Outdated and burdensome provisions within the HOA’s governing documents can serve to hinder operations and create confusion. Common examples include developer rights that no longer apply to the community, outdated assessment restrictions, and a lack of utilization of technological advances.
The issue of outdated governing documents is especially important given the extensive recent legislative changes aimed at HOA regulation. For example, changes in laws related to an association’s ability to regulate signs, flags, landscaping, solar panels, electric vehicle charging stations, and collection rights often create situations where the community’s governing documents no longer comply with applicable law.
As a community ages it is inevitable that the HOA will need to update its governing documents at some point. We commonly receive questions regarding the approval requirements for amending governing documents. Can it be done by the Board? Does it require a vote of the homeowners? Are third-party approvals from mortgage holders, the developer, and/or the municipality necessary?
Amendments that can be approved by the HOA’s Board of Directors without a vote of the homeowners can typically be enacted on an expediated and inexpensive basis. However, such amendments are restricted in scope by both the Colorado Common Interest Ownership Act (“CCIOA”) and the Colorado Revised Nonprofit Corporation Act. This article addresses general questions of whether amendments to the community’s governing documents require a vote of the homeowners.
Articles of Incorporation
The HOA’s Articles of Incorporation are filed with the Colorado Secretary of State’s office. The Articles of Incorporation bring the corporation into legal existence and establish the HOA’s corporate structure. With limited exception, amendments to the Articles of Incorporation will require a vote of the homeowners. The exceptions relate to administrative issues such as a change to the HOA’s registered agent.
The default statutory amendment requirement for the Articles of Incorporation is the approval of a majority of those homeowners voting, assuming at least a quorum of homeowners participate in the vote. However, this is the minimum voting requirement, and the HOA’s existing governing documents may require a higher voting percentage. For example, the existing Articles of Incorporation or Declaration of Covenants may require amendments to the Articles of Incorporation be approved by 75% of all homeowners. In such instance, the higher percentage outlined in the existing governing documents will be required.
Bylaws
The Bylaws establish regulations for the administration and management of the HOA and provide an “operating manual” for corporate action. The Bylaws include processes for corporate operations such as the requirements for meetings of the homeowners and Board, voting rights of the homeowners, procedures for electing the Board of Directors, and the general powers and duties of the Board.
The Bylaws, or at least some provisions within the Bylaws, can commonly be amended by the Board of Directors without a vote of the homeowners. The specific issue of whether an amendment to the Bylaws can be approved by the Board, without a vote of the homeowners, depends upon: (i) the amendment provisions within the existing Bylaws and other governing documents; (ii) the nature of the amendment; and (iii) whether the community was formed before or after the enactment of the Colorado Common Interest Ownership Act – July 1, 1992.
First, the issue is document specific. If the HOA’s existing Bylaws or other governing documents require a vote of the homeowners to amend the Bylaws, then such vote will be required. Like the Articles of Incorporation, the default statutory homeowner approval requirement for a Bylaw amendment is the approval of a majority of those homeowners voting, assuming at least a quorum of homeowners participate in the vote. However, this is the minimum requirement and the HOA’s existing governing documents may require a higher homeowner voting percentage that must be satisfied.
If the existing governing documents do not require a homeowner vote to amend the Bylaws then the Board’s ability to amend the Bylaws will depend upon the nature of the proposed amendment and whether the community was formed before or after the enactment of the Colorado Common Interest Ownership Act.
- For communities formed prior to July 1, 1992, (known as Pre-CCIOA communities), with limited exception, such as changes to quorum requirements, the Board can amend the Bylaws without a homeowner vote.
- For communities formed on, or after, July 1, 1992, (known as Post-CCIOA communities), with limited exception, the Board can also amend the Bylaws without a vote of the homeowners. For Post-CCIOA communities the exceptions and the Board’s amendment limitations are more restrictive than for Pre-CCIOA communities. For example, CCIOA requires a homeowner vote for amendments that relate to changes in quorum requirements, director terms/qualifications, and the powers and duties of the Board.
As you can see the Board may be able to amend the Bylaws without a vote of the homeowners, but there are technical nuances that should be discussed with the HOA’s attorney prior to the commencement of the amendment process.
Declaration of Covenants
The Declaration of Covenants or “Declaration” is the most fundamental and important of the HOA’s governing documents. It directly affects and restricts the rights of the homeowners. Among other things, the Declaration establishes maintenance and insurance obligations for the HOA and its homeowners, provides authority for the HOA to impose assessments, and places restrictions on how property within the community may be used.
Given the importance of this document, the Declaration cannot be amended solely by the Association’s Board of Directors. At a minimum, amendment to the Declaration will require a vote of the homeowners. The range of the homeowner approval that is required will depend upon when the community was created, the amendment provisions within the existing document, as well as the nature and scope of the proposed amendment.
Homeowner approval requirements for amendments to the Declaration typically range from homeowners holding at least a majority of the total votes in the HOA to homeowners holding at least 67% of the total votes in the HOA. Note this is not a majority or 67% of those homeowners that participate in the vote, but rather a majority or 67% of all homeowners within the community. There are also limited circumstances where the Declaration may legally require homeowner approvals in excess of 67% of the total votes.
In addition, some amendments may require approval from the homeowner’s mortgage holders, the original developer of the community, and/or the municipality in which the community is located. A determination of the specific amendment requirements for your community’s Declaration and strategies for obtaining the necessary approvals will require a review of the existing Declaration and a discussion with the HOA’s attorney. However, the result is that amendment to the Declaration cannot be achieved solely by the Board and some level of homeowner approval will be required.
At some point, all HOAs will need to update and amend their governing documents to address operational issues and to bring the documents into compliance with current law and industry standards. Boards considering amendment should have a preliminary discussion with the HOA’s attorney to discuss the amendment process including the necessary approval requirements. If you have questions concerning amending your Association’s governing documents, please contact one of our attorneys at 303.432.9999 or [email protected].