2005 October                                                                               

Updating Declarations & Bylaws

Bill Ward, Esq.

Associations often seek to “update” their Declaration and Bylaws (documents) for many reasons.  Some Associations created before 1984 seek to revise their documents in accordance with the provisions of the Common Interest Ownership Act, which became effective on October 1, 1984.  Other Associations face issues, which seemingly are not covered by their documents.  Finally, issues do arise not contemplated when the documents were originally drafted.

Though Associations often think that the easiest way to update documents is to simply create a whole new set, experience dictates otherwise. Often it is much more economical, timely, and practical to draft specific Amendments to the documents rather than prepare new documents. 

Most Connecticut Condominiums use model documents. The advantage to the model documents is that they contain similar, if not identical, provisions.  The disadvantage is that often the provisions do not include the different types of projects, high-rise, townhouse, detached units, etc.  That can lead to definitions, which are inaccurate at worst, or inexact at best.

Undertaking a comprehensive review of condominium documents is beneficial to the Association to ensure orderly operations.  Following are some issues that should be considered when going through this process.

1. USE RESTRICTIONS  - The most frequent request from associations is to change documents to regulate activities by unit owners.  Examples of restrictions commonly proposed include leasing, pets, and carpeting.  Some associations want to limit the number of investor-owned units because of the perceived, or actual, problems which sometimes occur with a high percentage of renters.  Those problems range from difficulty in obtaining mortgages by potential purchasers to abuse of common elements by non-owners to difficulties of enforcement actions against tenants.  Other associations seek to minimize the noise by requiring carpeting on living areas.  Limiting the size, kind, and number of pets is always a favorite topic.

Prior to 1995, any restriction of the permitted uses or occupancy of a unit had to be approved by one hundred percent (100%) of the unit owners.  In 1995, the Common Interest Ownership Act reduced the percentage from one hundred percent (100%) to eighty percent (80%), unless a larger percentage is required in the declaration, and provided the following criteria are met:

1. The amendment must provide reasonable protection to current owners.  In essence the proposed restrictions cannot be applied to current owners.  The current owners are “grandfathered” concerning the prospective prohibitions.
2. The declaration must be amended in accordance with the provisions of the association’s declaration.
3. No unit owner may vote against the proposed amendment.
4. Notice of the proposed amendment must be delivered to every unit owner who has not voted or who has not agreed to the proposed amendment and the association does not receive a written objection in thirty days (30) after the association delivers notice.
5. If at least one unit owner objects to the proposed amendment, the association must file an action in Superior Court. The court must determine whether the objecting unit owner or owners have a “unique minority interest” different from the interest, of the other unit owners. 

The good news about the statutory change in 1995 is that it provides a methodology for imposing use restrictions that never occurred previously due to the 100 percent (100%) requirement.  The bad news is that such an undertaking still requires eighty percent (80%) approval and exempts current owners.  Therefore, it is not an immediate solution to a current problem. 

2.         OBTAIN LOANS - Most associations no longer budget for significant capital improvements.  In an effort to maintain low common charges annual contributions to the capital reserve account are minimal.  As a result, when a major capital project must be completed, new roof, repaving, replacing windows, etc. most associations elect to obtain a loan.  Prior to October 1, 1984, associations did not have the authority to borrow money because the statute did not authorize associations to pledge its right to collect common charges to a bank as security for the loan.  Since associations do not own any property, the only security for such a loan is a pledge of its right to collect future common charges.  Therefore, pre-1984 condominiums, which are now facing significant capital projects due to the age of their facilities, must first amend the declaration and bylaws prior to obtaining a loan.

3.        RECORDS AVAILABLE FOR INSPECTION – Often a dispute arises as to what documents are available for inspection by a unit owner.  Most unit owners, as a member of the association, believe they are entitled to every document, record, invoice, contract, cancelled check relating to the association by virtue of their membership in the association.  Pre-1984 bylaws usually contain a provision that simply allows a unit owner to examine the books or account of the association.  There is little guidance as to what constitutes the books of account. 

The issue becomes what records does the association want to make available.  For   instance, does an association want another unit owner to be able to obtain the account history for a delinquent unit owner?  Does a unit owner have the right to review bids received by the      board in deciding what contractor to hire for a capital project?  Does a unit owner have the right         to review contracts for services provided to the association?  Individual associations have    different philosophies concerning these issues.  To avoid disputes and needless controversies, the      record provisions need to be reviewed carefully.

4.     ENFORCEMENT FINES - Through 1984 most documents contained a provision allowing a fine for violating provisions of the documents of five dollars ($5) per day with each day being a separate violation.  Though the purpose of fines is to obtain compliance with the association’s documents, not to generate revenue, five dollars for a single infraction is woefully inadequate today.  In addition, there may also be a need to have a sliding scale or the ability to fine different amounts based upon the infraction(s).  For instance, an association may want to increase the fine for a repeat offender of the same type of violation.  An infraction involving safety or health issues for an association may justify a higher fine.  Unfortunately, the pre -1984 documents only allow a five dollar per day fine.

The above issues are examples of items associations may want to consider when reviewing their documents.  It is not an exhaustive list by any means.  At CAI-CT’s November 5, 2005 Southern Connecticut Trade Show, these issues, and others will be discussed at length.  Associations considering revisions to their documents will learn more about these issues as well as the following:

1. Repair/Maintenance responsibilities – Unit Owner versus Association;
2. Refining the definitions of Common Elements, Limited Common Elements, and Units; and
3. Effective enforcement provisions.

There are no model amendments applicable to all associations.  Each association must carefully consider its objectives in amending the documents.  Each association’s philosophy of community living will dictate appropriate amendments to their documents.  Deciding which amendments may be beneficial to your community is as important as drafting the language of those amendments. 

Bill Ward, Esq. practices law in the firm of Ackerly & Ward.  He represents many associations throughout the State of Connecticut.  He currently serves on the Southern Connecticut Trade Show Committee.