The Declaration

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? How does one even know if their property is a part of an association? These issues and more are established in what’s commonly called an association’s “declaration.” Declarations Attorney Daniel B. Greenstein with Bernick Lifson, P.A. in Minneapolis, Minnesota spoke with us at length and explained the nuances of declarations as well as many other important common interest community topics.

One important note — in some states, statutes vary for condominiums, homeowner associations (HOAs) and cooperatives. Additionally, Greenstein noted that the historical phrase “Covenants, Conditions and Restrictions” is rarely used in modern association declarations; most developers now simply refer to the document as the declaration.

Declarations are recorded with the county in which the particular association is located. In Minnesota, Greenstein said, they can be found using a conventional title search. In some counties they are even accessible via a governmental internet system. “When a property becomes subject to a recorded declaration, that property becomes a part of the association,” he said. A declaration should also 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. Declarations cannot usually be changed in this manner, Greenstein noted. They usually require an owner vote – specifically, a super majority – to amend. The ability for boards to change the declaration by vote is limited to certain circumstances, such as addressing errors and omissions, and may not be done to make substantial changes. Voting regulations can vary by state and association type as well.

In cases where it is required by the declaration, he said, mortgagee approval may be needed to pass amendments. Sometimes this approval can occur by default if the mortgagee does not respond to the amendment approval request within a certain time period, which is usually sixty days.

A declaration is the document that governs the community from its outset, and it is generally rather broad and covers a wide variety of issues. It is created by the developer, sometimes known legally as the “declarant.” Rules and regulations, Greenstein said, are created by the board, typically over the course of time and to the extent to which they are allowed as outlined by the declaration. Rules and regulations are more easily created and more easily revised. Occasionally, however, they are not as easily enforced. Rules and regulations work in conjunction with the declaration, and they are used to supplement the governing documents. “A good analogy would be that the declaration is like the U.S. Constitution and the rules and regulations are like the laws that Congress enacts. Rules and regulations are used to supplement or address issues that are not specifi- cally covered in the declaration and may not contradict them,” Greenstein explained.

As an example, the declaration may say that no commercial vehicles shall be parked within the confines of the community without board approval. That implies, he noted, that the board can theoretically approve some commercial vehicles. The board can then come up with rules and regulations that specify which commercial vehicles are approved and how that restriction will be enforced.

The initial declaration carries the most weight amongst an association’s governing documents. They are the most fundamental, and they are usually harder to amend. The declaration requires an incredibly large su- per majority to amend—a super majority that flows from the total number of interests in the community, and not just a special few. Some states specify the exact majority needed to amend a declaration. “In Minnesota, an amendment to the declaration usually requires approval of 67% of the ownership interests in the association,” Greenstein said. Bylaws, however, can often be amended by a smaller super majority. They can be amended by a super majority of owners who are in good standing or owners who are present at a meeting which, he noted, is significantly lower than the total number of owners who exist throughout the community as a whole.

How detailed does the declaration 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 declarations more difficult to enforce, but it can also give board members flexibility, Greenstein said. Certain issues may need to be very detailed, such as members’ easement rights. Specificity is always best, but not to the extent that it lim- its the flexibility of the board. For example, he explained, the declaration 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. 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 ad- ministered; it gives the board the ability to function. “Contrary to popular belief, in Minnesota a board is not required to publish a schedule of fines before enforcing violations of the declaration or rules. The board has the authority to determine the fine amount based upon the exact violation in question,” Greenstein said.

More specific language does not necessarily lend greater ability to enforce. Discretionary language, on the other hand, allows for more rights to create. 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 the existing declaration, Greenstein said. Conventional wisdom holds that boards are looking to enforce and control things, but that is quite often not the case. 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 declaration man- dates that they do something. Boards often want to be flexible and look to the declaration for ways to prevent a lawsuit, rather than having those governing documents held over their heads. “However, if there are violations of provisions of the declaration or rules, it is the duty of the board to ensure compliance and to enforce the provisions of its documents,” he explained.

Even if boards follow their rules and governing documents, the potential still exists for them to be challenged successfully. Declarations are presumed to be valid unless they are shown to be completely unnecessary or violate state or federal law, Greenstein said. 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.

Take for example an association’s ability to restrict or prohibit the installation of energy efficient systems for aesthetic purposes. There are modern-day, state-by-state regulations that have tried to limit the powers of community associations to regulate these systems. According to some state laws, Greenstein said, associations may only be allowed to limit where these systems can be placed and how they are installed. By contrast, some states allow associations to outright ban systems like solar panels for aesthetic reasons, although with the rising popularity of green technology it is becoming harder to do so. Even regardless of any such laws, Greenstein noted that owners could still successfully challenge a board’s attempts to regulate or prohibit energy efficient systems.

