The governing documents of a housing development—be it a cooperative, condominium, or homeowners association—spell out the rules, regulations, and policies that all unit owners or shareholders are obligated to follow as a condition of their residence. There are three main documents in this category: the bylaws, which contain provisions for directorship, voting, transfers, fees, and so forth; the proprietary lease (or declaration, in the case of a condo or HOA), which describes the rights and responsibilities of unit owners or shareholders as well as of the corporation or association; and the house rules, which are usually a component of the proprietary lease and spell out the day-to-day rules and regulations for safe and harmonious multifamily habitation.
The Cooperator spoke to several attorneys specializing in co-op and condo law to get their take on the state of these documents: how often they should be revisited and revised, what the procedures are for making revisions, and common mistakes clients make when they do decide to give their governing documents an overhaul.
Entering the Void
Dean M. Roberts, Esq. is the Practice Group Leader for Real Estate at law firm Norris McLaughlin, P.A., with offices in Manhattan, New Jersey, and Pennsylvania. He reveals that bylaws are sometimes drafted with no amendment provisions whatsoever, leaving boards “in this legal void on what the procedure is for amending [them].”
In such cases, the first step is to come up with language that makes sense for the particular population and governing body of the co-op, condo, or HOA in question. For co-ops, where a shareholder vote is usually required to make any bylaw changes, “You have to come up with what you think is the right quorum—is it half? Is it a majority of the shareholders? Is it two-thirds? Or is it bifurcated?” by which Roberts refers to having a different quorum requirement for votes on specific topics, such as changing the flip tax.
Even an existing amendment procedure can turn problematic when attempted to be put into practice. “Many proprietary leases have very high quorums, too,” continues Roberts. “Some require 100% of the shareholders [to vote], which can get really ridiculous and make it technically impossible to amend them.”