The Downside to Stagnant Governing Documents
By Donna DiMaggio Berger, Esq. / Published December 2015
It is hard enough serving on a community association board of directors without the added burden of having outdated, unreliable governing documents. If more than five years has passed since the last time your community updated its documents, you already have a problem. If you haven’t updated those documents in decades or, worse, have never amended the developer-created documents, you are likely up the proverbial creek without a paddle. Relying upon outdated governing documents is akin to using a map where the topography has completely changed—you simply have no idea where you are going and chances are you will make a wrong turn somewhere.
Sure, some of you will agree that you would like to amend your documents, but a high amendatory threshold, a lender consent requirement, or a lack of funds are all preventing you from doing so. None of those reasons are reason enough to forego updating your documents. If you still need convincing that amending your governing documents is the right thing to do, here are the five major downsides to having stagnant documents:
- You do not have a useful guidebook to operate and administer your community, particularly if your documents lack what is known as “Kaufman language,” which is based on a seminal Florida case Kaufman v. Shere, 347 So. 2d 627 (Fla. 3d DCA 1977). The Court in Kaufman required specific language to be in a condominium declaration in order to incorporate later passed amendments to the statute into those documents. In a state like Florida where changes to the shared ownership stautes are virtually guaranteed each year, the failure to have Kaufman language in your governing documents can result in your community’s inability to take advantage of positive changes in the law. (See the case of Pudlit 2 Joint Venture LLP v. Westwood Gardens, No 4D14-1385, 4th DCA).
- You may be giving away money. If your governing documents contain language, which unnecessarily subordinates your association lien to all other liens (including second and third mortgages), or your documents do not contain language, which allows you to collect interest and late fees in the highest amount permitted by law, you are missing the opportunity to collect a lot more money from your delinquent owners.
- You will spend more money in calls to your association attorney than you would in updating your documents. Far too many associations use money as a reason for not amending their documents, but the reality is that those same associations will need to call their association attorney much more frequently as they cannot be sure that the language in their documents complies with the pertinent statutes.
- Your residents may not be eligible for FHA and/or VA financing unless you remove certain language in your documents, including provisions regarding purchase and lease approvals and a right of first refusal. As the demand for the more attractive financing options offered by the federal government grows as well as for products like the HCEM reverse mortgage offered by the FHA, communities who are not FHA or VA certified may see a decrease in interested purchasers and an increase in unhappy residents.
- You may be committing de facto discrimination as a result of illegal language remaining in your documents. This is especially dangerous if you have illegal restrictions pertaining to age, satellite dishes, and other items, and you continue to enforce them or those restrictions dissuade potential purchasers just by virtue of being in your documents.
Given the foregoing, isn’t it time you made updating your documents an immediate community priority?
Donna DiMaggio Berger, Esq.
Becker & Poliakoff
Donna DiMaggio Berger is a Shareholder with Becker & Poliakoff and has represented all types of shared ownership communities throughout Florida. She is a member of the College of Community Association Lawyers (CCAL), a prestigious, national organization, which acknowledges community association attorneys who have committed themselves to high standards of professional and ethical conduct. Berger has worked with legislators on behalf of shared ownership communities. She has testified before the Florida Legislature and frequently appears on radio talk shows and in print media discussing association issues. She can be reached at (954) 364-6031 or at email@example.com.