Q: Could you elaborate on the differences between covenants, bylaws, and rules and regulations for condominium complexes? Are there any best practices to follow when updating the rules and regulations? For example, does the board alone approve the changes, or must the changes be approved by the homeowners? Is there such a thing as too many rules? Should the rules and regulations be reviewed by an attorney before updating?
A. Condominium and homeowner associations, both of which I will refer to in this article as HOAs, are governed by several sources of authority. The various sources have an important hierarchy and I have listed them below in order of priority. If there is a conflict between two sources, the source higher on the list prevails. The sources are:
Federal law: Federal housing law deals primarily with federally backed home-mortgage qualification, handicap access and housing discrimination. Common issues we encounter relate to restrictive covenants or rules that impair a handicapped person’s ability to access or use a home or community amenities, or that prevent homes in the community from qualifying for federal mortgage programs.
State law: Chapter 47C of the North Carolina General Statutes, known to practitioners as the Condo Act, is the body of state law that governs condominiums. Chapter 47F, known as the Planned Community Act, governs planned communities, which include most non-condominium HOAs.
Chapter 55A governs nonprofit corporations, which is relevant because most HOAs are established as nonprofit corporations. There are also many opinions by North Carolina courts that bear directly on HOAs.
Declaration: If you reside in an organized community of townhomes or single-family homes, your community will be governed by a declaration of covenants, conditions and restrictions (CCRs). If you reside in a condominium, your community will be governed by a declaration of condominium.
CCRs and declarations of condominium contain the bulk of the restrictions on how homes are designed, constructed and modified. They contain provisions for the establishment of an HOA and the protocol for annual assessments to pay for common expenses, as well as various rules for home and landscape maintenance and use restrictions related to parking, pets, and other issues.
CCRs and declarations of condominium govern the real estate itself and must be recorded with the register of deeds’ office. Changes to CCRs and declarations of condominium usually require a super-majority 67 percent vote of the members of the HOA, although this number can be higher or lower depending on when the community was created and what the CCRs or declaration of condominium require.
Articles of Incorporation: The articles of incorporation state the purpose of the corporation and who its members are (typically, all the homeowners in the case of an HOA). There may also be provisions related to the composition of the board of directors and the voting rights of members, but those items are more often found in the corporation’s bylaws.
Bylaws: Bylaws are in essence a corporate playbook. They specify the number of directors and the directors’ qualifications, terms of office, and powers and duties. Bylaws also set out methods for removing directors, the voting rights of members, and how and when meetings of members and directors are called and held. Amendments to bylaws usually require a majority vote of the members at a minimum, but that percentage can be higher depending on what the bylaws say about amendments.
Rules and regulations: The Condo Act and the Planned Community Act both contain provisions authorizing HOAs to “adopt and amend” rules and regulations. See N.C.G.S. §§ 47C-3-102 and 47F-3-102. However, this is not an unlimited power. The board can only adopt rules that state law and the CCRs or the declaration of condominium authorize.
The governing documents of some communities require member input and/or approval before new rules can be adopted. In most cases, an HOA’s board of directors has the authority to adopt rules governing the use and maintenance of common areas, and sometimes also the use and maintenance of condos and homes in the community. In some instances, rules may govern the owners’ conduct as well. In general, rules and regulations cannot be any more restrictive than or conflict with provisions contained in the CCRs or the declaration of condominium.
In regard to your question about legal advice, an experienced HOA attorney can offer valuable insight and guidance to a board considering adding or changing rules and regulations or proposing amendments to the HOA’s CCRs, declaration, or bylaws. It is certainly possible for an HOA to get too restrictive with its rules and regulations. I encourage HOA boards to seek input from members before considering changes or additions to the rules, especially for controversial ones. If enough homeowners disapprove of the job the directors are doing, the owners simply need to consider the board members’ performance when election time rolls around, and make sure their voices are heard and their votes are cast.
Originally published in the Charlotte Observer September 7, 2013.