Although document amendments lead to desirable results, boards frequently refuse to utilize this tool based on commonly held preconceived notions and popular myths about the process. This article will focus on common misconceptions when it comes to document amendments and will provide you with the actual facts about this process, which apply to both pre and post—CCIOA communities.
| Myth | Fact |
| If declarations contain mortgagee approval requirements, it is impossible to amend them. | The Colorado Common Interest Ownership Act (“CCIOA”) creates two options when it comes to mortgagee approvals.
The first option involves filing a court petition with the District Court seeking approval of declaration amendments. Using the court petition process allows associations to bypass mortgagee approval requirements and only requires membership approval equal to one-half the number required by the declaration. In other words, if your declaration requires approval by 75% of the owners, you can petition the court with approval from 37.5% approval (i.e. one half of 75%). Keep in mind, however, the court petition process cannot be utilized when an amendment seeks to change allocated interests (i.e. assessment allocations, number of votes, or interest in common elements) The second option allows associations to send notice of the proposed amendment to mortgagees by certified mail as well as publishing notice of the amendment in a local newspaper at least two times and one week apart. The mortgagees then have 60 days to vote. However, a nonresponse is counted as a “yes” vote. It is important to note that for this option, the Association must actually receive the requisite number of owner approval set forth in the declaration. |
| Document amendments are required by Colorado law if portions of the document do not comply with the law. | Colorado does not require associations to amend their governing documents to comply with laws. However, any provision contrary to law is unenforceable. |
| An association can save on legal fees if the board creates a first draft of amended documents. | It has been our experience that most attempts by boards to save on legal fees by preparing first drafts of amended documents, rarely saves on legal fees, and in many instances, actually increases the fees. When an attorney is presented with a draft document amendment prepared by a board, that attorney is required to read every provision very carefully and ensure compliance with current state and federal laws. The attorney must then also correct or rewrite provisions that violate laws. This process is generally extremely time consuming. It normally takes far less time for an attorney to review the current set of documents and prepare a set of amended documents based on the board’s request. |
| All amendments cost the same. | The cost to amend governing documents can vary widely depending on the type of amendment (i.e. complete rewrite v. limited amendment) and the number of document(s) being amended (i.e. declaration, articles of incorporation, bylaws). Additional variables that increase legal fees include, but are not limited to, multiple and major revisions to drafts, meeting with legal counsel multiple times, asking counsel to help the board obtain consensus from the membership, and having to utilize the court petition or certified mailing process. |
| A complete rewrite of an association’s governing documents can be accomplished in three months or less. | A typical rewrite of all three governing documents (i.e. declaration, articles of incorporation, and bylaws) takes 12 to 18 months on average. |
| All governing documents have the same owner approval requirements for amendments. | The amendment requirement for the declaration, articles of incorporation, and bylaws are typically contained within each specific document. Furthermore, the amendment requirements are not usually the same for all three documents.
Typically, articles of incorporation and bylaws have lower owner approval requirements than the declaration. The articles of incorporation and bylaws most often require approval from a majority of the owners who are voting; while the declaration typically requires approval from owners representing 67% of all votes in the association. However, you should never assume this to be the case and you must review the actual amendment provisions in each of the documents. |
| Only older documents require amendments. | Although older documents tend to require amendment more often, many newer documents require amendment as well to eliminate obsolete declarant provisions, clarify maintenance and insurance obligation, and to comply with recent legislative changes. |
| It is always better to draft limited amendments to existing documents then to rewrite the documents. | If the legal documents are reasonably up-to-date and in fairly good shape, only one or two sections of the documents may require amending. In such cases, it’s better to prepare limited amendments to the legal documents.
However, if the documents require amendments to multiple provisions, an association would be better served by creating an entirely new up-to-date set of documents. This will result in all prior amendments and revisions being combined into one document so that owners and boards are not required to review multiple documents to find answers to their questions. |
For more information on the document amendment process, or if you have any questions, please contact one of our attorneys at 303.432.9999 or at [email protected].