In other posts we have discussed the governing documents of a homeowners association. Many communities were established 20 to 40 years ago with governance documents that worked well for the developer and, for the most part, for the community association. However, many of these governing documents are out of date. Federal and Virginia laws regarding community associations have changed substantially. If your board of directors has not conducted an audit of the documents that govern your communities in the last 5-7 years, it should.

What is an “audit” of our governing documents?

An “audit” of your documents is an in-depth review conducted by your HOA’s board of directors in conjunction with your association’s attorney. The Board reviews each document and looks at sections that are unclear, no longer apply, appear to not apply to your community, protect a missing developer, or fail to provide the association with adequate resources. The Board prepares a list of concerns or issues facing the community, such as unmaintained housing, large numbers of delinquent assessments, or association enforcement capabilities. The Board provides this information to the association’s attorney.

When should the documents be modified?

Although there are many reasons to amend documents, these 7 reasons are the most common:

1. The documents do not comply with federal or Virginia law.

The board of directors of a community association are volunteers. Documents that do not comply with the law create difficulties and expense for a community association. Board members read the documents and determine that they should enforce an agreement, only to discover that the agreement has been superseded by a change in law. Rather than requiring the ongoing involvement of a lawyer to interpret and advise the association on whether the provisions of the documents have been changed by new legislation, statutory amended documents allow a board to carry out its duties without the continuous and constant involvement of a lawyer.

2. Documents include declarant/developer language.

After the developer/respondent term ends, the board should consider removing the provisions regarding developer/respondent rights. Most of the provisions containing developer/declarant rights are probably no longer relevant and may cause confusion among owners. Removing these provisions provides clarity in the document and can often result in a substantial decrease in the number of pages in your documents.

3. The documents contain high quorum percentages for meetings or difficult requirements to modify the documents.

Many associations are faced with apathetic owners. Lowering quorum requirements allows an association more flexibility in conducting business. Lowering quorum requirements encourages owner participation because an owner who wants to vote “no” on an issue can choose not to attend a meeting, and effectively, the “no” vote is exercised by not participating. Increased quorum requirements make it necessary for the owner to participate in the meeting to record their “no” vote. Modifying documents shouldn’t be a daunting process. Communities must be prepared for change. Document modification must be efficient and possible. Lowering the percentage required to pass an amendment makes our communities more viable for the future.

4. Documents require mortgagee approval.

Although this requirement is still necessary for condominium communities to allow financing through government-guaranteed loans, single-family communities no longer require mortgagee approval. In our ever-changing mortgage world, non-condominium communities that wish to consider eliminating mortgagee requirements may also consider authorizing the board of directors to make document changes if necessary for government-guaranteed loans.

5. The documents only allow the association to enforce the covenants and rules by filing a lawsuit.

Filing a lawsuit is the most expensive enforcement remedy available to an association. Modifying the documents to allow assessment of charges under the Virginia Condominium Law or the Homeowners Association Law allows for a less expensive application by the association. Associations should also consider adding provisions that allow the association to “self-help” in certain situations. Abandoned homes that are neglected and in disrepair have affected some communities. Allowing the association to correct the deficiency and assess costs against the owner is more efficient and less expensive than a lawsuit.

6. The documents include unrealistic caps on assessment increases.

All communities want to keep assessments low. However, the reality for some communities is that they are unable to pay necessary operating expenses and adequately fund reserve accounts because the documents restrict how much assessments can be increased. The amendment to the documents allows the association to remove outdated limits and replace them with a limit that allows for appropriate budgeting by the association.

7. The documents include strict limitations on the types of building materials allowed in the community.

Today’s building materials have changed. Providing flexibility in documents to allow for the use of new materials is not only convenient for the owner, but can also provide substantial cost savings for the association in its responsibilities.