Another example would be an association trying to ban satellite dish- es, even though the FCC Rules and Orders explicitly outline which dishes and installation locations associations are allowed to restrict.

According to Greenstein, other rules that would be tested are those that violate the Fair Housing Act, which protects individuals who are in certain classifications from discrimination. One most often sees these rules successfully challenged by disabled residents, typically requesting that the association modify its practices in such a way as to accommodate their disability. Those issues often fall into two areas: parking and pets. One may see challenges regarding how close parking spaces must be to certain buildings, or if an association can ban all pets or certain types. In these situations, the individual may opt to challenge the association privately or through the government. These matters are often delicate as well, with potential for substantial damages, Greenstein noted, so it is usually best for associations to seek legal counsel.

Another potential Fair Housing Act violation would be trying to en- force single-family use restrictions, especially if the association requires residents to be related. “There is no good reason to include restrictions on the number of occupants allowed, moreover, every city will have occupancy regulations,” Greenstein explained. In sum, any potential violation of the Fair Housing Act or state discrimination law is easy enough for residents to file complaints about, but expensive for associations to deal with. “Be sure to talk with your insurance agent about coverage for these potential trouble spots,” he said.

An association may have an appeals process in place, based on the governing documents. There may be specific language in the declaration about an appeals process, how rules are enforced and how penalties are administered. But absent that language, the board must decide the manner in which an appeal would take place.

“In Minnesota, most associations provide for the board of directors to enforce the rule violations,” Greenstein noted. Some governing documents allow for the association to form a committee specifically for rules and violations. Committees are typically created and staffed by volunteers appointed by the board. Some governing documents, however, allow for the formation of what’s known as committees of the membership; although not very common in Minnesota, Greenstein said, these commit- tees are staffed through the voting in of members, and they are granted authority and autonomy by the governing documents. Committees of the membership may have their own authority to resolve issues separate the board.

Is a committee’s decision final when penalizing a resident rule-breaker, or can a resident appeal to their association’s board? As explained above, Greenstein said it depends on the association’s governing documents. A resident could certainly appeal to the board, but that doesn’t guarantee anything can or will be done. A board may have no power to change the decision of a committee of the membership, for example, depending on the governing documents. Ultimately, it may prove more worthwhile for residents to appeal to a court of law, rather than to the same people who issued the penalty.

In some states, a person does not have the right to appeal to the board. “Minnesota, however, provides that every owner who has violated the governing documents or rules is entitled to a due process hearing before the board,” Greenstein said. Where there is disagreement, however, associations may make alternative dispute resolution available as an alternative to litigation, he noted. An alternative dispute resolution is when a neutral third-party is brought on to look at all the facts of the case and determine the outcome. The cost of an alternative dispute resolution is either paid evenly by those involved or negotiated beforehand. The mediator of the alternative dispute resolution and manner in which it is conducted must also be agreed upon beforehand between all parties. If a party is dissatisfied with the arbitration award (the ruling), they can only reject the award and litigate the case if there was a showing of impropriety during the arbitration process.

Alternative dispute resolution is a popular, and often more affordable, alternative to litigation. The mediator of the resolution is agreed upon be- forehand and may be chosen according to their knowledge of the issue at hand, which cannot be done with a judge prior to litigation.

How does an association determine fine amounts? Common sense and reasonableness should always prevail. Fining someone $5,000 because they failed to take their Christmas wreath off the door by the deadline is very inane and is just going to attract bad publicity. “It would inevitably be struck down by a court reviewing the action. A fine must be reason- ably related to the infraction,” Greenstein said.

“Minnesota does not place restrictions on fine amounts; however, our laws do state that after notice and an opportunity to be heard before the board or a committee appointed by it, the board may levy reasonable fines for violations of the declaration, bylaws, and rules and regulations of the association,” he explained. Fines may be specified in the association’s enforcement policy, though, which is part of its rules and regulations.

In some policies, there are specific fines for certain types of violations. “However, if a board relies on a schedule of fines, it may not vary from that schedule. This often limits the board’s fining authority and compels the board to follow the schedule. This is not always in the association’s best interest,” Greenstein said. In addition to traditional fines, an association may also seek to recover costs it has incurred because a violation has taken place. These costs and expenses are often more enforceable and more reasonable than traditional fines. For example, if an owner violates a parking rule and parks their 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.

