How They Work Together and When They Need Updating
Every community association–whether a homeowners association (HOA) or condominium–operates under a set of governing documents. Together, these documents define how the community functions, what owners may or may not do, and how decisions are made. Although most owners are familiar with the “rules,” few realize how those rules fit into a hierarchy of authority or how and when those documents should be updated.
Declaration of Covenants
The Declaration (sometimes called the “Covenants,” “CCRs,” or “Restrictions”) is the document filed with the county that created the community association. It is a contract among owners, defining rights and responsibilities. The Declaration specifies what owners may do on their private lots (or “units” in a condominium), what areas are shared, and the obligations of each owner. In short, the filed Declaration tells owners what they can and cannot do, even before they buy into the community.
Declarations are usually drafted by the original developer but can be later amended by owners to better fit the community’s existing needs. Importantly, not every change in state law requires a Declaration amendment. In North Carolina, HOA and condominium statutes include both mandatory and non-mandatory provisions. If a provision is mandatory, it overrides any conflicting Declaration language. So communities don’t need to “update” their documents to conform to all existing laws, since many are mandatory. Similarly, Declarant provisions mentioning a developer who no longer exists generally become irrelevant and don’t have to be formally removed.
Amending a Declaration is possible but often challenging. North Carolina law usually requires approval from at least 67% of all owners (that percentage can at times be higher), which can be difficult to achieve unless there is widespread support for the change. The cost of such an amendment can vary significantly depending on the complexity of the changes, the number of provisions involved, and the current state of the documents. Actual preparation costs depend on the existing documents and the scope of the proposed revisions. With a quick review of the proposed amendment and existing documents, we could provide a fairly quick estimate of costs for preparing and filing a Declaration amendment.
For additional insight into how and when to amend a Declaration, see these posts:
- To Amend or Not Amend the Declaration at a Meeting?
- Top Amendments for an HOA or Condo in North Carolina & South Carolina (Part 1)
- Top Amendments for an HOA or Condo in North Carolina & South Carolina (Part 2)
These articles outline the most common and beneficial Declaration amendments and provide practical advice for boards planning to update their documents.
Bylaws
If the Declaration provides the framework, the Bylaws are intended to describe how the Association operates day to day. They address when and how to hold the annual meeting, quorum requirements, board composition, length of Board terms, committees, etc. Many original Bylaws are quite general, modeled after nonprofit templates rather than customized for each community, which is why Bylaws often need to be amended following transition from the developer to owners (see Why Are Our HOA/Condo Bylaws So Bad?).
For guidance on updating Bylaws, see Considerations When Amending or Revising Association Bylaws. And for the differences between individual Bylaws amendments versus a Bylaws revision and best practices for amending Bylaws, check Thoughts on Bylaws: Individual Amendments, Bylaw Revisions & Best Practices.
Revising Bylaws tends to be easier than amending a Declaration, as Bylaws amendments often require only a majority or two-thirds vote of those members at a meeting or by written ballot, depending on the existing language. Costs can vary widely depending on the number and complexity of changes. As with Declaration amendments, the cost of Bylaws changes depends on the documents and the desired scope of revision. That said, Bylaws changes are almost always less expensive and time-consuming the Declaration amendments. However, changes to condominium documents tend to be more expensive than to HOA/townhome documents, as condo Bylaws are almost always filed with the county, which adds complexity and effort. Bylaws updates are usually worth it, as a well-drafted and current set of Bylaws helps ensure smoother operations and reduces confusion about meetings, elections, and officer duties.
Articles of Incorporation
Although often overlooked, another document Board members should have read are the Articles of Incorporation. Newer HOAs and condominiums must be incorporated nonprofits, and the Articles of Incorporation establish the association as a nonprofit corporation. Unlike the other governing documents, the Articles are filed with the NC Secretary of State.
More recent Articles tend to only list several essentials about the association, such as legal name, address, the initial Board members, the name of the “registered agent” who can be served with legal documents, and sometimes details on indemnification and other matters. On the other hand, older associations may find MANY details in the Articles, including month of the annual meeting or the number and length of terms of Board members. Since the Articles usually override the Bylaws, it’s important to know what’s in the Articles. While more recent Articles often don’t need change, it’s smart to confirm that the Association’s address and registered agent information are current, as errors can lead to missed legal notices or administrative issues.
Rules and Regulations
Rules and Regulations (sometimes referred to as “policy”) provide the guidelines a Board adopts to govern the use and enjoyment of common areas (parking lots, pools, private streets, common area playgrounds or spaces, etc.). Because the association owns the common property, the Board can usually adopt or change such rules without a membership vote, so long as the rules do not conflict with higher governing documents.
As a result, if an association needs a rule about dogs being on leashes in the association playground, that likely can be accomplished by Board-adopted policy. However, if the concern is about dogs being leashed on owners’ private lots, almost certainly a Declaration amendment will be necessary.
The Declaration may give the Board authority to adopt policy over more than just the common area, but such decisions must still be reasonable. See Rules and Regulations: Staying in Your Lane and Avoiding Potential Hazards.
Final Thoughts
The Declaration, Bylaws, Articles, and Rules & Regulations all play a vital role in maintaining an organized, well-functioning community association. Understanding these governing documents, their hierarchy, and how they interrelate can help both boards and homeowners know where authority lies and how changes should occur. Before adopting changes to any, boards should consult with legal counsel experienced in community association law to ensure compliance and avoid unintended consequences. A thoughtful approach today can prevent confusion and disputes tomorrow.
For help with any HOA/condo governing document questions or amendments in North or South Carolina, contact one of the community association attorneys at any of Law Firm Carolinas’ offices.