By: Melissa M. Garcia, Esq.
I’m sure you’ve heard of “Two Truths and a Lie.” It’s a classic icebreaker game where people attempt to identify which of three statements is bogus. Each person prepares three statements, two of which are true and one of which is a lie. It’s a great way for people to get to know new people in a fun setting.
I’d like to apply this game to an association. Hello! My name is Happy Hollow HOA. Here are two truths and a lie about me:
1. My governing documents are over 15 years old.
2. Quorum is always satisfied at our annual meetings.
3. My board has called the attorney three times in the past several months to interpret my Declaration.
Which of the three statements above, do you think, are true, and which one is bogus?
I think most would say that number two is a lie, as it is often very difficult to get enough people to attend an annual meeting and satisfy quorum. The other two are likely true given the number of existing communities in Colorado that are at least 15 years old, and the number of calls our office receives to decipher confusing provisions of the Declaration.
The bottom line, however, is that it doesn’t matter which statements are true. All three statements are bogus. Not in the traditional meaning of “false,” but in the Bill and Ted’s Excellent Adventure meaning of expressing extreme displeasure. “Dude, your governing documents are over 15 years old. That’s bogus!”
So why are all three of the above statements bogus?
“My governing documents are over 15 years old.”
If that is the case, then most likely your governing documents are out of compliance with Colorado law. Did you know, for example, that Colorado law now requires you to post physical notice of your annual meetings in a conspicuous place in the community? This is in addition to, not in lieu of, your regular mailed notice. Did you know that adopting rules and amending the Articles or Bylaws must be done during a board meeting and not in executive session or by email? Did you know that owners do not have to obtain association approval prior to installing satellite dishes on their unit or exclusive use area, regardless of what your documents require? Did you know that Colorado law now provides a list of association records that are required to be open for inspection by owners, as well as a list of association records that must be withheld from inspection?
The above are only a few examples of the numerous updates to Colorado law over the last 10 years. If your governing documents do not comply with Colorado law:
• Directors can be misled as to their duties and responsibilities by relying on outdated provisions;
• Members may be misled into believing the documents accurately describe members’ rights and obligations, legal procedures, etc.
• Your documents may fail to take advantage of liberalized rules regarding meetings, director proxies, participation by members, telephone meetings, mail balloting, etc.
If your governing documents are over 15 years old, you need to amend them to meet current law.
“Quorum is always satisfied at our annual meetings.”
Again, this is probably the false statement of the three, as quorum is often not satisfied. If you don’t meet quorum at an annual meeting, then what happens? Nothing. What I mean is that, with the exception of budget ratification, no action may be taken at an annual meeting without quorum. You cannot elect directors. You cannot vote on the special assessment. You cannot conduct the annual meeting. It would be better to amend the Bylaws to reduce quorum to a more feasible number.
In addition to quorum, there may be other limitations in your documents that make for a less flexible or efficient way to conduct association business. For example, if the board wants to take action outside of a meeting (i.e., by email) many sets of Bylaws require unanimous consent for such action. Why not amend your Bylaws to take advantage of the statutory procedure for board action without email, which allows for less than unanimous board approval?
Or, perhaps your Declaration contains a cap on the amount of late fees that can be charged for untimely payment of assessments, or the amount of fines that can be charged for violation of the governing documents. Do you really think that a $10.00 cap on fines will prevent someone from continuing to park their RV on the driveway? It costs more to store the vehicle offsite then it does to pay the fine.
If your governing documents contain limitations that hamper efficient and effective governance, you need to amend them to provide more flexibility.
“My board has called the attorney three times in the past several months to interpret my Declaration.”
The above statement is no problem for an attorney. We are happy to decipher the documents for you (and to charge you for that interpretation!). But why spend all that money to have the documents interpreted? Why not revise them so they are clear and easy-to-read?
Wouldn’t it be better if the Declaration stated that all pipes inside the walls are the association’s responsibility, and any pipes outside the walls the owner’s responsibility, without trying to make you guess where the unit ends and the common elements begin? Instead of stating that the association is responsible for the “exterior building surface”, why not have the Declaration just list which building components are to be maintained by the association? And it’s not that difficult to state that all perimeter fences are to be maintained by the association, rather than trying to allocate responsibility based on location (Is the fence located on the common elements? On the Lot? Both??). Often disputes can be avoided if everyone understood their expectations.
If your governing documents subject you to hours of decoding and deciphering, you need to amend them to make them easier to understand.
The above are three of the many reasons why you should consider amending your governing documents. Review our article Turning Bad Documents Into Good Ones for more.
If you would like more information on the process and cost for amending your governing documents, please do not hesitate to contact a Altitude Community Law attorney at 303-432-9999 for more information.