How are the elements of a community defined? What determines the components of the common areas versus homeowner-owned areas? Where is it written that certain elements are the responsibility of the homeowner and others are the responsibility of the association? These issues and others are established in what’s commonly called an association’s Covenants, Conditions and Restrictions (CC&Rs). Attorney David J. Byrne, of Ansell Grimm & Aaron, PC in Princeton, New Jersey spoke with us at length and explained the nuances of CC&Rs as well as many other important common interest community topics.
One important note – in New Jersey, as well as some other states, statutes vary for condominiums, homeowners associations (HOAs) and cooperatives. Additionally, in New Jersey, neighboring Pennsylvania and New York, the phrase Covenants, Conditions and Restrictions is not used, although it’s the way most people across the country recognize these governing documents, Byrne said. Instead, you’ll find terms such as master deed or declaration and bylaws used when referencing CC&Rs in a legal sense. Similarly, there’s no real distinction between the terms covenants, conditions and restrictions, Byrne said. CC&Rs could just as easily be called restrictions, instead of using three words to illustrate the same point.
CC&Rs are recorded with the government entity in which the particular association is located. In New Jersey, Pennsylvania and New York, they are recorded with the county clerk’s office. In some states, they are accessible via a governmental Internet system, Byrne said. In others, they can be found using a conventional title search. CC&Rs should not be confused with the rules and regulations of an association. Rules and regulations are something entirely different. Most notably, boards can generally change rules and regulations without holding a vote of the association’s members. CC&Rs cannot be changed in this manner. Generally, they require an owner vote –often a super majority but sometimes the absence of an owner objection – to amend.
According to Byrne, CC&Rs are the documents that govern the community from its outset. They are created by the developer, sometimes known legally as the “sponsor.” Rules and regulations, though, are created by the board, typically over the course of time. Rules and regulations are more easily created and more easily revised, Byrne said. Occasionally, however, they are not as easily enforced. Rules and regulations work in conjunction with the CC&Rs. They are used to supplement the governing documents, Byrne explained. “A decent analogy is the United States Constitution,” he said. “The Constitution lays out the powers of the branches of government, and then the branches create things within their perceived or actual powers. Rules and regulations are similar to the acts of Congress and more like the laws it enacts. The branches will inevitably seek to address issues that could not have been imagined when the Constitution was adopted and ratified in 1787. That’s how you look at rules and regulations working in conjunction with the CC&Rs.”
As an example, the CC&Rs may say that no commercial vehicles shall be parked within the confines of the community without board approval. That implies that the board can theoretically approve some commercial vehicles, Byrne said. The questions then become: What commercial vehicles will be approved? How will they be approved? And, how will the restriction be enforced? “That’s what a rule or regulation is for,” he said.
Which governing document carries the most weight? According to Byrne, it’s the initial set of CC&Rs, or in New Jersey, Pennsylvania and New York, the document legally defined as the master deed or declaration. “Those are considered the more fundamental documents, and those are the ones that are typically harder to amend,” he said. The master deed or declaration will require an incredibly large super majority to amend, a super majority that flows from the total number of interests in the community, not necessarily the interests that are “in good standing,” Byrne explained. Bylaws, however, can oftentimes be amended by a smaller super majority, he said. They can be amended by a super majority of owners who are in good standing or owners who are present at a meeting, which is obviously significantly lower than the number of owners who exist throughout the community as a whole. In New Jersey, a community’s board can amend the bylaws subject to the right of a not less than10% of the owners to invalidate that amendment.
How detailed do the CC&Rs need to be in the governing documents? And what role does vague language play in drafting the “supreme law” of the community? Vague language can make CC&Rs more difficult to enforce, but it can also give the people serving on a board flexibility. According to Byrne, specificity is always best but not necessarily specificity in so much that it limits the flexibility of the board. For example, the CC&Rs could include the board’s power to levy a fine or penalty against an owner for some infraction. A very specific way to define that power would be that the board has the power to fine, that fine can be no more than “X” dollars, and it has to be administered in a certain way, etc.
