By Suzanne M. Leff, Esq., Winzenburg, Leff, Purvis, & Payne, LLP
Community association declarations may seem like template documents—and often they are. But not all covenants are created equally, and each community’s covenant needs are unique. Anyone shopping for homes in different covenant-controlled communities (and inclined to read the documents) will run across declarations that contain the same general terms. Those general terms tell a familiar story: a common interest community is created, owners must pay assessments, the association will take care of some things, owners are required to do other things, certain things no one can do, and owners may change things if enough people agree. Beyond the general terms, the nuances of these recorded declarations impact the lives of homeowners within individual covenant-controlled communities. The ways in which covenants affect owners can sometimes warrant review and revision of the documents. Even though recorded covenants function like mini-constitutions for the communities they benefit, and, thus, are hard to change, communities should consider getting a vote of the people to change the covenants in the following circumstances:
Mean What You Say and Say What You Mean. Sometimes the law changes, but a community’s governing documents do not. An example of documents not updated to align with new mandates involves budget approvals. In 2018, the Colorado legislature extended a requirement for budget meetings and owner votes on board-approved budgets to certain communities formed prior to July 1, 1992. These communities must now comply with the state statutory requirement for budget approval by owners even though their documents do not give any indication that the requirement applies. While a board serving in 2018 may have received educational materials about the change to state law, newer board members may not have that same resource and may not understand the association’s legal obligation because the documents themselves give the board sole authority to adopt the budget.
An amendment to the bylaws or declaration to include the statutory budget procedures would help to ensure that the association operates in accordance with state law on an ongoing basis, without requiring board members to read and apply state statutes on their own. Other examples within this category include covenants that prohibit satellite dishes, clotheslines, or solar panels or restrict the size of families living in a home: various laws preempt the covenants in these areas and, without amendments to the declaration, may result in legally actionable missteps by association members who think they can enforce what the covenants say.
Keep Up with the Joneses. Trends happen in the world of covenant-controlled communities. When one community can do something desirable that a nearby community with the same market-base cannot do because of what the covenants say, word tends to travel. Owners may advocate for trending changes to the covenants, and community association managers and association attorneys also recommend them in circumstances where amendment trends serve to solve common problems without the need to reinvent the wheel.
This type of amendment may relate to architectural control issues and restricting or allowing certain types of improvements, like fence styles and trash enclosures, or may concern use restrictions related to parking or leasing. Trends may include provisions that disclaim an association’s responsibility for mold when owners fail to report and mitigate leaks or, as seen in mountain condominium communities, require owners to permit inspections or access by management to help reduce costly insurance claims resulting from thermostats left too low and broken pipes. Other trends—for older communities especially—involve changes to insurance coverage requirements for associations and owners and allocation of insurance deductibles and removal of caps on how much an association can charge in annual assessments.
Clean Up Messes. Simply put, some documents get recorded in a half-baked state and do not serve communities well from the outset due to imprecision, inaccuracy, and mistake. When a declarant remains on the scene, the declarant can amend the documents to correct certain types of problems. But declarants do not hold the keys to all document problems and may require owner participation to amend the documents. Other communities do not come to understand the messiness of their documents until years after development is complete.
Examples in this category include those documents brought to Colorado by developers from other states without attention to compliance with Colorado laws, and declarant use of the same documents as a neighboring community without asking legal counsel whether the terms apply to the current project. Sometimes a planned community gets a document made for a condominium and vice versa. Documents may not properly allocate owner interests or may not include reference to parcels intended as part of the common interest community. Amendments alone may not suffice for some of these scenarios. Association legal counsel can help identify whether owners can control the outcome through a vote to amend or if a court must assist.
Put Out Fires. Sometimes associations get sued and an option for resolving the dispute requires an amendment to the declaration. For example, a party may assert easement rights across association property. Depending on the powers granted to the association under the documents, the association may not have the ability to enter into a settlement agreement related to easement rights without amending the declaration to gain that authority.
General Housekeeping and Updating. A well-maintained 1960s bathroom can function for all intended purposes, but that bathroom’s bubblegum pink porcelain fixtures may not appeal to every owner. Similarly, covenants recorded in the 1970s may continue to serve a community on many levels but also draw criticism for their out-of-date status. Many modern communities like to review their declarations after all development ends and the declarant no longer holds power under the documents.
Common housekeeping amendments involve scrubbing references to the declarant and development rights from documents and removing provisions related to initial purchasers of units. While other circumstances may prompt these housekeeping and update amendments, they often get included when other amendments are undertaken.
While no hard and fast rules apply to when communities should amend their covenants, any of the situations listed above should at least lead to consideration of a document amendment project. Boards that identify the need for amendments must look beyond the substance of what the association may amend in the declaration and determine, minimally, whether the community can (1) bear the expense, (2) give the time and commitment to the process, and (3) ultimately gather sufficient owner approvals to make the efforts worthwhile. In other words, knowing that a document needs fixing does not mean it will get fixed—or that it will get fixed in the way the board wants.
Document amendment projects typically cost thousands of dollars for attorney drafting and meetings with the board and owners to educate each other on the issues and tailor covenants to community needs within legal parameters. This process for a complete amended and restated declaration can easily take a year’s time and requires devoted leadership to shepherd the process on the community side. Early discussions about any document amendment project must consider the realities of the membership’s willingness to support the requested amendments. Community covenant amendments necessitate board and volunteer involvement akin to a political campaign. Those seeking support for the amendments will need to understand the substance, anticipate vote counts, and work to gather approval from other owners.
With an understanding of the substantive need for amendments and the process required for owner approval, boards can better answer the question “Should the declaration get amended?” for their own communities. Professional management and legal counsel can assist with tailoring document amendment projects to the specific needs of a community while educating on options for how to navigate this process.