Tuesday, October 27, 2009

Look before you leap when amending your documents.

The associations who get into the most trouble when it comes to amending their documents are usually those who did not think through the process ahead of time.

The starting point for any association wishing to amend its documents is to review the amendatory threshold in the document being amended. The declaration, articles and bylaws might all have different amendatory requirements. If you are amending a document that requires lender consent to do so, please save yourself a costly headache and contact your association attorney to discuss what must be done and whether or not you can rely on the relatively new statutory procedures concerning lender consent requirements.

If amending your declaration requires 90% approval from your total membership, you might want to consider first amending the declaration to lower that threshold and then going on to amend other provisions at a later time.

You must also consider whether or not the document you are amending is the proper place for the provision you are adding. For example a leasing restriction should not be placed in your Articles of Incorporation simply because the Articles contain an easier method of amendment than the Declaration does.

Here is a checklist of sorts next time you want to amend your documents:

1. Can we achieve the necessary amendatory threshold?

2. Is lender consent required and if so can we obtain it?

3. Are we amending the correct document?

4. Is the amendment reasonable and enforceable?

5. Does the amendment in one document require an amendment to another in order to avoid a conflict?

6. Are the members aware that we will be asking them to vote on this amendment and will they support it?

Some amendments are relatively easy to pass (i.e. making the date of the annual meeting more flexible) and others meet a high level of resistance (i.e. guest/occupancy restrictions). Make sure you know ahead of time what your chances of amendment success are and whether or not you have followed all the proper steps.

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