Outdated and burdensome provisions within the association’s bylaws can serve to hinder operations and needlessly increase administrative costs. For example, does your board conduct business via email? The association’s bylaws likely have a provision that sets forth the requirements for the board to make decisions outside of a board meeting (such as email) and it may require unanimous written approval from all directors. Inconsistencies concerning the association’s operational practices and the bylaw requirements can result in delayed board action, questioned authority, and increased expense to the community.
The good news is that some of these issues may likely be addressed by simple limited amendments to the bylaws approved by the board of directors. In that case, an amendment to address the issue can be drafted and implemented quickly and with relatively little expense. The specific issue of whether an amendment can be approved by the board, without a vote of the homeowners, depends upon: (i) the nature of the amendment; (ii) if the community was formed before or after the enactment of the Colorado Common Interest Ownership Act – July 1, 1992; and (iii) the amendment provisions of the bylaws.
Although the board should confirm with its legal counsel, below is a description of some common problematic bylaw provisions that may oftentimes be resolved by a simple board-approved limited amendment.
Action Outside Meeting
The association’s bylaws should contain a provision that sets forth the requirements for the board to take action without holding a formal meeting (action outside of a meeting). Some bylaws require unanimous written consent from all directors to take such action. This is problematic if a board member is on vacation or otherwise nonresponsive. In such event, the proposed action cannot be taken and a formal board meeting will need to be held.
However, there is a standard statutory process within the Colorado Revised Nonprofit Corporation Act (C.R.S. § 7-128-202) that allows action to be taken without unanimous approval so long as certain notices are provided to all directors, no director demands that a formal meeting be held, and the action is approved by the same number of directors as would be required at a meeting. Amending the bylaws to allow for action to be taken without written approval from all directors can serve to improve efficiency for those times when decisions need to be made quickly but not all directors are available or responsive.
Number of Directors
The association’s articles of incorporation typically defer to the bylaws with respect to the required number of directors. It is not uncommon for an association to operate with a board which does not comply with the size requirements established within the bylaws.
If the association has less directors in office than required by the bylaws and the board cannot find volunteers willing to serve on the board to fill the vacancies, an amendment would be appropriate to reduce the size of the board. Conversely, if you have an active and involved community, an amendment could serve to expand the size of the board to allow for greater community participation.
Annual Meeting Date
Some boards are surprised to find that their bylaws require the annual homeowner meeting to be held on a specific date – such as the second Saturday in June of each year. The association may have historically held their meetings on this date, or it may be that the date has just been ignored.
These required dates may not make sense or support the board’s intention to hold the meeting later in the year. Annual homeowner meetings are commonly held in October, November, and December to align with the homeowner budget ratification meeting so that new assessment levels can be established and noticed for the new year. A simple amendment to allow the board to select an appropriate date for the annual meeting can serve to resolve this issue.
Fiscal Year
The bylaws may set the association’s fiscal year. To the extent it is desirable for the association to change the fiscal year for accounting purposes, this is often possible via a board-approved amendment to the bylaws. It is prudent to discuss this potential revision with the association’s accountant prior to making the change.
Secret Ballots
The Colorado Common Interest Ownership Act (C.R.S. § 38-33.3-310) requires the use of secret ballots at homeowner meetings in contested board elections, at the discretion of the board, or upon the request of 20% of the homeowners present at the meeting. However, some community bylaws require the use of secret ballots in all elections or upon the request of a single homeowner.
This can be problematic, costly, and needlessly burdensome in some situations. For example, if the association is holding an election for two directors and there are only two candidates, a formal secret ballot vote seems superfluous. The situation can be further complicated if the association is conducting a homeowner meeting electronically, such as via zoom, and secret ballots are required for an uncontested election. In that case, the association would be prohibited from holding a voice roll call vote or by declaring the two candidates elected by acclamation and instead would be required to hold a formal secret ballot vote even though there is but one possible election outcome.
Corporate Seals
Older sets of bylaws may require the association to use a formal corporate seal on certain types of documents. This may cause issues to the extent a seal is not used as required by the bylaws. Corporate seals are no longer required in Colorado and a simple amendment can be used to remove this outdated requirement.
It would be prudent for the board of directors to periodically review the association’s bylaws in order to identify problematic provisions – especially those that may be addressed via a simple limited amendment. If you have questions or your board would like to discuss possible amendment, please contact one of our attorneys at [email protected] or 303.432.9999.