Procedures for the Adoption of Association Rules

In addition to the basic governing documents, an association should have its own internal rules and regulations to implement and supplement the provisions of the declaration and other governing documents. The internal rules are usually not recorded and, as a result, they are not enforceable on their own as equitable servitudes. The manner in which community association boards of directors may adopt and amend these internal operating rules is regulated by state statutes and the association’s governing documents, which should always be reviewed before a rule is considered for adoption.

“Operating rules” are any regulations that are adopted by a homeowners association’s board of directors that apply generally to the management and operation of the development or the conduct of the business and affairs of the association. A “rule change” is the adoption, amendment, or repeal of an operating rule by the board of directors of the association. All operating rules should be:

• Reasonable;
• In writing;
• Within the authority of the board of directors (being defined by law and by the governing documents of the association);
• Consistent with governing law and the governing documents; and
• Adopted, amended, or repealed in good faith and in substantial compliance with the statute’s procedural requirements.

State laws pertaining to homeowners associations and / or the association’s governing documents should contain provisions that mandate that an association provide its members with written notice of a proposed rule pertaining to certain specified categories of rules a certain number of days (i.e. 30 days) before its effective date. Such a notice would include the full text of the proposed rule along with a description of the purpose and the effect of the proposed rule. The state laws and/or association’s governing documents also typically contain provisions that detail a process by which members can challenge a proposed rule. Proposed rules that should be presented to an association’s members for review and challenge before they may be implemented generally fall into the following categories:

• Rules for use of the common areas or exclusive use of common areas;
• Rules relating to use of separate interests (including architectural rules);
• Rules relating to member discipline, including adopting any schedule of monetary penalties for violation of the governing documents;
• Rules imposing standards for the payment of delinquent assessments under a plan;
• Procedural rules for resolving assessment disputes;
• Procedures for reviewing and approving or disapproving a proposed physical change to a member’s separate interests or to the common area; and
• Procedures for elections.

Exceptions to the advance notice requirements may exist when an association’s board of directors determines that an immediate rule change is necessary to address an imminent threat to public health or safety or imminent risk of substantial economic loss to the association. Such exceptions generally have limitations and requirements that the association’s board of directors provide members with notice of the emergency rule that includes the text of the rule, a description of its purpose and effect, and the date that the rule will expire.

The types of rules that may be expressly excluded from the notice and challenge requirements typically fall within the following categories:

• A decision about common area maintenance;
• A decision on a specific matter that is not intended to apply generally;
• A decision setting the amount of a regular or special assessment;
• A rule change that is required by law, if the board of directors has no discretion as to the substantive effect of the rule change; and
• The issuing of a document that merely repeats existing law or the governing documents.

The procedure for members to object to a proposed rule following their receipt of the notice setting forth the text of the proposed rule, along with the description of the purpose of the rule and its effect, is the subject of state laws and the association’s governing documents. Typically, after the board has provided the members with general notice of the new rule or a change to an existing rule, the members have a period of time (i.e.30 days) in which to tender a request that the board notice and convene a special meeting of the members to vote on reversal of that rule or rule change. Any petition tendered by members opposing the rule or rule change must be supported by members owning a specified percentage (i.e. 5% or more ) of the separate interests in the association. If the members submit the required request, the association’s board will have a period of time (i.e. 35 to 90 days) after receipt of the request to hold a vote of the members on whether to reverse the rule change. The rule change may be reversed by the affirmative vote of a majority of a quorum of the members, unless the declaration or the bylaws call for approval by a greater percentage. If the members do not make a timely request, their ability to object to the rule ends, and the board can act on the proposal.

Clearly, an association’s board of directors should be familiar with their state’s laws and the provisions of the association’s governing documents relative to the adoption of rules before taking action to draft or implement a rule or a rule change. With the exception of emergency situations, once a proposed rule or rule change has been drafted by the association’s board of directors, it should be circulated to community members for their comments at a scheduled meeting. After discussion at such a meeting, approved changes based on member input should be incorporated into the rule. The final version should then be circulated to the members to comply with state laws and provisions in the association’s governing documents. This process should minimize objections by members and conflicts between an association’s board of directors and the individual members over rules that believed to have been arbitrarily adopted without consideration of the association’s membership.