It is common for associations to use an escalating fine schedule, especially for relatively harmless violations, such as putting out trash at the wrong time. Some states even outline these fine schedules for condos and HOAs, making it easier and more enforceable for associations. In Minnesota, where Greenstein said that is not the case, associations may choose to dole out fines at their discretion, where each fine is determined by the body that is performing the hearing and then confirmed by the board. However, the more discretion you put into the system, the more you are required to keep good records of the circumstances surrounding the violation and the fine that was levied.

Speeding tickets may be another way associations can levy fines. For the most part, associations may issue them unless the state or local government has ownership of the road or has been assigned the right to exclusively enforce speed restrictions via state law or some other mechanism. “However, consider how you would effectively determine if someone is speeding. It will be difficult to establish,” Greenstein said. In addition, it’s ill-advised to issue tickets to visitors because the association would likely have difficulty enforcing them. Instead, associations may choose to issue fines to the owners associated with those visitors. In rare instances, associations could also have the right to pull residents over, but that would largely depend on the community’s way of living. For example, if allowed by the local government, a large community association may choose to hire a private security company to hand out speeding tickets.

According to Greenstein, fines should never be simply punitive in nature, and they are not to be considered a true form of revenue. Any fines that are enacted are done so to alleviate the harm or financial cost brought upon the association by violations or simply to obtain compliance. Regardless, fines should be enforced equally throughout the community. Not doing so could be considered a form of discrimination.

The concept of due process is found in the United States Constitution. Due process requires that the person who is being accused is given knowledge of that which they are being accused. There is a certain amount of specificity needed to inform the person of what they did, when they did it and that it was in violation of an identified restriction. After the suspected offender has been notified, they must be given an opportunity to defend themselves of the violation. “In Minnesota, an association board must give someone a right to a hearing before the board, before a fine is placed on a violator’s account. The board must determine whether or not it is likely the person violated a provision of the governing documents or rules,” Greenstein said.

If it can be determined that a violation has actually occurred af- ter following those steps, and the association has the right to fine to begin with, then it can be said that due process has been satisfied and the fine may be levied.

How does the governing body make knowledge of its actions available to residents, and what is meant by transparency? Some people who talk about transparency are talking about governing by the whole. To them, transparency means everything gets voted on by the members and the vast majority must agree upon everything that is enacted. While that may be theoretically ideal, it is not a practical application of transparency in a community association. This is why members of an association vote for people to serve on the board — to represent them when making decisions.

In its realistic application, transparency is when decisions are made known to all owners. Meetings may or may not be open to all owners, for it depends on the meeting location and the topics at hand. But as a general rule, Greenstein said, decisions made by the board must be made during open meetings. Meetings held in a board member’s home will most likely not be made public. There may also be certain topics that are sensitive in nature that require discretion, or demand legal privilege or privacy, and those meetings may not be open to the public. Such private executive sessions do not necessarily make for a lack of transparency. However, all owners are allowed access to meeting minutes and outcomes from open meetings, but not from closed executive sessions, he noted.

“In Minnesota, the board is allowed to close a meeting to the pub- lic when discussing (1) personnel matters; (2) pending or potential litigation, arbitration or other potentially adversarial proceedings, between unit owners, between the board or association and unit owners, or other matters in which any unit owner may have an adversarial interest, if the board determines that closing the meeting is necessary to discuss strategy or to otherwise protect the position of the board or association or the privacy of a unit owner or occupant of a unit; or (3) criminal activity arising within the common interest community if the board determines that closing the meeting is necessary to protect the privacy of the victim or that opening the meeting would jeopardize investigation of the activity,”
Greenstein explained.

Furthermore, open meetings do not give owners the right to interject themselves into the conversation whenever they see fit. There are appropriate times for open homeowner feedback during meetings, and owners must remember that the board was elected to make such decisions. “Unless allowed by the board, non-board members should not be speak- ing at a board meeting,” he noted.

What kind of notice is required to inform residents that a new rule is in effect? The law does not usually outline how an association must give notice of a new rule, but they are generally responsible for doing so in some manner. Once a resolution is signed and adopted, the board could then send it to members. Sometimes an association’s governing documents may specify how and when the board gives notice of new rules. Some associations may give little to no notice, but doing so risks the possibility of members challenging those rules. “Minnesota requires reasonable notice; most attorneys read this to mean 7-10 days advance notice,” Greenstein said.

