Can Bylaws Contain Restrictions

Started by CoriS1 • 11 replies • 1295 views

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CoriS1 (Texas)
Posts: 19

Posted:

I am a newly elected President of a POA in Texas with a long history of problems.

Our Subdivision was turned over to owners in 1980. The AOI do not make any mention of mandatory/voluntary membership but refer to the CCRS. The 1978 CCRS were to run for 25 years, with ONE automatic 10 year extension unless amended within first 25 year. IT WAS NOT AMENDED. In 2008, FIVE YEARS AFTER 25, BOD tried to push an amendment WITHOUT owner approval or notification to CHANGE THE EXPIRATION. MOST LEGAL OPINIONS AGREE AMENDMENT WAS ILLEGAL AND VOIDED AND OUR CCRS EXPIRED. [Would be impossible to get 100% or even 67% of vote required.]

Original Bylaws had no restrictions. In 2010, in an effort to push the void CCRS, BOD made VALID AMENDMENTS, but included restrictions and referred to "Covenants."

Our attorney said we ARE A POA UNDER TEXAS CORPORATIONS CODE AND PROPERTY CODE. He said we can take liens and ENFORCE BYLAWS.

But some people (with different legal opinion) are claiming that without CCRS, we have NO CONTRACT with owners, that the Bylaws have NO ENFORCEMENT and we are a VOLUNTARY POA, even though we have common property. They claim the Bylaws only apply to the BOD. They claim while we can have Assessments and fines, we CANNOT FORECLOSE or ENFORCE liens on PROPERTY of Owners since we have NO CONTRACT (CCRS). They say, the best we can do is prohibit use of common area, which is not practical and WE CANNOT PHYSICALLY REMOVE, even with Sheriff.

We are trying to AMEND our Bylaws to comply with new POA laws and to end all the infighting. We want to attempt to make everyone happy, including allowing owners to vote on Amendments (which currently only the BOD does). Because we have no CCRS, we want to include restrictions, fines and penalties in our Bylaws, so we can pursue the MANY violations that exist, mostly maintenance issues and delinquent dues. As it stands, the BOD is not respected and MANY just ignore our warnings or letters, claiming we are NOT A POA, and CANNOT DO ANYTHING TO THEM. There are also some issues between the Corp. Code (such as availability of records, notices, etc.) with the Property Code as pertains to HOAs.

1. Can we include restrictions, fines and penalties in properly prepared, voted on, and filed Bylaws.
2. Can we enforce Bylaws with judicial action if no CCRS?
3. Can dues be mandatory?

All thoughts are appreciated.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Cori,

The Arizona Court of Appeals ruled in Wilson v. Playa de Serrano that bylaws for an incorporated association cannot be used to impose restrictions on real estate.
See http://caselaw.findlaw.com/az-court-of-appeals/1485688.html

In the above case, a condo association tried to use its bylaws to create property restrictions that would have made their complex a 55+ community. I have no idea whether the Texas courts would find approval with the Arizona opinion, but the decision was based heavily on Restatement (Third) of Property: Servitudes, which is a universally recognized authority.

My experience in dealing with attorneys is that none of them ever wants to admit that he is not an expert on every aspect of the law. A verbal opinion from an attorney is usually worthless, as it is the product of his ego rather than solid research into the applicable law. (Also, verbal opinions are subject to the level of understanding of the person who hears it and often is not an accurate reflection of what was stated.)

The way to get better advice from an attorney is to request a written opinion with citations to authorities, especially common law opinions. Even this approach is not fool-proof. My own association posed a number of questions to our then-attorney and his written response cited some statutes but no court opinions. In the absence of statutes, he guessed at a few things and at least one his guesses was dead wrong as the question posed had already been answered five years earlier by the Arizona Supreme Court.

My personal opinion, based on what you wrote, is that your CC&R's expired as they were intended to and that your association is now strictly voluntary; it lacks lawful authority to levy assessments, fine, lien, or foreclose. My guess is that this matter will remain disputed until either the association or one or more homeowners files a lawsuit to resolve the matter.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Cori,

My understanding is that for restrictions to be enforceable, they need to be contained within the deed restrictions (CC&Rs).

The issue will come to a head when someone (or a group) wants to challenge the issue in the courts.

To head that off, you could ask the court for a ruling if certain sections are valid or not.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Cori

It sounds like you have different people playing outhouse lawyers. This may well have to end up with a court ruling to stop the outhouse lawyers.

CoriS1 (Texas)
Posts: 19

Posted:

Thanks guys. Appreciate the feedback.

JohnC46 and TimB4: We've been advised by our attorney a court ruling is unlikely, and we'd have to wait to be sued. That's how we got in this mess. Old BOD maliciously sued someone for ACC violation and it opened a terrible can of worms that cannot be undone.

LarryB13, you are probably correct on all points. I was praying there was some other avenue. If we are voluntary, we are doomed as no one here volunteers for anything, help or dues. There is just a small group of us sustaining the entire subdivision for the masses, and many violations. We are praying legislation changes requirements for new CCRs so we can hope to fix this in the future.

If anyone has better ideas, please let me know.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Rather than wait for a lawsuit, cannot the BOD petition the court for a ruling?

