Should Your Covenants Be Amended?
Times change, people change, laws changes, can your covenants change too? The simple answer to this question is yes, they can. Two of the most frequent questions we get is how is this done and when should we consider it? Below are our answers to these questions.
When Should Your Covenants Be Amended?
At WLPP we don’t believe there is any hard and fast rule as to when your covenants should be amended. In general, we recommend that they be reviewed at least every ten years to make sure that they are up to date with current laws and practice. However, a sooner review may be warranted whenever there are significant changes to Colorado law addressing homeowners associations (for example, Senate Bill 05-100). There may be terms that are no longer applicable to your community, outdated restrictions, or terms that no longer comply with current law.
For example, your covenants may impose an outdated cap on the annual assessments that makes balancing your budget nearly impossible. Without the ability to properly assess the owners, proper maintenance of community property could be impaired, significantly devaluing the property values in your community. This would be a case where an amendment to the covenants may be appropriate.
Another example would be a restriction that prohibits the placement of political signs on an Owners property. Recent changes to Colorado law make this type of restriction illegal and unenforceable. To avoid confusion by the Board and Owners (and possibly litigation if an uninformed Board tries to enforce this restriction), it is best to amend these types of conflicts with Colorado law.
Other terms that homeowners associations typically seek to have amended:
- Outdated terms that reference the Declarant. This could include terms that grant the Declarant special rights that have long expired.
- Mandatory Dispute Resolution. Many associations request that we add this requirement to their covenants.
- Easements. Provisions that allow the Board to grant easements over the common elements are often requested.
- Restrictions on Leasing. We get numerous requests for either the addition or deletion of provisions that regulate an Owners right to lease their Unit. Depending on your community, such restrictions may be desirable.
If your covenants are completely outdated (over 20 years old) or were poorly drafted, a complete overhaul may be a good idea. This is typically a lengthy process that will eventually result in a completely new document for the community. In such cases it is best to appoint a committee that is in charge of reviewing the proposed amendment and presenting it to the owners. It is always a good idea to allow the owners as much input as possible into the process. Once an initial draft is approved by the committee, we suggest holding an owner forum where owners can comment on the proposed Amendment and offer additional changes.
How Are Covenants Amended?
For most communities, Colorado law states that covenants can be amended with the affirmative vote or agreement of at least 67 % of the votes in the association. This type of approval can be achieved through a vote at a special meeting, through written approvals obtained via mailing, or through door to door solicitation. Once the requisite number of approvals has been obtained, the amendment should be recorded in the County where Association is located.
Depending on the covenants, approval of the proposed amendment by first mortgagees may also be necessary. If the covenants do not provide a procedure for the registration or notification of first mortgagees, Colorado law provides the following steps to obtain first mortgagee approval:
- Send a dated, written notice together with a copy of any proposed amendment via certified mail to each first mortgagee.
- Cause the dated notice, together with information on how to obtain a copy of the proposed amendment, to be printed at least twice - at least one week apart - in a newspaper of general circulation in the county in which the community is located.
A first mortgagee that does not send a negative response within sixty (60) days after the date of the notice shall be deemed to have approved the proposed amendment.
If an association cannot obtain the necessary percentage of owner approvals, the covenants may also be amended through a court order. To obtain a court ordered amendment, the association must first do the following:
- Send at least two notices of the proposed amendment to all owners that are entitles to vote on it.
- Discuss the proposed amendment during at least one meeting of the association.
- Obtain the approvals of at least fifty percent of the number of owners required to adopt the proposed amendment (if 67% of the owners are required to adopt the amendment, this number would be 33.5%).
Once the Association completes these steps it can then petition the Court to approve the amendment.
I hope this article takes away some of the mystery surrounding covenant amendments. Feel free to contact one of our attorneys if you have any questions regarding the amendment of your association’s covenants.