How do associations define “reasonable”? Reasonableness is hard to strictly define, but it’s often simple to pinpoint in any given situation. According to Greenstein, anything that leads to ridicule or widespread criticism is most likely unreasonable. Anything that is easily defendable is most likely reasonable. For example, it would be reasonable for associa- tions to require that renovation work be permitted and specify that con- tractors be licensed and bonded.

Can associations place restrictions that would affect the sale of properties in their communities? Greenstein said that every restriction has the potential to impact the sale of properties in either a negative or positive way. Restrictions provide the stability of maintaining things that residents do not want changed. The premise of the entire restrictive property scheme is that the rules are desired by the people who will buy the property and are designed to uphold a certain community standard. Given this, it’s difficult to argue that a restriction actually hurts the value of the property. Classic examples of restrictions that come into question here would be pet policies and leasing restrictions. One prospective buyer might be turned away by such restrictions, while others might find them ideal. “Use restrictions in Minnesota cannot be simply voted on as a rule. Use restrictions, such as leasing and no-smoking in units, must be in the association’s declaration in order to be enforceable,” Greenstein said.

Can an association grant a variance to any type of rule? According to Greenstein, an association can grant a variance if its governing documents first allow it, and even then only under certain limited conditions. Reasons for granting a variance should not be subjective or favor-based and dependent on who the owner knows on the board; reasons should al- ways be objective, he said. Those objective standards should always show that the owner did not self-create the cause for their variance request.

What are considered reasonable architectural controls? The declaration can contain a wide array of architectural controls detailing specifically how a home can and cannot be built and what can be added to the property. Reasonability largely depends on what is written in the govern- ing documents, Greenstein explained. Beyond that, any other architectural control would be deemed reasonable as long as it doesn’t violate the law.

“If a board believes that a rule is important enough to remain in the association’s set of rules, the board must enforce the rule,” Greenstein noted. What are some of the negative consequences for associations that don’t enforce their own rules? If a board fails to enforce the association’s rules and regulations, the association can be sued. Individual board members can also be sued. Additionally, associations may not be able to get away with re-enforcing an old rule that has not be used in a while, he said, especially without first notifying the residents. If a board has no intention of enforcing a certain rule, Greenstein advised it would be in their best interest to have it removed.

Associations should also proceed with caution when attempting to restrict certain visual elements, such as holiday displays and political signs. In some states, those types of regulations are not necessarily legal because the state regulates an association’s powers in a free speech con- text. Greenstein explained that associations are viewed by some states as quasi-governmental in the application of free speech, assembly and religion; so they should handle these subjects accordingly, much like any other government entity. Instead of prohibiting certain types of holiday displays, the association should attempt to only regulate their size and extent, including how long they are allowed to remain visible in the community. “In Minnesota, the associations are given discretion in allowing holiday displays and political signs,” Greenstein noted. As for political signs, they may be easier to restrict in a condo association due to more common property being shared between residents, while HOA residents may have their own lawns for displaying signs. “However, if an association’s declaration prohibits signs, even political signs can be restricted,” he said.

Reasonableness should also govern other exterior issues, such as light- ing. For example, an association may be sued if a member is injured while passing through an area with insufficient lighting. In that case, one could say that the amount of lighting was unreasonable and that the association knew of its dangerous potential ahead of time. But ultimately, boards should base their decisions on reasonableness and not the likelihood of being sued. It is the board’s fiduciary responsibility to act in the best interest of the community — not their own — anyway.

Declarations establish the components of the common areas versus the homeowner-owned areas. The governing documents contain those delineations, which typically include boundaries, easement rights, and where units, lots and common elements begin and end. An encroachment, Greenstein said, is when an individual member builds or puts something on a common element or area.

How do associations deal with encroachments in common areas? There are a few ways of dealing with this, Greenstein said. Using the ex- ample of a resident who planted shrubbery in the common area, one meth- od would simply involve the forced removal of the item. The association can send notice to the owner that the item in question will be removed by the association at the owner’s expense. If the encroachment might actually harm the common property or cause drainage or other problems, he said, removal may be the only way to remedy the situation. However, absent such a threat or other factors, it’s advised that associations simply render the encroachment harmless and come to an agreement with the owner. In some cases, the association may need to go to court.

Occasionally, a developer may construct something that encroaches on a common element or area. In such a situation, nothing can usually be done. Most Minnesota association declarations allow waivers for encroachments caused by the developer, Greenstein noted.
Like plant life, play sets can sometimes encroach on common areas. Before they are forcibly removed or made the subject of an agreement between the association and owner, it should first be determined if they are a temporary structure. Play sets that are simple enough to remove may not even be considered an issue.