TimB4 (Tennessee)
Posts: 21,059

Posted:

Cori,

I've never seen language that only renews the CC&Rs once.
Would it be possible to provide that section of your CC&Rs?

KevinK7 (Florida)
Posts: 1,343

Posted:

Let me see if I understand. Your original restrictions expired. The association amended the expired restrictions. They were challenged and lost. Now they want to some how resuscitate the declaration by putting restrictions in a corporate document.

I see this method as an attempt to circumvent laws or requirements. The argument that there exists no contract is what I believe to be the correct one. If you want to institute new restrictions I would think you would have to get approval again and your new declaration may have to contain less properties than the original one.

NigelB (Texas)
Posts: 254

Posted:

Quote:

Posted By CoriS1 on 10/16/2016 12:28 PM
I am a newly elected President of a POA in Texas with a long history of problems.

Our Subdivision was turned over to owners in 1980. The AOI do not make any mention of mandatory/voluntary membership but refer to the CCRS. The 1978 CCRS were to run for 25 years, with ONE automatic 10 year extension unless amended within first 25 year. IT WAS NOT AMENDED. In 2008, FIVE YEARS AFTER 25, BOD tried to push an amendment WITHOUT owner approval or notification to CHANGE THE EXPIRATION. MOST LEGAL OPINIONS AGREE AMENDMENT WAS ILLEGAL AND VOIDED AND OUR CCRS EXPIRED. [Would be impossible to get 100% or even 67% of vote required.]

Original Bylaws had no restrictions. In 2010, in an effort to push the void CCRS, BOD made VALID AMENDMENTS, but included restrictions and referred to "Covenants."

Our attorney said we ARE A POA UNDER TEXAS CORPORATIONS CODE AND PROPERTY CODE. He said we can take liens and ENFORCE BYLAWS.

But some people (with different legal opinion) are claiming that without CCRS, we have NO CONTRACT with owners, that the Bylaws have NO ENFORCEMENT and we are a VOLUNTARY POA, even though we have common property. They claim the Bylaws only apply to the BOD. They claim while we can have Assessments and fines, we CANNOT FORECLOSE or ENFORCE liens on PROPERTY of Owners since we have NO CONTRACT (CCRS). They say, the best we can do is prohibit use of common area, which is not practical and WE CANNOT PHYSICALLY REMOVE, even with Sheriff.

We are trying to AMEND our Bylaws to comply with new POA laws and to end all the infighting. We want to attempt to make everyone happy, including allowing owners to vote on Amendments (which currently only the BOD does). Because we have no CCRS, we want to include restrictions, fines and penalties in our Bylaws, so we can pursue the MANY violations that exist, mostly maintenance issues and delinquent dues. As it stands, the BOD is not respected and MANY just ignore our warnings or letters, claiming we are NOT A POA, and CANNOT DO ANYTHING TO THEM. There are also some issues between the Corp. Code (such as availability of records, notices, etc.) with the Property Code as pertains to HOAs.

1. Can we include restrictions, fines and penalties in properly prepared, voted on, and filed Bylaws.
2. Can we enforce Bylaws with judicial action if no CCRS?
3. Can dues be mandatory?

All thoughts are appreciated.

Are you positive the CCRs expired? Ours (also a Texas HOA),were enacted in 2008 and automatically renew for successive periods of 10 years beginning in April of this year unless changed. In order to change 3/5th approval of the members is required. Section 209 of the Texas property code specifies 67% or if the declaration specifies a lower percentage the declaration controls.

To amend our Bylaws requires a majority of a quorum.

CoriS1 (Texas)
Posts: 19

Posted:

Unfortunately the original CCRS were not well written and did in fact only renew for "a period of ten years" rather than "successive periods of ten years." That was the change the then BOD tried to make, but it was in 2008, without owner vote, and after the original period expired.

We have been told it is unlikely we will get any rulings even if we petition.

At this point, based on consensus from here and elsewhere, we are amending the Bylaws without restrictions, preparing a list of Rules and Regulations, and putting it all before the Membership for vote. We understand we cannot attach real estate to this and cannot foreclose but we still have common property we have to protect. Until situation and/or legislature changes, we don't have much other choices.

Thanks for all your comments. It has been helpful and enlightening.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By CoriS1 on 10/19/2016 10:26 AM
We have been told it is unlikely we will get any rulings even if we petition.

Can you post the attorney's written opinion where he said that?

KevinK7 (Florida)
Posts: 1,343

Posted:

Quote:

Posted By CoriS1 on 10/19/2016 10:26 AM
Unfortunately the original CCRS were not well written and did in fact only renew for "a period of ten years" rather than "successive periods of ten years." That was the change the then BOD tried to make, but it was in 2008, without owner vote, and after the original period expired.

We have been told it is unlikely we will get any rulings even if we petition.

At this point, based on consensus from here and elsewhere, we are amending the Bylaws without restrictions, preparing a list of Rules and Regulations, and putting it all before the Membership for vote. We understand we cannot attach real estate to this and cannot foreclose but we still have common property we have to protect. Until situation and/or legislature changes, we don't have much other choices.

Thanks for all your comments. It has been helpful and enlightening.

So are you only going to add rules regarding use of the property? It seems now your association is more of a social club with property now

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