Knowing Your Governing Documents Pillars of the Community

Knowing Your Governing Documents

Whenever a co-op or condo resident has a burning question about policy, rules, or procedure in their association community, chances are the answer doesn't lie in some obscure legal document or under lock and key somewhere in the depths of the association's management office. Chances are it's right there in the association's governing documents—but what are those exactly, and who has access to them?

According to Dennis A. Estis of Greenbaum Rowe Smith & Davis LLP in Woodbridge, New Jersey, there are four basic documents that make up the governing framework of a condominium association. They are, in order of importance, the master deed, the bylaws, the association's certificate of incorporation and/or proprietary lease, and the rules and regulations.

The master deed, which is the document that must be recorded in the NY State Attorney General's office, establishes the condominium and is the equivalent of its constitution. Its primary purpose is to divide the land into units and common elements and set out the most important aspects of the condominium, such as voting rights, liability for common expenses, and so forth.

Next down on the ladder are the bylaws, which form the basic guide for how the co-op or condo will do business. Bylaws lay out everything from the organization's purpose to its form of government and method of elections to a description of the directors and number of officers.

"Bylaws are the next most important set of documents," says Estis. "The bylaws deal with how the association is to be run, contains details regarding the set-up of the association and the board of directors, outlines the powers of the board, and contains provisions for elections, fines, and so on."

"Bylaws are documents prepared by the builder," says Bob Shanahan, an attorney with Kilcommons Shanahan, LLC in Annandale, New Jersey. "They are registered with the county, where the deeds are recorded. They run with the land. If you buy the co-op, you're on notice that they apply. They show up in the title search."

For co-ops, the proprietary lease comes next. While the Certificate of Incorporation focuses on the business aspects and the responsibilities of the shareholders, the proprietary lease addresses the tenants or the residents of the building. "Owners have a dual role," says Howard Schechter, a partner at the Manhattan law firm of Schechter & Brucker PC. "On one hand, they're shareholders, but they're also tenants of the building, which is owned by the shareholders." The rules of tenancy are governed by the proprietary lease, so if you're looking to find out who can occupy an apartment, or what the restrictions are on subleasing or sales, your proprietary lease holds all the answers.

Condominiums, on the other hand, do not have proprietary leases. In the case of condos, much of the detail that would be found in a co-op's proprietary lease is found in the condo's more detailed bylaws. The difference lies in circumstances of ownership. "Instead of a unit owner being a tenant, as in a co-op, [a condo owner] owns the apartment itself," Schechter says. Under New York law, the certificate of incorporation relates to the formation of the association and is filed directly with the Secretary of State.

The certificate of incorporation and the declaration of covenants, conditions and restrictions (CC&R) are condominium documents that are rarely if ever changed, although sometimes a certificate or declaration will be altered if there are spaces in a building that don't have shares assigned, or if a condo community expands. If changes are deemed necessary, a meeting of shareholders and/or owners would be called and a majority must vote in favor of the alteration.

Finally come the house rules. "Usually," says Estis, "the bylaws are supplemented by the existence of rules and regulations established by the developer or the board of trustees. They generally govern the conduct of unit owners, such as use of common elements, changes to their units that affect others, and so forth."

"House rules are passed by the board," Shanahan says. "There are rules about where you can or can't plant flowers. There are rules about recycling. House rules are subject to change and are not recorded." Not carved in procedural stone, in other words.

Altering or adding house rules can be done simply by the board of directors. But whatever the amendment and whatever the document, it's vital to have the advice of experts. "You need to work with the building's attorney at each step of the process," Schechter says.

Blessing…or Curse?

Although both co-op buildings and condo communities have their own carefully designed systems and letters of governance, condo owners are slightly more footloose and fancy-free. And sometimes fewer rules mean fewer flare-ups when a resident feels one rule or the other is unnecessary or unfair.

"Issues are less pronounced in condominiums because of the way condos have been set up," Schechter says. "They're generally much less restrictive with the use of units and therefore, there are fewer restrictions that are a source of friction among unit owners."

That notion of freedom can work in the other direction, too. While the profusion of documents might seem like overkill, condo owners often envy the highly detailed guidelines most often found in co-op rules and regulations.

"Much of the discussion in co-ops is around whether restrictions should be eased up. In a condo, it's the opposite," says Schechter. "Residents will say their neighbor is doing renovations that are disturbing everyone else. They'll ask if the board can do something about it. But under condo documents, the board often doesn't have a right to restrict those kinds of things."

Whether you live in a high-rise co-op building or a sprawling condo development, it pays to have at least a passing familiarity with your community's governing documents. Knowing what they contain can help save you time, answer questions, and avoid hassles and misunderstandings.

Hannah Fons is associate editor of The Cooperator.

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