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Bylaw Amendment - Need translation from legal to english

Started by JosephH2 • 15 replies • 1816 views

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JosephH2 (Pennsylvania)
Posts: 57
Posted:
Help! We are a new HOA in Pennsylvania and we want to make an amendment to our Bylaws.

The Article in our Bylaws regarding Amendments has a lot of legaleese about mortgages.

Here is the full Article. Can anyone help translate the mortgage parts into plain english?

ARTICLE 7
Amendments

7.1 Amendments to Bylaws. These Bylaws may be modified or amended only by vote of Unit Owners entitled to cast a majority of the votes in the Association, except as otherwise expressly set forth herein or in the Act; provided, however, that until the date on which all Declarant-appointed Board members voluntarily resign or are required to resign pursuant to Article XI of the Declaration, (i) Section 2.4, (ii) Section 3.1, and (iii) this Section 7.1 may not be amended without the consent in writing of the Declarant, and further, these Bylaws may not be modified or amended if, at the time of such amendment or modification, any Unit is encumbered by a mortgage in favor of or insured or guaranteed by the Veteran's Administration ("VA"), the Federal Housing Administration ("VHA"), the Federal National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage Association ("FHLMA"), or similar entity or program without their consent if required under regulations or requirements relating thereto.

7.2 Approval of Mortgagees. These Bylaws contain provisions concerning various rights and interests of record holders of mortgages on Units. Such provisions in these Bylaws are to be construed as covenants for the protection of such holders on which they may rely in making loans secured by such mortgages. Accordingly, no amendment or modification of these Bylaws impairing or affecting such rights, priorities, remedies or interests of such a holder shall be adopted without the prior written consent of such holders who have registered an address with the Secretary.

7.3 FNMA, FHLMA, FHA, VA Amendments. If any amendment to these Bylaws is necessary in the judgment of the Executive Board to cure any ambiguity or to correct or supplement any provision that is defective, missing or inconsistent with any other provision, or with the Act or the Declaration, or if such amendment is necessary to conform to the then current requirements of any agency or entity that has established national or regional standards with respect to loans secured by mortgages or deeds of trust on units in community projects, including but not limit to the Federal National Mortgage Association, the Federal Home Loan Mortgage Association, the Federal Housing Administration or the Veteran's Administration, the Executive Board may, at any time and from time to time, effect such amendments without the approval of the Unit Owners or the holders of any liens on all or any part of the Community, upon receipt by the Executive Board of an opinion from independent legal counsel to the effect that the proposed amendment is permitted by the terms of the Act.

7.4 Amendments to the Declaration. Any two officers or Executive Board members of the Association may prepare, execute, certify and record amendments to the Declaration on behalf of the Association.
TimB4 (Tennessee)
Posts: 21,059
Posted:
I am not an attorney and I do not work in the legal field. This is my layperson's opinion:

Quote:
Posted By JosephH2 on 07/10/2012 5:56 AM

ARTICLE 7
Amendments

7.1 these Bylaws may not be modified or amended if, at the time of such amendment or modification, any Unit is encumbered by a mortgage in favor of or insured or guaranteed by the Veteran's Administration ("VA"), the Federal Housing Administration ("VHA"), the Federal National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage Association ("FHLMA"), or similar entity or program without their consent if required under regulations or requirements relating thereto.

This section specifies that, in addition to the membership, you need the approval from the mortgage companies.

Quote:
Posted By JosephH2 on 07/10/2012 5:56 AM

7.2 Approval of Mortgagees. These Bylaws contain provisions concerning various rights and interests of record holders of mortgages on Units. Such provisions in these Bylaws are to be construed as covenants for the protection of such holders on which they may rely in making loans secured by such mortgages. Accordingly, no amendment or modification of these Bylaws impairing or affecting such rights, priorities, remedies or interests of such a holder shall be adopted without the prior written consent of such holders who have registered an address with the Secretary.

This section further stipulates that consent is only required from mortgage companies who have registered themselves with the Secretary of the Association.

Quote:
Posted By JosephH2 on 07/10/2012 5:56 AM

7.3 FNMA, FHLMA, FHA, VA Amendments. If any amendment to these Bylaws is necessary in the judgment of the Executive Board to cure any ambiguity or to correct or supplement any provision that is defective, missing or inconsistent with any other provision, or with the Act or the Declaration, or if such amendment is necessary to conform to the then current requirements of any agency or entity that has established national or regional standards with respect to loans secured by mortgages or deeds of trust on units in community projects, including but not limit to the Federal National Mortgage Association, the Federal Home Loan Mortgage Association, the Federal Housing Administration or the Veteran's Administration, the Executive Board may, at any time and from time to time, effect such amendments without the approval of the Unit Owners or the holders of any liens on all or any part of the Community, upon receipt by the Executive Board of an opinion from independent legal counsel to the effect that the proposed amendment is permitted by the terms of the Act.

