To Amend or Not To Amend? The Debate Surrounding VT Statute Amendments

Article written by Client Admin
Posted on Nov 17, 2011

By A. Jay Kenlan, Esq.

On April 4, 1997, Vermont Governor Howard Dean signed into law Act 104, the Vermont Common Interest Ownership Act (“VCIOA”) to supersede Chapter 15 of Title 27 of the Vermont statutes, the old Vermont Condominium Act (the “old Act”), that had been in effect since 1967.  VCIOA was, in turn, based on the Uniform Common Interest Ownership Act (“UCIOA”) that had been developed by the National Conference of Commissioners on Uniform State Laws (the “ULC”).  VCIOA became effective on January 1, 1999, and all common interest communities formed on or after January 1, 1999 must be formed in accordance with and comply with the provisions of VCIOA.  Common interest communities formed prior to January 1, 1999 continue to be governed, for the most part, by the Act.

Act 155 was introduced in theVermontlegislature on February 10, 2010 as H.689 “to implement model updates to the Uniform Common Interest Ownership Act” and was signed into law by Governor Douglas on June 3, 2010.  Act 155 becomes effective on January 1, 2012. Ever since Vermont’s common interest community associations and the Vermont real estate bar became aware of the passage of Act 155, associations and practitioners have been wrestling not only with the substance of the changes to VCIOA that resulted but with the ‘process’ steps that may (or may not) be necessary to comply with the Act’s requirements.  One of the more significant ‘process’ issues that must be addressed at the outset is whether or not it is necessary to amend existing common interest community declarations and bylaws to conform to the Act changes.

 Pre-January 1, 1999 Communities

Under § 1-204 of VCIOA, common interest communities created prior to 1/1/99 continue to be governed by the old condominium Act, however, unless exempt under § 1-203 (“Exception for small projects and limited expense liability planned communities”), pre-1/1/99 common interest communities are also made expressly subject to the following sections of VCIOA:  “1-103, 1-105, 1-106, 1-107, 2-103, 2-104, 2-121, 3-102(a)(1) through (6) and (11) through (16), 3-111, 3-116, 3-118, 4-109 and 4-117 to the extent necessary to construe the applicable sections” (see below for the subjects of the sections).

Under § 1-204 of the Act 155 that becomes effective on 1/1/12, the following Sections of VCIOA will apply to common interest communities created prior to January 1, 1999:

 Both the old and new versions of § 1-204 state that the VCIOA sections identified in § 1-204(a)(1) and (a)(2) “do not invalidate existing provisions of the declarations, bylaws, plats or plans of those common interest communities.”  The Comments to § 1-204 confirm and clarify that, as stated in § 1-204(a)(1) and (a)(2), to the extent the common interest community documents for pre-1/1/99 common interest communities address issues covered by the designated VCIOA sections, the pre-1/1/99 common interest community documents would control in the event of a conflict.  However, in practice, a number of common interest community practitioners appear to view the VCIOA sections listed in § 1-204 as mandatory and controlling notwithstanding any contrary or conflicting language in the pre-1/1/99 common interest community documents.  Given the fact that the language used in the declaration and bylaws of a particular common interest community, in particular pre-1/1/99 common interest communities, will be somewhat unique (and some are more “unique” than other), it is unclear how, on a case by case basis, managers, associations or their attorneys will be able to determine with any degree of certainty whether the sections applicable to pre-1/1/99 common interest communities under § 1-204 are in conflict with “existing provisions of the declarations, bylaws, plats or plans of those common interest communities”.  Accordingly, notwithstanding § 1-204’s deference to pre-1/1/99 declaration and by-laws, the prudent approach may be to assume that the sections of VCIOA listed in § 1-204(a)(1) and (a)(2) apply until a court tells us otherwise.

 Nor is it clear how Act 155 would apply retroactively to “events and circumstances” occurring between December 31, 1998 and December 31, 2010, respectively, and January 1, 2012.  Laws can be applied retroactively in some circumstances, however, it is hard to imagine how, if an action was taken by a pre-1/1/99 common interest community in 2000 that was legally effective under then-existing law, a statute passed in 2010 and effective in 2012 could affect the validity of the earlier action or decision.

