The board has discussed it and decided: it’s time to amend those out-of-date, confusing or incomplete governing documents. Maybe they want to enact a rental restriction or prohibit basketball hoops; maybe they want to set term limits. Whatever changes the board wants to make, the road to amending governing documents is a long and arduous one, requiring a serious commitment by each board member. The board needs to be prepared and plan ahead to avoid the pitfalls that can happen when working towards getting an amendment approved.
What are the common pitfalls board encounter?
Lack of support. In most cases, governing documents require at least 75% of all owners to vote in favor of an amendment. If 75% of the owners are not likely to vote in favor of the amendment, then it’s not worthwhile using the time, energy and funds towards drafting it. For example, the board is concerned about the number of rentals in the community and wants to limit them. If rental homes already make up 30% of the association, it’s very unlikely that those owners would vote in favor of the amendment, thus the association will not obtain the votes it needs to pass.
Delaying involving the manager/attorney. The association’s manager and attorney should be part of the process of developing and reviewing the language of any proposed amendments. Why? Managers can help the board determine the practicality and enforceability of the changes, while attorneys can help ensure the board does not make any changes that violate laws or that contradict other sections of the governing documents. They can also help you determine the correct percentage of owners required for the amendment to pass. An attorney can also ensure that the format of the amendment is correct; if the spacing is wrong, the county won’t record it, and that’s a lousy thing to discover at the end of this grueling process!
Allowing insufficient time. Amendments do not happen in a day or a week and shouldn’t even if they could. An amendment affects the association and its owners from the date of the recording onwards, so it’s critical to ensure it is exactly what the board wants and the association needs. There are also many hands that need to be involved: the board to determine the need, the manager/attorneys to draft it up, the manager to mail the draft and ballot out to all owners, the board members to walk the neighborhood and collect ballots (yes, the board should plan to have to do this if you want an amendment to pass!), and the attorney submitting all the documentation plus amendments to the county for recording (condominiums may also need to obtain approval from the Oregon Real Estate Agency). This process takes time and effort.
Failing to provide sufficient information. Owners are critical in the success or failure of an amendment since they are the ones who decide (whether they cast their ballots or not) if the amendment will succeed. The board needs to provide written rationale and reasoning - maybe applicable board meeting minutes - about why this amendment is necessary and desirable for owners. The manager should work with the board to help them determine what information owners might need or want to know so that this can be provided as part of the amendment mailing. Boards need to communicate with their owners in advance of the mailing so that owners know to watch for the ballot and amendment and return it promptly; this can be done at a board meeting, on the association’s website or Facebook page, on the community notice board, or any other common communication method.
Amending governing documents can be highly frustrating but very worthwhile in the end. Boards can make this process less burdensome by ensuring they have the support of their owners, involving their manager and attorney early on in the process, providing plenty of information and rationale to all owners, and allowing plenty of time to get it all done.
This article was previously published in the CAI-Oregon newsletter in 2010.