Declaration
& Bylaws
Declaration (CC&Rs) & Bylaws combine to complete the first leg of your governing documents triumvirate.
Common interest community (CIC) Declarations or Covenants, Conditions and Restrictions (CC&Rs) are dedicatory instruments recorded by county governments that "run with the land" to form the foundation of every association's governing documents. Bylaws partner with the declaration / CC&Rs to establish the broadest forms of organization-specific governance and restrictions. Both documents typically incorporate statutory language from your state statutes (CIC statutes, nonprofit corporation act, etc.)
If your declaration & bylaws were a Scrabble board, every single piece that's played must follow the structure they create. Articles of incorporation are not discussed here because their critical role allowing the formation of a corporation generally gives way to the Bylaws once things are “up and running” and almost certainly after homeowners take control from developers. Moreover, some CICs are not incorporated. Many state and county governments provide an online technology portal that allows searching for corporations and for recorded documents, respectively.
Reference the Uniform Common Interest Ownership Act and Uniform Condominium Act.
EXAMPLES: What's in the Declaration / CC&Rs?
Formation of the association subject to a specific state CIC statute (or not)
Allocated interest for Units
for condominiums, interest is often divided into % of common elements (CE) and residential limited common elements (RCLE)
Powers of the Board and of the association
Dispute resolution and methods of enforcement
Restrictions on the use of units such as smoking, rental caps, keeping pets, conducting certain kinds of business and other activities
Exhibits that demarcate components, define responsibilities and references to the survey map and plans
Insurance requirements and responsibility for costs to restore damage in common elements and Units
Rubric for defining and approving capital improvements
Unit Access
THE DECLARATION PREVAILS
Many state statutes directly establish the hierarchy of governance like this: If a conflict exists between the declaration and the organizational documents, the declaration prevails except to the extent the declaration is inconsistent with this chapter.
USE RESTRICTIONS
N.B. Use restrictions are recorded in dedicatory instruments (Declaration / CC&Rs). Modifying restrictions to the use of units (smoking, rental caps, keeping pets, conducting certain kinds of business, etc.) typically requires a super-majority of owners (from 67% to 90% or more) to agree to amend or restate governing documents.
Filmore v. Centre Point Unit Owner's Association (2015 - WA State Supreme Court) | Blog Article about the Filmore Opinion
YOUR state statutes dictate changes to use restrictions. RCW 64.34.264:
(4) Except to the extent expressly permitted or required by other provisions of this chapter, no amendment may create or increase special declarant rights, increase the number of units, change the boundaries of any unit, the allocated interests of a unit, or the uses to which any unit is restricted, in the absence of the vote or agreement of the owner of each unit particularly affected and the owners of units to which at least ninety percent of the votes in the association are allocated other than the declarant or such larger percentage as the declaration provides.
EXAMPLES: What's in the Bylaws?
Basics for all meetings of the association including members / owners, the Board and committees (quorum, place & time, notice, etc.)
Basics for your Board of Directors and Committees (who can serve, term limits, elections, removals, vacancies, officer roles, etc.)
Ethics, oath of office and conflicts of interest clauses (highly recommended and even statutorily required in a few states)
Communications Policy (read Bylaws Words of Wisdom)
No Variation by Agreement
Most CIC statutes throughout the United States prohibit variation by agreement meaning that statutory language supersedes the language in your governing documents (especially indicated by the term notwithstanding) except where sections of a statute specifically state your governing documents control.
EXAMPLE OF STATUTORY 'NO VARIATION' LANGUAGE
a) Except as specifically provided in specific sections of this Chapter, the provisions of this Chapter may not be varied by the declaration or bylaws. To the extent not inconsistent with the provisions of this Chapter, the declaration, bylaws, and articles of incorporation form the basis for the legal authority for the planned community to act as provided in the declaration, bylaws, and articles of incorporation, and the declaration, bylaws, and articles of incorporation are enforceable by their terms.
