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KASS: Condo’s ‘declaration’ and ‘bylaws’ are different

Q: Please explain the difference between the “Declaration” and the “Bylaws” in a condominium association. I believe Boards of Directors — and owners — often focus on the Bylaws and overlook the more important Declaration.

Our Board of Directors recently altered and eliminated certain common elements in our Association. Moneys for these projects were taken from our reserve accounts. Our Declaration requires a unanimous vote of all owners — and lenders — but we do not believe the Board is even aware of these restrictions.

What should we do? Karen.

A:   Dear Karen: You are correct: much attention is given to the Bylaws , but very little has been written about the Declaration. You are also correct;   this document is more important than the Bylaws.

In condominium law, there is what we lawyers call the “power source.” The most important source of authority is the law — the Statute, such as the Maryland, Virginia or Florida Condominium Act. To the extent the Act covers a particular issue, the Act controls, even if your condominium documents take a different approach.

However, state legislators have taken a cautious — and wise

— position when enacting legislation involving community associations. The law spells out certain basic requirements, but allows drafters of condominium documents – as well as the Board and its members – to shape the future of the association as they so desire. Furthermore, although it is often difficult to amend condominium documents because of the high percentage vote ordinarily required, these documents can be amended from time to time by the unit owners as the need arises.

The second level of authority is the Declaration. This document is highly technical, but is the primary instrument by which the condominium is created. In effect, the developer “declares” its intention to create a condominium, and accomplishes this by recording the Declaration on the land records in the jurisdiction where the property is located.

Every member of the Board of Directors should read the Declaration at least once a year. The Condominium instruments (i.e., Declaration, Bylaws, Plats and Plans, and House Rules) should be available on every website, at every Board meeting and at all annual meetings.

Although there is no such thing as a “boiler-plate” declaration, generally this document will contain such information as:

— definitions of terms used in the condominium documents;

— a description of common elements, limited common elements and units. This is perhaps one of the most important questions constantly confronting Boards of Directors: what is considered the boundaries of the Unit and what are the common elements? Are the windows part of the unit? Is the heat pump a common element? Is the balcony a limited common element? The Declaration should provide the answers.

— the percentage interest that each owner has in the Association. This is important for voting purposes and to determine the amount of the condominium fee which each owner has to pay.

— the rights and restrictions given to lenders who make mortgage loans to individual unit owners.

The third “power source” level is the Bylaws of the Association. This document – analogous to a Constitution – contains many provisions affecting the day to day operations of the Association, such as:

— the number of Directors for the Association and their powers;

— restrictions on and use of units;

— collection procedures;

— maintenance of the association property, and

— voting and proxy requirements.

Finally, we get to the Rules of the Association as adopted — and amended from time to time — by the Board of Directors. Rules can be enforced only if those Rules have been properly adopted and only if they do not conflict with any higher power source — such as the Bylaws, the Declaration, or especially the Act.

For example: if your Declaration identifies windows as a part of the Unit (as compared to a common element), the Board does not have the authority to change those windows. The Board would have the authority to remove the windows to fix common area problems (such as a leak caused by faulty flashings), but the Board does not have the authority to replace the existing windows with energy efficient windows unless the unit owner specifically gives his/her approval — and pays the cost.

In your situation, you claim the Board has altered and eliminated certain common elements. Read your Declaration, and ask the Board to obtain a legal opinion from its attorney as to the authority of the Board.

If it turns out the Board exceeded its authority, there are several steps you can take:

  1. Ask the Board to call a special meeting of all owners to discuss the situation. Perhaps the unit owners will retroactively support the Board’s position.
  2. If the Unit owners are not in support, ask the Board to restore the common elements to their original condition.
  3. As a final resort, you can file a lawsuit asking the Court for a Declaratory Judgment. This means that you are asking the Court to make a legal decision as to whether the Board acted properly. If they did not, the Court may require the Board to correct the situation. And if there is a large expenditure of moneys required, the Court may require that the individual Board members come up with those funds.

Board members are protected by Officer and Director Insurance. In the final analysis, the insurance company may be required to pick up the legal defense of the Board of Directors and to pay any judgment ordered by the Court.

Litigation is time consuming and expensive. More importantly, it will dramatically impact on your association and on your ability to refinance (or sell) your own unit. Litigation should only be considered after all other avenues of relief have failed.

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