In other publications we have analyzed the documents that govern a homeowners association. Many communities were established 20-40 years ago with government 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 However, many of these governing documents are out of date.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 related to community associations have changed substantially. If your board of directors has not audited the documents that govern your communities in the past 5-7 years, it should.

What is an “audit” of our governance documents?

An “audit” of your documents is an in-depth review by your HOA’s board of directors in conjunction with your association’s attorney. The Board reviews each document and points out sections that lack clarity, no longer apply, appear not to apply to your community, protect a long-missing developer, or do not provide the association with proper remedies. The Board prepares a list of concerns or problems faced by the community, such as homes that are not maintained, large amounts of delinquent appraisals, or performance capabilities of the association. The Board provides this information to the association’s attorney.

When should the documents be modified?

Although there are many reasons to modify 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members read the documents and determine that they must enforce a covenant, only to find that the covenant has been superseded by a change in law. Rather than requiring the constant involvement of attorneys to interpret and advise the association on whether the provisions of the documents have been modified by new legislation, amended documents that comply with the law allow the board to fulfill its duties without the continuous and constant participation of lawyers.

2. Documents include declarant / developer language.

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

3. Documents contain high quorum percentages for meetings or difficult requirements to amend documents.

Many associations are faced with apathetic homeowners. Reducing quorum requirements allows an association to have more flexibility in conducting business. Lowering the quorum requirements encourages owner participation because the 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. The increased quorum requirements make it necessary for the owner to participate in the meeting to record their “no” vote. Modifying documents shouldn’t be an overwhelming process. Communities must be prepared for change. The modification of documents must be effective and possible. Reducing the percentage required to pass an amendment makes our communities more viable for the future.

4. The documents require the approval of the mortgagee.

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

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 resource available to an association. Modifying the documents to allow assessment of charges in accordance with Virginia Condominium Law or Homeowners Association Law allows for a less costly application by the association. Associations should also consider adding provisions that allow the association to “self-help” in certain situations. Abandoned houses that are run down and in disrepair have plagued 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. Documents include unrealistic limits on quota increases.

All communities want to keep evaluations 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 the amount of contributions that can be increased. Modifying the documents allows the association to remove outdated caps and replace them with a cap that allows adequate budgeting from 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 the use of new materials is not only easy for the owner, but can also provide substantial cost savings to the association due to its responsibilities.