“I would suggest, however, that what you really want to do is just create the power itself,” said Byrne, “which would simply be that the board has the power to levy fines subject to applicable state law.” This provides flexibility in terms of the amount, the way in which the fine gets levied, the way in which it gets waived, and the mechanism by which fines are noticed, he said. It gives the board the ability to function.
“If you’re looking at these things as a board member, you’ll think specific language gives more ability to enforce, but vague language gives more rights to create,” Byrne said. That’s especially important as boards are charged with the responsibility of creating and revising rules and regulations over the course of time to supplement existing CC&Rs. Conventional wisdom holds that boards are looking to enforce and control things, but that is quite often not the case, Byrne said. In fact, boards are often looking for ways to avoid controlling things and are sometimes limited in their discretion if the specificity of the language in the CC&Rs mandates that they do something. “They don’t want to end up in litigation,” Byrne said.
Often, he said, boards want to be flexible and are looking to the CC&Rs for ways to prevent a lawsuit, rather than having those governing documents held over their heads. As Byrne explained, “It would, often, benefit the community as a whole to have CC&Rs that simply enumerate association powers, with the discretion as to when and how to carry them out, but not mandate various things.”
If boards follow their rules and documents, does the potential exist for them to be challenged successfully? “Yes,” said Byrne. “The board’s action or inaction can be judged on good faith.” A board that is adhering to its governing documents is either doing something it is authorized to do or refusing to do something it doesn’t have to do, he said. However, a legal component regarding “good faith” allows someone to challenge that action (or inaction) – even if it is consistent with the governing documents – by arguing it’s being done in bad faith.
As an example, Byrne used an association’s ability to restrict or prohibit the installation of energy efficient systems for aesthetic reasons. He said that there are modern-day, state-by-state regulations that have tried to limit the powers of a planned unit community to regulate those types of things. Even absent those laws, owners could successfully challenge a board’s attempts to regulate or prohibit energy-efficient systems. “The owner would argue that it’s wholly unreasonable and in ‘bad faith’ to deny energy efficient modifications for aesthetic reasons in this day and age,” Byrne said. “Solar panels on the roof look weird, but so what? An owner adds something to his home in an attempt to save energy costs and conserve energy, and some board votes to fine the poor guy; that’s the kind of thing that ends up on the news. A board would be hard-pressed to take that position and take it all the way home,” he said.
Other rules that would be tested are those that violate the Fair Housing Act. Byrne said that he most often sees those successfully challenged by disabled residents, typically those requesting that the association modify its practices in such a way as to accommodate the disability of the resident. He further broke it down into two areas, specifically parking and pets. “Sometimes we will see meritorious challenges concerning how close parking spaces have to be to the front of buildings and/or when an association may or may not allow pets and/or allow only certain types,” he said.
Is a committee’s decision final when penalizing a resident rule-breaker, or can a resident appeal to an association’s board? “It all depends upon the community’s governing documents and the state in which the community is located,” said Byrne. The appeals process might exist based on the governing documents. There may be specific language in the CC&Rs about an appeals process, how rules are enforced and how penalties are administered, he said. But absent that language, there’s no specific way an appeal would take place.
In New Jersey, a person does not have the right to appeal to the board. However, associations are obligated to make alternative dispute resolution available as an alternative to litigation, Byrne said. “That doesn’t necessarily mean appeal to the board,” he said. “It can mean some other thing, some other fair process that would potentially result in the avoidance of litigation.” According to Byrne, that’s the focus of the New Jersey law. “It’s not necessarily one practice or form over another, but simply that every association has to come up with ways to potentially keep things out of the court system,” he said.
How does an association determine fine amounts? Byrne likened the process to starting a football team and choosing who your quarterback will be. In other words, common sense and reasonableness should always prevail. “A fine that is reasonable is ultimately what you’re going to look for,” he said. “If you have to stand before a judge and explain why you set the amount you did, you better be able to come up with something that makes sense.” Byrne said that fining someone $5,000 because they failed to take their Christmas wreath off the door by the deadline may be very inane and, like denying solar panels, is just going to get you in the newspaper. “It might be legal, but it’s not smart,” he said. “Besides that, a judge may laugh at you.”