 Differing Schools of Thought

 There are a number of schools of thought on this issue.  One is that amendments to declarations or bylaws are not required to comply with the Act.  In support of this position, a careful review of the text of Act 155 changes reveals that most if not all of the provisions of the Act are self-effectuating, that is, that they state what Vermont common interest community law will be as of 1/1/12 and arguably do not require any further action or amendment by the association.  Under this theory, a provisions of a declaration or bylaw to which an Act 155 change is applicable that is not in compliance with the applicable Act 155 change as of 1/1/12 will simply be superseded and nullified by the Act 155 change.  The cost and time of making amendments is not inconsiderable, and, particularly in these difficult economic times, associations can be expected to be reluctant to spend money on an amendment process if the law does not require it.

 The other side of this debate is also compelling.

 VCIOA § 2-105 as amended by Act 155 states that:

 (a) The declaration shall contain all the following:

 (1) The names of the common interest community and the association and a statement that the common interest community is either a condominium or planned community.

 (2) The name of each municipality in which any part of the common interest community is located.

 (3) A legally sufficient description of the real estate included in the common interest community.

 (4) A statement of the maximum number of units which the declarant reserves the right to create.

 (5) A description of the boundaries of each unit created by the declaration, including the identifying number of the unit.

 (6) A description of any limited common elements other than those specified in subdivisions 2-102(2) and (4) of this title as provided in subdivision 2-109(b)(10) of this title and, in a planned community, any real estate which is or will be common elements.

 (7) A description of any real estate, except real estate subject to development rights, which may be subsequently allocated as limited common elements, other than those specified in subdivisions 2-102(2) and (4) of this title and a statement that they may be so allocated.

 (8) A description of any declarant rights required by subdivision 1-103(14) of this title and other special declarant rights required by subdivision 1-103(29) of this title reserved by the declarant, and a legally sufficient description of the real estate to which each of those rights applies and a time limit within which each right shall be exercised.

 (9) A statement of any development rights which may be exercised with respect to different parcels of real estate at different times, and:

 (A) either a statement fixing the boundaries of those portions and regulating the order in which those portions may be subjected to each development right or a statement that no assurances are made in that regard; and

 (B) a statement as to whether, if any development right is exercised in any portion of the real estate subject to that development right, that development right must be exercised in all or in any other portion of that real estate.

 (10) Any other conditions or limitations on the rights described in subdivision (8) of this subsection.

 (11) An allocation to each unit of the allocated interests pursuant to section 2-107 of this title.

 (12) Any restrictions:

 (A) on alienation of the units, including any restrictions on leasing which exceed the restrictions on leasing units which executive boards may impose pursuant to section 3-102(c)(2) of this title; and

 (B) on the amount for which a unit may be sold or on the amount that may be received by a unit owner on sale, condemnation or casualty loss to the unit or to the common interest community, or on termination of the common interest community.

(13) The volume and page of recorded easements and licenses appurtenant to or included in the common interest community or to which any portion of the common interest community is or may be subject by a reservation in the declaration.

 (14) All matters required by sections 2-106, 2-107, 2-108, 2-109, 2-110, 2-111, 2-112, 2-113, 2-114, 2-116 and 3-103(d) of this title.

  (b) The declaration may contain any other matters which the declarant deems appropriate, including any restrictions on the uses of a unit or the number or other qualifications of persons who may occupy units.

 VCIOA § 3-106 as amended by Act 155 states that:

 (a)  The bylaws of the association shall:

(1) provide the number of members of the executive board and the titles of the officers of the association;

(2) provide for election by the executive board or, if the declaration requires, by the unit owners, of a president, treasurer, secretary, and any other officers the bylaws specify;

(3) specify the qualifications, powers and duties, terms of office, and manner of electing and removing executive board members and officers and filling vacancies;

(4) specify the powers that the executive board or officers may delegate to other persons or to a managing agent;

(5) specify the officers who may prepare, execute, certify, and record amendments to the declaration on behalf of the association;

(6) establish the frequency of association meetings, which in no case shall be less than one per year;

(7) establish the number of voters constituting a quorum, which shall not be less than 20 percent of the persons entitled to vote for the executive board. Proxy votes may be included for a quorum;

(8) specify a method for the unit owners to amend the bylaws;

(9) contain any other provisions necessary to satisfy requirements of this title or the declaration concerning meetings, voting, quorums, and other activities of the association; and

(10) provide for any matter required by the laws of this state other than this title that is required to appear in the bylaws of organizations of the same type as the association.