This section specifies that if the Board receives a written legal opinion from an attorney that the changes reviewed by the attorney may be made without approval from the membership or mortgage holders.

Such changes can only clarify or remove items that are no longer in compliance with State or Federal laws. Any other changes, will still require membership and mortgage holder approval.

Quote:
Posted By JosephH2 on 07/10/2012 5:56 AM

7.4 Amendments to the Declaration. Any two officers or Executive Board members of the Association may prepare, execute, certify and record amendments to the Declaration on behalf of the Association.

This section just states that it takes two officers of the Association to sign the paperwork for filing any changes with the county.

Question - Are you a condominium Association or a Homeowners Association?

There may be additional info contained in the appropriate State law.

Example: section 3221 of the condo act discusses Rights of secured lenders. That law requires notice of the changes be sent to the lenders and if there is no response within 45 days, the board may conclude that the lender accepts the change. (note, this section only applies if your a condominium).

Hope this helps,

Tim

JosephH2 (Pennsylvania)
Posts: 57
Posted:
Tim

Thanks for the great comments!

After seeing your comments, and then re-reading the Article, it's starting to make some sense to me.

To answer your question, we are a Homeowners Association - 75 Townhouses and semi-attached homes.

Thanks again,
Joe
LarryB13 (Arizona)
Posts: 4,099
Posted:
Joe:

Here’s my take on this. I am not an attorney, either.

Section 7.1

The bylaws may be amended only upon a vote of the owners. Units that are financed with mortgages subject to VA, FHA, FNMA, or FHLMA require approval of thosee agencies if they have rules requiring their approval. This means that any time your association seeks to amend the bylaws, you will need to determine whether any of your units have mortgages insured by those agencies and whether any of those four agencies require approval. As I read this section, you do not need their approvals if those agencies’ rules do not require approval.

Section 7.2

If amending your bylaws will effect the interests of other mortgage holders, you will need to get their approval but only if they have registered with your association’s secretary. If the amendments do not effect the mortgage holders’ interests then you do not need their approval.

Section 7.3

If the board believes that the bylaws do not conform to state law, the declaration, or the rules of VA, FHA, FNMA, or FHLMA, then the board of directors may amend the bylaws without a vote of the owners to bring the bylaws into compliance but the board needs an opinion from its attorney before doing so.

Section 7.4

Pertains to amendments to the declaration and not to amendments of the bylaws.
LarryB13 (Arizona)
Posts: 4,099
Posted:
What it was supposed to look like:

Joe:

Here’s my take on this:

Section 7.1

The bylaws may be amended only upon a vote of the owners. Units that are financed with mortgages subject to VA, FHA, FNMA, and FHLMA require approval of the lenders if any of those agencies have rules requiring their approval. This means that any time your association seeks to amend the bylaws, you will need to determine whether any of your units have mortgages insured by those agencies and whether any of those four agencies require approval. As I read this section, you do not need their approvals if those agencies’ rules do not require approval.

Section 7.2

If amending your bylaws will effect the interests of other mortgage holders, you will need to get their approval but only if they have registered with your association’s secretary. If the amendments do not effect the mortgage holders’ interests then you do not need their approval.

Section 7.3

If the board believes that the bylaws do not conform to state law, the declaration, or the rules of VA, FHA, FNMA, or FHLMA, then the board of directors may amend the bylaws without a vote of the owners to bring the bylaws into compliance but the board needs an opinion from its attorney before doing so.

Section 7.4

Pertains to amendments to the declaration and not to amendments of the bylaws.
DaveD3 (Michigan)
Posts: 796
Posted:
7.1 Also reads (to me) such that if the developer has his own appointees on the board, that the developer also has to approve the changes.

Might be an issue if the HOA is very new.
JosephH2 (Pennsylvania)
Posts: 57
Posted:
Thanks for all the comments. I'm starting to get a better understanding.

Our HOA has recently gone to homeowner control.

My biggest question right now is in 7.1 where it states at the end:

“……if required under regulations or requirements relating thereto.”

Whose regulations or requirements are they talking about?

Joe H
LarryB13 (Arizona)
Posts: 4,099
Posted:
Quote:
Posted By JosephH2 on 07/10/2012 8:57 AM
Thanks for all the comments. I'm starting to get a better understanding.

Our HOA has recently gone to homeowner control.

My biggest question right now is in 7.1 where it states at the end:

“……if required under regulations or requirements relating thereto.”

Whose regulations or requirements are they talking about?

