In a recent “Ask the Experts” webinar, Attorneys Hope Carmichael and Nute Thompson of Jordan Price, PLLC, discussed some best practices for board members to employ when it becomes necessary to adopt rules or amend covenants/bylaws in their communities. In this article, we’ll discuss cultural trends and shifts that may require rule changes, the differences between adopting rules vs. amending covenants, legal requirements in both NC and SC, and some strategies for presenting amendments to the membership and getting them passed.
Amendments vs. Rule Changes – What’s the Difference?
Before we dive into reasons for rule changes or amendments, we first need to determine what the difference is between amending covenants and creating new community rules.
Covenants affect the use of real property and are found in the community association’s declaration, deed, or other recorded document. Amending governing documents can get quite complicated so if board members can avoid going this route, they probably should. Take into consideration what the change is seeking to accomplish– it may be something the board already has the authority to enforce by way of existing covenants. It is also important to explore other solutions that may not require amendments. Amending covenants most often requires a sixty seven percent affirmative vote of the membership, while most bylaws require a majority vote of the members - what determines a majority will be detailed in the declaration.
Rules, on the other hand, govern actions or conduct within a community and often expand or interpret preexisting authority given by the declaration. When changing rules or making new ones, a vote of the membership typically isn’t required (check your governing documents to be sure!), but you must give the members notice of the change and provide them with access a copy of the changes such as the community’s website. Be sure to always keep a record of having informed the membership of any changes should questions of the rule’s legitimacy arise in the future.
NC & SC Differences
In North Carolina, typically a 2/3 majority is required to approve amendments whereas in South Carolina, it will be more specific to the community itself – i.e. whatever the declaration/deed says. In some NC communities, the membership can sometimes override the board by calling a special meeting to have a referendum on the issue. It is also important to note that in NC, an in-person meeting may not necessarily be required as amendments can be approved by written consent.
In 2018, South Carolina began to implement more community association requirements, specifically governing document filing requirements. These new requirements state that any updates to rules or amendments must be recorded with the register of deeds.
When board members are making any alterations to the community provisions – whether it be rule changes or document amendments – it is crucial to act reasonably. One of the key elements here is enforceability – if you make this change, can it be enforced? Consider why you’re making this change and, again, explore other avenues before committing yourselves to amendments or rule changes.
Why Make Changes?
There are numerous reasons why a community association may consider implementing new rules or amending covenants. As things change and modernize, so do the needs of the association.
The advent of services like Airbnb and VRBO have brought into question rental regulations in communities as there has been an uptick in short-term rentals. Many members may not like unknown persons coming and going each week and seek to limit the number of rentals or put a rental cap in place. This is an issue that it is appropriate to address, but it must be addressed in a clear manner to be effective. Vague provisions such as “no lot shall be used for commercial purposes” probably isn’t going to successfully reduce the number of short-term rentals in the community. However, enacting a provision such as “all rental leases must be at least 6 months long” would be appropriate in this scenario. Overall, it is important to keep in mind that any amendments or rules that seek to limit an owner’s use of their property must be explicitly stated, enforceable, backed up by good reasons, and properly explained.
Another reason a community association board may seek to amend covenants or change rules would be a desire to modernize existing rules and covenants. The motivation to modernize can exist for a variety of reasons – the original rules and covenants could be outdated, vague, or no longer relevant to the way the association operates in present time. When making changes in hopes of modernizing, boards should first carefully go through the existing covenants and contemplate what they’d like to change and why. Doing this will allow board members to examine what the issue with the existing covenants really is and perhaps come up with alternative solutions to amending. As a best practice, boards should consider whether there is a less involved action than amending that will achieve the same goal.
Avoid Vague Language
Remember, vague provisions such as “lots shall be maintained in a neat and orderly manner” or “non noxious or offensive activity shall take place on any lot” are highly subjective and therefore difficult to enforce. If your board decides an amendment or rule change is needed, specificity is key, and the change needs to address specific issues.
Use Restrictions may become outdated over time. Rules or covenants that state things such as “common household pets only” or “all homes must have 2 car garages” create more questions than they answer. What is considered a household pet? If the home has a 2-car garage, must the homeowners always park inside it? These issues of vagueness can be corrected by changes such as “No animals may be kept on property except…” and “No parking on streets of community”. Another common issue, especially today, is the displaying of flags - you don’t want your community to turn into a hotbed for political issues. Even if you have a regulation that addresses flag displays, what about signs? Whatever your community decides is best, it is important to be clear yet flexible with these types of restrictions.
Presenting Changes and Amendments to the Community
When considering an amendment, a vote of the membership is almost always required to pass it. So, how do you get members on board with amendments? Just as with most things, clarity and transparency are key here. If you’re making an amendment, a thorough explanation should be given at the next membership meeting. It is also advisable to conduct a town hall type meeting and, in some cases, bring in experts (think real estate professionals, attorneys, engineers, etc.) to help bolster your case for making the amendment. There’s also something to be said for good ol’ grassroots campaigning – if your board needs to get members on their side, going door-to-door (when possible) or making personal phone calls can go a long way.
The main takeaway here is that amending covenants, or even making rule changes, can be an arduous process and, if possible, should be avoided. Not to say that making amendments and changes is a bad thing, but rather it can get quite time consuming and unnecessarily ruffle the feathers of the membership. Always explore your governing documents to determine if the board’s goal can be properly achieved through another avenue and, when an amendment or rule change is deemed necessary, be sure to fully understand your scope of power in making such a change. But, if board members carefully consult the governing documents, consider some outside-the-box solutions, and avoid vague language, passing rule changes and amendments can be successful in your community.
Is your community considering changing the rules or amending its governing documents? If so, reach out to the experts at CAMS for Trusted Guidance on how to best navigate the issue with your community members.