(b) Subject to the declaration and this title, the bylaws may provide for any other necessary or appropriate matters, including matters that could be adopted as rules.

Neither § 2-105 nor § 3-106 is listed in § 2-104 as applicable to pre-1/1/99 common interest communities so that pre-1/1/99 declarations and bylaws do not have to be amended to include these provisions.  Both § 2-105 and § 3-106 appear in the original VCIOA and post-1/1/99 declarations that were adopted under VCIOA should already include the required provisions.  Although Act 155 makes some wording changes to § 2-105 and § 3-106, the only substantive change to § 2-105 is the addition of § 2-105(15) that requires the declaration to contain “[a]ny authorization pursuant to which the association may establish and enforce construction and design criteria and aesthetic standards as provided in sections 3-103 and 3-106 of this title”, and the only substantive changed to § 3-106 is the addition of § 3-106(9).  Arguably, § 3-106(9) can be read to require amendments to bylaws of common interest communities formed on or after 1/1/99, at least to the extent of bylaw provisions relating to “meetings, voting, quorums, and other activities of the association”, to bring those sections into conformance with VCIOA.  Others might argue, however, that if the Act 155 amendments are self-effectuating, the changes are already “contained” in the bylaws and no amendments are necessary.

Practical Considerations

 Whether or not Act 155 requires amendments to existing declarations or bylaws of post-1/1/99 common interest communities, if a provision of a declaration or bylaws to which Act 155 is applicable appears to be at variance with a provision of the Act, the association board will be faced with the challenge of determining how to conduct association business, often in circumstances where legal assistance is not immediately available to them.  Will the association board and the unit owners be required to conduct association business with the Act and the declaration and bylaws open on the table side-by-side, and determine on a case-by-case basis (often without legal representation ) which one controls?  Does the board undertake its own legal analysis to determine in each case whether the Act trumps the declaration or bylaws?  How will the board respond to a point of order raised at an association meeting when the board announces that it is acting contrary to the long-standing association declaration or bylaws because “the law requires us to go against our own condominium documents”?  Good association governance and wise legal counsel would suggest that recommending amendment of association declaration and bylaws to conform to Act 155, thereby reducing the potential for conflict and debate at association meetings, and the risk of a good faith but faulty resolution of conflicts between the declaration or bylaws and the Act by the association board, would be the most prudent course of action.

 Equally compelling is the argument that, whether or not old common interest community documents must be amended, they should be amended.  Many of our pre-1/1/99 condominium documents (and some of our post-1/1/99) documents were drafted by practitioners with little or no background or experience in condominium or common interest community law, and many of us wrestle frequently with documents that are either almost impossible to understand, reconcile with the realities of the common interest community, or administer.  In some cases the condominium document are so deficient that they barely (if at all) meet the requirements of the either the Act or VCIOA.  With all of the focus on the changes resulting from Act 155, practitioners, associations and managers are, in many cases, more familiar with the documents for their common interest communities and more familiar with the provisions of VCIOA then they ever have been or may ever be again.  The questions about whether Act 155 requires amendments to common interest community documents may give some associations cover to an initiative to modernize and standardize the documents of older common interest communities.  The problems presented by Act 155 may actually be an opportunity.

 Accordingly, even though it may not technically be necessary to amend existing declarations and bylaws by January 1, 2012 to conform to Act 155, it would be prudent to do so and that the time and cost of amending the documents would be justified to avoid potentially greater time and cost in dealing with issues that may arise out of conflicts between the Act and existing declarations and bylaws.   While practitioners, association boards and managers are encouraged to make the changes as soon as possible, it is ultimately your (or your client’s) call.  What should be amended and what should not is a decision to be made by attorneys for associations, association boards and association managers on a case by case basis after reviewing their common interest community document and applicable provisions of VCIOA and Act 155. 

A. Jay Kenlan, Esq. is a partner with the firm Kenlan, Schwiebert, Facey & Goss in Rutland, VT.  He is a member of the VT Legislative Action Committee and chapter speaker.

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