Likewise, some state laws place restrictions on fine amounts. New Jersey is one of those states that has such laws, Byrne said. So is Pennsylvania, but not New York. In addition to traditional fines, an association may also seek to recover costs it has incurred because a violation has taken place. These “processing fees” are often more enforceable and more reasonable than traditional fines, Byrne said. For example, if an owner violates a parking rule and parks his car in a prohibited place during a snowstorm, the association can likely recoup the cost of having that car towed in order to get the road plowed.
“Whether it chooses to fine the guy $50 on top of that is something else,” he said. “I’m not a big fine guy. I tend to think boards rely too heavily on them.”
Speeding tickets may be another way associations can levy fines, according to Byrne. For the most part, he said, associations can issue them, unless the state or local government has ownership of the road or has been assigned the right to exclusively enforce the speed restrictions via state law or some other mechanism. He advised against issuing tickets to visitors because the association would likely have difficulty enforcing them. In rare instances, associations could also have the right to pull residents over, but that would depend largely on the community’s way of living. “If you have a 3,000-home community in west Texas where everyone has four acres and the local government essentially wants the association to regulate those types of things, there may be a private security company pulling people over,” Byrne said. “It really depends on the culture and the location.”
How do associations define “reasonable”? “You know it when you see it,” said Byrne. “It’s almost impossible to define. Ultimately, something is likely reasonable if it doesn’t spark laughter or ridicule upon it being heard.” If either of those things happens, one can more easily argue unreasonableness, he explained. “You feel like a fool if you try to argue it,” he said. “But if you can stand up in front of people and defend yourself, it may very well be reasonable.” According to Byrne, it would be reasonable for associations to require that renovation work be permitted and specify that contractors be licensed and bonded.
Keeping that in mind, he suggested that associations also proceed with caution when attempting to restrict certain visual elements, such as holiday displays and political signs. In New Jersey, he said, those types of regulations are not necessarily legal because the state regulates an association’s powers in a free speech context. “When it comes to speech, assembly, religion, or expression, some states deem private communities to be quasi-governmental,” said Byrne. “They’re subject to rigorous scrutiny, much the same way the government itself would be scrutinized if it attempted to limit the citizens’ rights.” Instead of prohibiting certain types of displays, he said that the association should attempt to regulate their size and extent, including how long they are allowed to stay visible in the community.
Reasonableness should also govern other exterior issues, such as lighting, Byrne said. But a board shouldn’t be overly concerned about whether or not it will be held liable for its decision. “There’s no way to tell a board ahead of time for what it will or won’t be liable,” he said. “An association can be liable in some fashion for refusing a request for lights and liable in some fashion for granting the request. Ultimately, I don’t think an association should be guided by whether it’s going to be sued or not,” he added. “Boards just have to be reasonable. They should follow normal human common sense, and if the lawsuit comes, it comes.”
CC&Rs establish the components of the common areas versus the homeowner-owned areas, according to Byrne. The governing documents contain those delineations, which typically include boundaries, easement rights, where units and lots begin and where common elements begin and end.
How do associations deal with encroachments in the common areas? Byrne said that there’s a “lawyer” way of handling it and a more diplomatic approach that often benefits each party (the association and the owner who encroached). Using the example of a resident who planted shrubbery in the common area, Byrne explained that the “lawyer” method would simply involve forced removal of the item. If the encroachment might actually harm the common property or cause drainage or other problems, removal will be the only way to remedy the situation, he said. However, absent such a threat (or other factors), he advised that associations simply render the encroachment harmless and come to an agreement with the owner. “Of course, the owner may have to pay a fee as a ‘license’ fee, and/or reimburse the association’s costs. Otherwise, a board’s decision to allow/maintain the encroachment could be more easily subject to attack,” he said.
Notably, play sets, like plant life, can sometimes encroach on common areas, but before they are forcibly removed or made the subject of an agreement between association and owner, it should first be determined if they are a temporary structure. “Some are fixed items that are set in the ground,” said Byrne. “But others can theoretically be folded up and moved away. It’s really going to depend on the magnitude of the play set in question, and as is the case in most of these situations, it will depend on the particular facts of the actual situation.”