By Curtis G. Kimble.
I am routinely asked if I will review amended governing documents (CC&Rs, bylaws, etc.) which the board, their manager or another person has drafted in order to save money over having an HOA attorney draft them. While this method can sometimes save some money if the association is just looking for a legal review to determine if any of the provisions are contrary to the law or fatally ambiguous or deficient, unfortunately, the new documents typically just exchange an old set of problems for a new set of problems and can even leave the association with worse documents than the original ones.
What about if a board drafts the documents and a qualified attorney revises them as necessary? Unfortunately, that doesn’t work well either, from a cost saving or an efficiency point of view. That approach usually takes more work than if the attorney simply drafted them from scratch because all of the drafting done by the board not only has to be reviewed to determine if the language would be interpreted in court in the way intended, to ensure that it complies with various laws and regulations and adequately establishes the legal foundation of the development and the association, but also has to be analyzed together with the rest of the document and the other governing documents to ensure they are all consistent. Then, revisions, comments and explanations have to be drafted and then conveyed to the board. All of that is extraordinarily time consuming, and that’s often just the beginning of the revision process.
As if board members and managers don’t have enough liability to worry about, the unauthorized practice of law also exposes them to potential liability. Drafting a complex legal document defining, granting and restricting the legal rights and obligations of people other than the person drafting it, and which is recorded against the real property of people other than the person drafting it, constitutes the practice of law. As all states do, Utah specifically prohibits the practice of law without a license.
But not only that, CC&Rs are the source of broad, complicated contractual rights and obligations, as well as property rights and obligations that are tied to the land directly and can affect the ability of owners to sell and finance the purchase of the properties within the association. To leave these issues up to laypersons that aren’t aware of or up to date on the many sources and intricacies of these issues should be unthinkable to any conscientious board. The first goal of drafting any legal document is to avoid expensive court battles over the interpretation and meaning of the terms of the document. Someone who has defended and enforced governing documents in court is able to draft documents effectively by knowing how that document will be interpreted and enforced by the courts.
In an illustration of how intricate and complex contract interpretation can be, the Iowa Supreme Court recently examined whether a $200,000 special assessment for garage repairs was void because the board failed to obtain preapproval of the repairs from two-thirds of the members in Oberbillig v. West Grand Towers Condominium Association. The following phrase was in the association’s CC&Rs: “The board shall not approve any expenditure in excess of $25,000, unless required for emergency repair, protection or operation of the Common Elements without the prior approval of two-thirds of the total ownership of the Common Elements.”
Does the word “emergency” refer to all three words “repair, protection or operation” or does it just refer to and modify the word “repair”? In other words, does an expenditure in excess of $25,000 for the protection or operation (in a non-emergency) of the Common Elements require a two-thirds vote of the members? The court applied a legal doctrine of interpretation called the doctrine of the last preceding antecedent to rule that no vote of the members was necessary to levy a $200,000 special assessment for the protection or operation of common elements in a non-emergency.
I’ll spare you the boredom of an explanation of the doctrine of the last preceding antecedent. Suffice it to say, legal documents, especially documents that govern the rights and obligations of dozens or hundreds of homeowners now and for years into the future, should not be drafted by a layperson that is unaware of how seemingly insignificant words and punctuation will affect a court’s interpretation of the document.
Additionally, an HOA attorney who routinely assists boards and property managers with the many issues that face associations on a daily basis knows what problems can and should be addressed in governing documents and how best to address them to minimize problems in the future. Importantly, they’ll also know whether something properly belongs in the CC&Rs rather than in the rules and vice versa. They know what works in other associations and what doesn’t. They know what causes hate and discontent and they know what helps promote balance and harmony.
This isn’t to say documents shouldn’t be carefully tailored to an individual community. They definitely should be. That is why form documents or documents taken straight from another community are never acceptable.
Every board should be careful to recognize the importance of their governing documents. They should work closely with their attorney to ensure the documents match the needs and desires of the membership. The attorney will need the input and direction of the board, but the board and manager should stay away from the drafting.