Utah HOA Attorneys Representing Clients From Logan To St. George

Is it time to redo our governing documents?

| Oct 16, 2020 | Firm News |

There is no question that Governing Documents (namely, CCRs and Bylaws) need to be updated from time to time.  This is primarily due to two issues (1) changing statutes; and (2) best practices.  Consequently, a common question we receive from both new and old homeowner association clients is “how do we know if it’s time to amend or rewrite our governing documents?”  We hope that we can answer this question, provide relevant information, and help homeowner associations understand what needs to be done to navigate this process.  This can be a long process and with lots of questions as “new documents” look and read quite differently from the set your members will be familiar with.  In addition, obtaining the necessary votes can be challenge as well.  In this entry, we will try explaining, the need, the why, the how and the process for updating your Governing Documents.

Association Review

What documents should be amended?

The basic HOA legal documents that may need amending are:

  • Bylaws
  • Declaration of Covenants, Conditions, and Restrictions (CC&Rs)
  • Articles of Incorporation may need to be updated but generally speaking staying current with the Corporate Division of the State of Utah and having updated Bylaws reduce the need to amend and update your Articles – but it should be looked at.

Amending vs. Rewrites

  • If the legal documents are reasonably up-to-date and in fairly good shape, only one or two sections may need to be amended; in such cases it is preferable to attach some simple amendments rather than to create a whole new document. We typically see documents, however, that have been amended many times and it becomes confusing to the reader as to which provisions control, what has been amended, and whether they even have the correct documents.
  • As such if the documents need multiple amendments, or are extremely outdated (for example, over 10 years old), we recommend a complete rewrite thus giving your Association a brand-new up-to-date set of documents. Doing this is more efficient, you get better updated terms and provisions (as opposed to just piecemeal amendments). Every now and again, the Board is insistent that it “likes” its current format and most of the document and all they want is statutory updates and some improved language.  Candidly, this presents a drafting challenge because the Board will usually not have an editable version of its Governing Documents but you should have the discussion with you attorney about a completely new set of documents versus retyping your current documents and adding in desired updates.

The Need

There are no statutory or state requirements to update governing documents but as the saying goes: “a stitch in time saves nine”.

  • Directors can be misled as to their duties and responsibilities by relying on outdated provisions and it is not uncommon for a well-intended Board to be following provisions (for holding and conducting Board meetings as an example) that are not consistent with Open Meeting Laws or perhaps notice of meeting are not being done according to Code. These are all serious issues.
  • Members may be unintentionally misled into believing the documents accurately’ describe members’ rights, legal procedures, etc., when, in fact, the statute provides more due process in their favor or grants the Board rights not stated in the CCRs or Bylaws. Disputes can be avoided by having your documents updated.
  • Documents may fail to take advantage of “best practices” which now include the use of website, email, text messages, for notice and voting purposes.

Examples.

  • To eliminate obsolete provisions such as annexation language or Declarant language that is no longer applicable.
  • To eliminate provisions no longer observed or enforced. If you have long abandoned a requirement such as a certain roofing material, your document should eliminate provisions you can no longer enforce (also think of pets, parking, and similar examples)
  • To eliminate provisions that conflict with current laws.
  • To improve poorly drafted documents by clarifying ambiguous provisions. Incredibly, some CCRs refer to swimming pools when there is no swimming pool.  This is a drafting error from the outset and needs to be remedied.  Further, often time it is not clear who maintains “X” such as a fence or certain parts of landscaping, or certain parts of the structure – all such issues should be clarified in updated documents.
  • To provide for changes in technology (satellite dishes, home office use, etc.).

FAQ’s

How long should it take to amend HOA documents?

  • Two to four weeks is a reasonable time for an attorney to produce an acceptable first draft of updated and amended documents. However, depending on how many edits you want, a first draft could end up being a “10th’ draft.  We have some tips to avoid that from happening.

Should the HOA hire an Attorney?

  • The analysis of HOA documents to determine whether or not amendments are desirable, and, if so, how the documents should be amended, requires a degree of expertise which can only be provided by a legal specialist, that is, an attorney who specializes in the drafting of HOA documents. Unless an association has such an attorney as a member, and that attorney is willing to contribute his or her time to amend the documents, the association should retain legal counsel for that purpose.
  • If an association wants to be helpful in providing its attorney with some suggestions or amendments, it should provide a list of points to cover, such as the number of directors, the length of the term of office, the number of pets, the number of vehicles, etc. In other words, give the attorney the basic facts, or the basic principles, but do not try to draft the actual language. That is what you are paying the lawyer to do.

What should it cost to amend association documents?

  • The cost to amend can vary widely, depending upon the type of revisions, the scope and age of documents. Fees can be as low as $500 for a simple amendment of one or two provisions, and anywhere from $5000 or higher for a complete updated set of the three basic legal documents.

What can be done to obtain member support for amended documents?

  • Boards need to get owner “buy in” to the changes. When that occurs, they feel ownership of the document and have an interest in its outcome.  This is best achieved by membership involvement after the first draft is prepared, and then solicit input from them.   We understand that this process must be controlled carefully to not let a ‘mob mentality’ take over the project.  Nevertheless, soliciting input or requests for “things to improve in the community” early in the process, help obtain the vote.

What comes next?

How often should association documents be amended?

  • Association documents should be reviewed and possibly updated approximately every 5 to 10 years to incorporate all the changes in statutory and case law. However, there are changes each year to Utah Law and your attorney should update you on these changes annually.  You can then decide if you need to amend or just educate your Board and members.

How Do We Get Started?

  • Contact your attorney for a document review. The ‘review’ will give you information as to whether your documents need to be revised.
  • If it is determined that a rewrite is necessary, we will send you a checklist of questions/issues that will go into our first draft. This will be the foundation for the final document as we work with you to incorporate statutory changes and best practices.
  • A quote and terms of engage will then be prepared. Feel free to ask us for samples of CCRs and Bylaws so you as Board members know what the updated documents will look like.  We will also work with you to create a plan to get owners involved and start planning a timeline for drafts and voting.