(b) The provisions of this Chapter may not be varied by agreement; however, after breach of a provision of this Chapter, rights created hereunder may be knowingly waived in writing.
EXAMPLE II
Except as expressly provided in this chapter, provisions of this chapter may not be varied by agreement, and rights conferred by this chapter may not be waived.
EXAMPLE III
In the event of a conflict between the provisions of the declaration and the bylaws, the declaration prevails except to the extent the declaration is inconsistent with this chapter.
Developers and their attorneys often leave room for improvement with regard to both declarations / CC&Rs, bylaws, rules and regulations and more. Perfecting these critical governing documents can take years, but is often a prudent (and sometimes necessary) step for common interest communities.
Steps to AMEND your Declaration / CC&Rs
Write down WHY you intend to make a change and list your specific goals and/or language you want to achieve
Identify the section(s) that require an amendment
Make sure your owners are informed early in the process. Encourage owner comment and participation.
Some amendments are statutorily allowed to be made by the Board absent a vote of owners (example: RCW 64.90.285(11)). If that's the case, proceed to engage your attorney.
If the amendments are complex, form a governing documents committee.
Committees, especially those including 2+ non-Board member volunteers, promote owner-centric processes. Volunteer engagement often has the added benefit of lessening the need for professional assistance and can dramatically reduce the amount of time and cost required to achieve superlative results. Since most amendments require owner super-majority (e.g. 67%) approval, putting your owners at the center is the only way to succeed.
Ensure that one or two committee volunteers are driving the process forward. Meet regularly, keep minutes and share progress in open Board meetings. Also keep detailed notes as you work through the governing documents.
Once your committee work wraps up, have the entire Board review the work product and come to a consensus about moving forward.
Engage your attorney. Spend time elucidating goals, reviewing your volunteer work product and then exchanging revisions. Make sure you take the time to engage in web or in-person meetings in addition to email exchanges. Email conversations absent the "human touch" of meetings are likely to limit your progress and might lead to gaps in the review process.
No detail is unimportant. This document runs with the land!
After finalizing revisions with your attorney, package everything up with an executive summary document.
Communicate. Communicate. Communicate with your owners.
Establish a special meeting of members (owners) to review the material.
If permitted by law and your governing documents, maximize engagement by using an electronic voting / balloting system. Examples.
Struggling to reach 67% (or other threshold)? Ask volunteers to engage owners individually via phone and email. It works!
Aim for at least one to two extra votes above and beyond your threshold.
Have all the votes you need? Meticulously document and retain voting records. Have your amendment signed (often by two directors) and notarized and then recorded by your county government ASAP.
Steps to AMEND your Bylaws
Similar in some ways to amending your declaration / CC&Rs, EXCEPT:
Amending your Bylaws may require a lower threshold of owners pursuant to your statutes and governing documents. View Article 12 - Amendments in the example Bylaws.
Bylaws are often not recorded by county governments. If this is true for your association there's one less step.
Steps to RESTATE your Declaration & Bylaws
Restatements (often called amendments and restatements) are intended to create a single, fresh copy of your governing documents.
The steps to restate are similar to the steps to amend while the volume of content you update is substantially more.
Some law firms offer flat fees to restate governing documents. These arrangements can save you 50% or more vs. hourly billable costs.
Restated governing documents require even more review and scrutiny than amendments. Your volunteers may need to review over 100 pages of material multiple times. Throughout the CIC world, one or more incredibly involved volunteer(s) make(s) all the difference.
Carefully review all template-based language used to restate your documents. Templates speed up incorporation of multiple changes, but may contain restrictions that do not make sense for your community.
There are items you might not catch until you review material 3 to 4 times. Use a collaborative file system like Google Docs or Sharepoint to help you mark up a single document with comments and suggestions.
Page 31: What Documents Define and Control My Association
Includes pertinent context for common interest communities throughout the USA
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