By: Scott Welker
A board member in a small, close-knit community recently posed a question to me that I have heard many times in one form or another. He asked, if a local ordinance already bans an activity the HOA is trying to stop, is there any point to the HOA banning the same activity in their governing documents? Can’t the board simply call on the city when enforcement is required?
Most of the time, if local law bans a certain activity, that law will be enforceable within the boundaries of your association, regardless of whether your governing documents ban the same activity. However, a more complete answer to the question above requires a discussion about best practices. Associations should be striving to craft governing documents, not just to provide some means for order, but to provide the most effective means for order. In some instances, that could well mean creating rules and regulations that mirror local ordinances and laws that already exist. Why? Because, in order for the Association to have any authority to enforce a regulation, that regulation must be in the governing documents.
A city ordinance might outlaw 15-foot fences but, if an HOA wants to fine for a 15-foot fence, they cannot simply rely on a local ordinance. They would need their own fence rule in their governing documents. Moreover, the local government’s enforcement arm might not prioritize infractions in your association the same way you do. Rather than wait and see whether the city or local police will be willing to take the time to come to your neighborhood and hand out tickets, it’s much more effective to put rules important to your community in your governing documents, even if those rules are already covered by local laws.
To take it a step further, let’s consider some larger issues that this question touches on. The state legislature recently wrapped up another legislative session and, as has become customary, they made some important changes to community association law. Every time they do that, boards and community managers around the state should be taking the time to familiarize themselves with the new legislation and asking the question, “Does this necessitate changes to my community’s governing documents?” So, I want to offer a few tools that will help when considering how local statutes interact with your community’s rules and regulations. To do this, I’ve divided statutes into three kinds, described below, using the new 2016 legislation as examples.
Type 1: “If your documents say so…”
Some statutes create authority for your association that is only available if your documents say the right things. These laws will often begin with language such as “a declaration may…” or will contain a clause like “if provided for in the declaration.” For example, in a real estate transaction, Utah’s Community Association Act and Condominium Ownership Act both allow an association to charge a fee for providing payoff information required by a buyer or seller at closing. However, this authority is neither mandatory nor automatic. It only exists if the declaration says it does. If the association’s declaration does not contain language specifically authorizing it to charge the fee, the association has no such authority.
Another good example of this comes from recent HOA legislation. In 2016, the legislature modified § 57-8-8.1 of the Utah Code to say that “a rule may” impose a reasonable limit on how many guests of a short term rental may use the common areas and facilities. In other words, when someone is renting a unit for less than the 30 days, the law now authorizes an association to limit how many guests to that unit may use common facilities. However, in order to take advantage of that authority, the association has to create a rule in the governing documents. No association gains the authority automatically without taking some affirmative action.
Watch for these types of statutes when a new law creates authority that you would like your association to be able to take advantage of. If the statute talks about what a board or governing document “may” do, you’ll likely need to amend in order to add new, affirmative language to your documents.
Type 2: “Unless your documents say you can’t…”
Some statutes provide that an association automatically has certain authority unless their governing documents say they don’t. This is the inverse of the first type of statute discussed above. Again, turning to 2016 community association legislation, there are two good examples. House Bill 255 created a rule whereby a condominium unit is considered a unit as soon as the plat depicts it and the declaration is recorded. Accordingly, Utah Code § 57-8-24 was amended to provide that an association can start assessing units that meet this description “except as otherwise provided in the declaration.” In other words, the authority to assess unconstructed units is now automatic unless that authority is taken away by specific language in the declaration.
Similarly, the legislature recently amended Utah’s nonprofit corporations act, making it easier for board members to take action without holding a meeting. Pursuant to the amendments, under certain circumstances, a board can now take binding action without obtaining the affirmative, written approval of every board member “unless otherwise provided in the bylaws.” In other words, the law grants a board automatic authority to streamline its process for taking action without a meeting unless the association’s bylaws specifically prohibit it.
Watch for these types of statutes when a new law describes authority that you don’t want your association to have. If the language of the statute uses phrases like “unless otherwise provided,” you might need to amend in order to add new, restrictive language to your documents.
Type 3: “Regardless of what your documents say…”
The third and final type of statute are those which say nothing at all about your governing documents. They simply say what an association may or may not do. For example, § 57-8a-219 of the Community Association Act reads, in part, “An association may not prohibit a lot owner from displaying a United States flag inside a dwelling or limited common area or on a lot….” In this instance, the association’s governing documents have no bearing on the regulation imposed by statute. The law simply is what it is, regardless of what your governing document say.
These statutes are most relevant to the question I opened this article with. If the law is going to apply, regardless of what your documents say, is there any need to amend? In addition to the points raised at the beginning of this article, let’s briefly explore two other principals your board should consider when discussing this question with your attorney.
- When a new legal requirement is inescapable, you might need to amend in order to create a framework that accommodates for the new reality your association will be operating under. For example, in 2015, new legislation was passed that requires a board to hold an informal hearing if requested by a person charged with a fine. The informal hearing requirement is binding on your association, regardless of what your governing documents say. However, in light of this requirement, it is wise to craft new provisions in your documents that govern how informal hearings are run and what kind of reasonable limitations will be imposed on those attending and participating.
- Amendments to the governing documents can be useful tools for informing and educating association members and future boards. Let’s consider again the display-of-flags statute cited above. Suppose that, contrary to the law, your governing documents prohibit lot owners from displaying the United States flag in their front windows. Your board learns that the association’s regulation on flags is contrary to the law. They understand that, despite what the governing documents say, the lot owners have the right to display the flag as provided by statute so they decide to simply not enforce the flag provision. In a world of perfect communication, this might solve the problem. However, the reality is that, when a new board comes into office, institutional memory is often lost and they rely on the governing documents for an understanding of what they can and cannot do. If the provisions of the governing documents are contrary to the law, a board member or an owner might rely on those provisions to the detriment of the association. It is not uncommon for a board to enforce provisions of the governing documents without realizing those provisions are outdated and no longer in compliance with the law. This can ultimately put the Association on the losing end of a lawsuit. To avoid these kinds of missteps, governing documents should be amended regularly to keep up with new legislation.
Neither your local laws nor your governing documents operate in isolation. Navigation of the two regulatory bodies requires practice and careful maneuvering. Good luck as you traverse these ever-changing waters.