Joe H

I read that to mean the agencies named (VA, FHA, FNMA, or FHLMA). For example, if the VA has some sort of rule that you have to get their blessing to make a change, then you gotta get VA to sign off. If they have no rule then you do not need their OK. This means you have to find out if there is a rule for each of those four agencies each time you want to amend your bylaws.

I would recommend discussing this provision with your association's attorney. Aside from being a major burden on the board, it seems that by virtue of those being federally-chartered agencies that their rules would trump anything your association does. That is, if there is a conflict between your bylaws and the agencies' rules, their rules win.

I would also question that part of 7.2 that reads "Such provisions in these Bylaws are to be construed as covenants for the protection of such holders on which they may rely in making loans secured by such mortgages." Bylaws are not the place for covenants and there is a body of common law that holds that bylaws cannot be used to create covenants. Covenants belong in the recorded Declaration. I would also bring this up with your attorney.

CarolR11 (Colorado)
Posts: 2,563
Posted:
Larry gives good advice, Joseph; get an opinion from your HOA attorney.
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Joseph

What changes to the CC&R's are you looking to make?

Thanks
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Joseph

In one townhouse HOA (3-4 townhomes per building, 30 buildings) our ARC and BOD made a change that units could have an awning over their deck, patio. One owner who was a condo buiding manager and against the awnings, sent a letter to the BOD claiming that her "professional interpertation" was that any such structural change would require permission of ones mortgage holder.

Our HOA attorney quickly showed her the errors in her beliefs.

AlA2 (Florida)
Posts: 2
Posted:
Here's a simplified version of the provided text:

7.1 Changing the Bylaws

The Bylaws can only be changed by a majority vote of the Unit Owners in the Association, unless otherwise stated in the Bylaws or the law. However, until all Declarant-appointed Board members resign (as per Article XI of the Declaration), certain sections (2.4, 3.1, and this section 7.1) cannot be changed without the Declarant’s written approval. Also, if any Unit has a mortgage backed by the VA, FHA, FNMA, FHLMA, or similar entities, their consent may be needed for changes, per their rules.

7.2 Mortgage Holder Approval

Some Bylaw provisions protect the rights of mortgage holders for Units. These provisions act as guarantees for lenders, and no changes that affect their rights, priorities, or remedies can be made without their written consent, provided they’ve registered their contact information with the Association’s Secretary.

7.3 Fixes and Updates for FNMA, FHLMA, FHA, VA

If the Executive Board believes an amendment is needed to fix unclear, incorrect, or inconsistent Bylaw provisions, or to meet the current standards of agencies like FNMA, FHLMA, FHA, or VA, they can make those changes without Unit Owner or mortgage holder approval. This requires a legal opinion confirming the amendment complies with the law.

7.4 Declaration Amendments

Any two officers or Executive Board members can prepare, sign, certify, and record amendments to the Declaration on behalf of the Association.

All the declarant stuff is just referring to the original person or company that created the association.

I created an app for your pc that let's you ask questions about bylaws, rules, statelaws, roberts rules, association reports, etc. It summarizes in plain english. It also automatically converts old photocopies into searchable text. Took me months to develop, but wow is it usefull. Give me a yell if interested.

-al
DeanJ
Posts: 1,786
Posted:
I have never seen Bylaws that give so much power to a mortgage holder. One mortgage holder registered with the HOA effectively has a veto over the remainder of the owners. This is the first issue I would try to change.
DeanJ
Posts: 1,786
Posted:
“ that until the date on which all Declarant-appointed Board members voluntarily resign or are required to resign pursuant to Article XI of the Declaration, (i) Section 2.4, (ii) Section 3.1, and (iii) this Section 7.1 may not be amended without the consent in writing of the Declarant, and further, these Bylaws may not be modified or amended if, at the time of such amendment or modification, any Unit is encumbered by a mortgage in favor of or insured or guaranteed by the Veteran's Administration ("VA"), the Federal Housing Administration ("VHA"), the Federal National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage Association ("FHLMA"), or similar entity or program without their consent if required under regulations or requirements relating”

You should speak with an attorney, all the restrictions May have extinguished when turned over by the developer.
JackS20 (North Carolina)
Posts: 271
Posted:
FHA and similar agencies like VA, FNMA, and FHLMC only care about amendments that affect:

Owner rights or obligations

Use of the property or units

Foreclosure, assessment collection, or lien powers

Common areas or shared amenities

Lease or rental restrictions

if you want to amend your bylaws to move the election date from October to November, or add more board members or specify the board members must live in the HOA, or other changes that don't affect the above then go ahead.You dont' need the mortgagee approval.

If however you want to sell common area land, prevent rentals to section 8 tenants, etc. then you should probably get approval. That being said if you didn't get approval, nothing would likely happen. HOAs are for the most part above the law, until they get caught, and even then typically nothing happens, but you dont' want to go there.

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