooperatives, the house rules can be amended through a vote of the shareholders in accordance with its terms.” Mlenak notes that this method is unique to New Jersey.
“Ninety-nine percent of the time,” says Richard Brooks, a partner with Marcus Emmer Errico & Brooks in Boston, “the preferred procedure for condos and HOAs is for the board to draft an amendment of the rules applying to common areas.” Remember, Brooks stresses, the board can only make rules over the common area. “The board then votes on the rule changes at a board meeting. They then publish it—not just in the minutes book—and we advise them to then record the changes at the Registry of Deeds, even though it’s not required. In the end [an amended rule] is easier to enforce when it’s recorded.”
When & Why to Amend
Common interest communities are living, breathing, organic polities. That’s why the rules by which communities conduct their business may need updating every so often.
According to McCracken, “There are basically three circumstances when a building might want to amend their governing documents: One is when the law changes and your governing documents no longer comply with the law. The second is when your governing documents no longer reflect best practices observed at other buildings. And the third is when good or bad experiences at your own building need to be recorded for future reference. That third situation is often where house rules come in, because the house rules can get into granular issues that may not rise to the level of a bylaws amendment, but may be useful to have written down.”
“If an association has a rule that is neither followed nor enforced,” adds Kasten, “then the association should eliminate that rule, because the rule serves no purpose.”
Hakim adds, “When reviewing governing documents and recommending changes, we often suggest that a board focus on practical changes intended to help the building run more efficiently and as commonly practiced.”
No matter the reason, Brooks cautions that “if you’re going to make a change, consult your attorney first.” It’s not complicated, he continues. “Rules are simple and easy to change because the board adopts rules.” As to other documents, he says, don’t do all the documents at one time, because all owners have to approve those changes, and it gets expensive.”
Mlenak suggests that “bylaws can and should be updated to address changes in the law, trends in the community that require addressing—things such as increased percentage of tenancies, parking behaviors, etc.—or simply updating for the times—things like increasing maximum fine amounts or capital contribution amounts.”
The Do’s & Don’ts
According to the pros, there are a few good standards to keep in mind when amending any document, whether rules, bylaws, or other doc. “Stay organized,” says McCracken. “Boards can pass rules, policies, guidelines, mandates, and lots of other things besides, but they should try to keep all of those things organized in one document.”
Also, any board looking to amend its association’s rules and regulations must first “understand the scope of your rulemaking authority,” Kasten advises. “That authority may be granted or limited by the applicable statute. That authority may also be found in the association’s governing documents. A board cannot adopt rules that go beyond its rulemaking authority.”
Brooks concurs, and stresses that boards must remember that they can only make rules that apply to common areas. “Don’t make rules that apply to the inside of units, or that are discriminatory.” The board doesn’t have the authority or right to do either of those things, and not only will the rule be challenged, but an overreaching board runs the risk of incurring the wrath of residents—and that can lead to acrimony and expensive litigation.
“Rules that are discriminatory, self-serving, or fraudulent will not be enforceable,” says Mlenak. “Further, bylaws must not contradict any statutory or regulatory limitation. And finally, typically, amendments cannot ‘change a unit’ without the express approval of that unit owner, and amendments that require the approval of the mortgage lender will not be effective without such approval.”
In the final analysis, rules and regulations governing the day-to-day operations of common interest communities must keep up with the times and the needs of the community. By their definition, house rules are easier to change than those contained within governing documents such as declarations and bylaws—but no matter what, boards should consult their attorneys before making any changes to make sure they get it right the first time.
A.J. Sidransky is a staff writer/reporter for CooperatorNews, and a published novelist. He may be reached at email@example.com.