Condo Owners Must Read Their Bylaws
Question: I am a senior citizen and live in a condominium. The Board of Directors recommended that the balconies be repaired and then passed a special assessment. As I read the Bylaws, there should have been a special meeting called, so that the owners could discuss the need for repairing balconies, and then vote. Our Bylaws require that three-quarters of the unit owners vote in favor of any such special assessment. The manager and Board of Directors sent threatening letters to all owners who did not pay their special assessment, and now are threatening to take us to court. What can we do?
Answer: It is amazing to me that people who live in condominium associations do not take time to read the Bylaws of their own organization, and that includes many board members also.
There is in condominium law a priority which we call the “power source.” In order of priority, the state condominium statute controls. To the extent that state law is silent on a particular subject, the next level of priority is the Declaration. This is the basic document creating (declaring) that a condominium is established.
The third level of priority are the Bylaws. Where the Declaration is silent, the Bylaws will control. The Bylaws are perhaps the most important part of any condominium association documents. They are, in effect, the association’s bible. These Bylaws should spell out, among many other items, what authority the Board has, what responsibilities unit owners have, and whether there are any limitations on spending power by the Board of Directors.
The final level of priority are the rules and regulations of the association. Where the rule conflicts with the Bylaw (or any higher power source) that higher power source takes precedence. The courts have made it clear throughout this country that where the Bylaws are clear and specific, the Board does not have to be “reasonable” in its enforcement and implementation of those documents. Every unit owner who buys into a condominium is presumed to know that this is a condominium, and the unit owner is duty bound to comply with those documents — as they exist today and as they may be properly and legally amended from time to time.
On the other hand, if the Bylaws are silent, the rules and regulations adopted by a condominium association must be “reasonable.” This is a wonderful concept taught to lawyers in law school, but the bottom line from this author’s point of view is that “reasonableness” should be equated with “common sense.”
You must review your Bylaws carefully. Many documents distinguish between “additions, alterations and improvements,” on the one hand, and “maintenance and repair” on the other. For the former, many condominium Bylaws put dollar limitations on the amount of money that a Board can spend without receiving approval from a majority of the unit owners. If indeed your Bylaws require 75% majority, I believe this is highly unusual — and indeed perhaps restrictive.
If, on the other hand, the Board believes that only repairs to the balconies are required (rather than improvements), usually the Board has the legal authority to complete the work, and assess each owner on a percentage basis. In some cases, where not everyone has balconies, and depending on what the Bylaws state, the Board can specially assess only those unit owners who enjoy balconies for the cost of these repairs. Again, you must review your Bylaws carefully, to get the answer to this question.
From a practical point of view, even if the Board of Directors has the legal authority to spend money for repairs, in my opinion if this amount is going to be substantial, the Board should involve all of the membership in the decision making process. Clearly, the Board must have authority to spend money to keep the building in good shape. On the other hand, if the Board members want to stay in office and want to do “the right thing,” I have always recommended that Boards of Directors keep the membership fully advised as to the scope of their plans. Transparency should be the motto of every association.
You raised an interesting question as to how the Board can raise the monies necessary to do the balcony work. Oversimplified, there are three options:
- take money from reserves;
- pass a special assessment; or
- borrow money from a bank
Many condominium associations have long been reluctant to borrow money from banks. Historically, this is probably because banks until recently were reluctant to loan money to condominium associations. However, in recent years, more and more banks have opened up their doors, and are more than anxious to work with community associations on their financial needs.
There is no easy answer to this question. Each association has different needs and concerns. However, at the very least a Board of Directors and its management company should be able to give a complete explanation to the membership outlining the pros and cons of all of the above financing options.
Finally, you have indicated that the Board intends to file suit against the unit owners who have not paid the special assessment. Either the Board has the authority or it does not. Your Bylaws should provide the answers to your questions. The courts will read your Bylaws.