Our HOA
Ninjas here at Moretz & Skufca have a little pet peeve when it comes to
terminology: folks who refer to the governing documents for their community
association as “the bylaws.” So (to
borrow from Shakespeare) what’s in a name?
Turns out that when it comes to homeowners association documents, names
mean a lot. There are articles, bylaws, declarations,
CCRs, deed restrictions, board resolutions, policies and procedures, and rules
and regulations, among other animals. Help
us stop the malapropism trend by understanding these different documents and
how they relate to one another. (Note
that while we use North Carolina nomenclature here, these concepts apply to
community associations in virtually every state.)
Articles
of Incorporation
An HOA’s
articles of incorporation, also known as its “charter”, legally create the
corporation when filed with the Secretary of State’s office, and confer upon it
all of its legal authority, as well as its non-profit status. Think of the articles of incorporation as your community
association’s Declaration of Independence – the document that creates a new
entity out of thin air. Since a corporation
has no legal authority to act in any manner not authorized by its articles of incorporation, the
articles are typically very broadly-worded and non-specific in order to avoid
inadvertently limiting the corporation’s authority to do business. Articles for homeowners associations must limit membership to lot
owners only and include language specified by the IRS in order to qualify as a
non-profit. Your HOA will almost never
deal with its articles once they are filed.
Bylaws
The bylaws
establish a corporation’s internal governance, voting and administrative
procedures. These include details about
membership and board meetings, board elections, descriptions of the officers,
how they are appointed and their authorities, and other similar matters. Think of your homeowners association's bylaws as its Constitution –
the rules of how the people will elect their representatives and what those
representatives can do. Bylaws need not
be filed with the Secretary of State or recorded with the local register of
deeds. (While many HOA declarations have the
bylaws attached to them when they are recorded with the register of deeds, this
is not legally required.) You will typically
refer to your homeowners association's bylaws only when there are questions regarding elections, special assessments or how
other important matters may be voted upon by the membership and/or the board. Generally, bylaws are fairly boilerplate and
should not require a lot of thought or attention by your board or your members
unless there are major issues facing your HOA.
This is
where our pet peeve comes in. We often
hear folks refer to their declaration of restrictive covenants, or to all of
their homeowners association’s governing documents, as “the bylaws” (cringe). Please
don’t do this! The bylaws are a specific
document, different from the other documents governing your HOA. If you need to refer to them all together,
the proper term is “governing documents.”
Use the word “bylaws” only when referring to the bylaws themselves.
The most
important document for your homeowners association is the declaration of
covenants, conditions and restrictions, or, for condominiums, the declaration
of condominium (sometimes called a "master deed" in South Carolina) – what we call the “declaration.” These are also referred to variously as the
“covenants”, the “restrictions”, or the “CCRs.”
These are recorded with the register of deeds where the association is
located prior to any lots being sold, which causes the provisions of the
declaration to “run with the land” and be binding upon all current and future
owners of each lot. The declaration
states what can and cannot be done with a lot owner’s land and the homeowners association’s common areas, and provides details as to how the HOA is
to be operated. In this latter regard
there can be substantial overlap between the declaration and the bylaws, and
this may be part of the confusion we see in terminology. In general, the declaration controls over the
bylaws if they are in conflict.
Deed
Restrictions
An aside
about deed restrictions. Some subdivisions
have “deed restrictions” in addition to, or in lieu of, a declaration. The term generally refers to a document which
places limits on what can be done with a lot owner’s land, but which does not
create a full homeowners association operational structure like a declaration
does. This type of restriction was used
primarily in the old days before homeowners associations with detailed
declarations became prevalent, but deed restrictions can also be used now to
place additional or special restrictions on a subset of lots within a larger
HOA, or for small subdivisions where no formal HOA is required. We avoid using this term except in these
limited situations. Modern declarations
include deed restrictions (specific restrictions on what can be done on the
owners’ lots) in addition to lots of other details regarding the operation of
the community association, so “declaration” is the proper term for modern, detailed
declarations of restrictive covenants as opposed to simple limitations on lots.
Everything
Else
The
final category of governing documents is board resolutions, policies and
procedures, and rules and regulations.
While these different terms are often used based upon type or level of
formality, they are all positions formally adopted by the board of directors setting
forth how a particular matter or situation will be handled now and in the
future. We refer to them generally as
the homeowners association’s “policies.”
Policies serve to spell out in detail matters that may be addressed more
generally in the declaration or the bylaws.
While
the articles of incorporation, the declaration and the bylaws ultimately control the governance of your homeowners association (in that
order), the board of directors has the legal authority to adopt policies which are in general
accordance with the authority granted by those documents. For example, an HOA’s declaration may
restrict leasing to no more than 15% of the homes in the subdivision, but it
may not go into specific detail regarding how the leasing restrictions are to be
implemented. The board has the legal
authority to adopt a policy describing how a homeowner may apply to lease his
or her home, defining who is considered to be a tenant versus a guest, how a
waiting list will be maintained, and other similar details. Conversely, the board could not adopt a policy
restricting leasing if such a restriction were not set forth in the
declaration.
Policies
can usually be adopted by the board acting alone, and need not be recorded or filed
anywhere – although the best practice is to make sure they are made known to
the members, usually by mailing, newsletter or website. The board should be sure that the board
meeting minutes reflect the research and consideration underlying the adoption
of a particular policy, including the board’s consultation with its management
company and professional advisors if necessary, and should take care that the
policy is well thought out and written down in clear and specific detail.
We hope
this discussion has shed some light on the various common HOA documents and the proper terminology for each.
If we can provide further information to assist your HOA, don’t hesitate to contact us.
Please give us a call or drop us an email if our HOA law team can assist your HOA or management company with your governing documents, or if we can be of assistance in any other way. We appreciate your reading our HOA law blog and encourage you to share it with others who may be interested. Thank you!
