The Board of Directors always has the power to make and amend Rules and Regulations on its own, without owner approval…right? Wrong. The Board’s rule-making power and authority completely depends upon what authority is given by the Declaration and Bylaws, and as we know, all associations’ Declarations and Bylaws are different! This is true in Wisconsin and in many other States. Knowing what is in your governing documents will keep you out of troubling lawsuits.
In a 2019 case, a condo association sued an owner seeking to collect a balance due on the owner’s assessment account. The Owner filed a counterclaim against the Association in the suit, claiming that the Association’s Rules and Regulations were invalid and unenforceable because the Board did not seek the approval of a majority of the owners before adopting the rules. Sure enough, the Association’s Bylaws stated “Rules and regulations concerning the use of the Units and the Common Areas and facilities may be promulgated and amended by the Board of Directors with the approval of a majority in interest of the Unit Owners.” The suit quickly became focused on the issue of whether the Board had authority to pass rules without owner approval, instead of whether the Owner owed assessments.
The court determined that the language from the Bylaws quoted above was clear, and clearly stated that before Rules and Regulations concerning the use of Units and Common Areas are effective, they must be voted in by a majority of the owners. The Board did not seek owner approval of any of the rules it adopted, so the Court held that those rules concerning the use of Units and Common Areas (and let’s face it, that covered many of the rules an association might like to pass!) were invalid and unenforceable. The Association endured an expensive lawsuit and appeal just for the Court to tell them what their Bylaws said all along.
Knowing what your governing documents say is important for the Board—both from a governance standpoint (you need to know what you are enforcing), and as this case teaches us, it can also save the association a lot of time and money. When in doubt about what your documents say, a quick consultation with your association attorney is much less expensive than litigation.
Scott v. Fall Line Condominium Association, 206 A.3d 307 (Maine 2019)
If you have any questions, please feel free to contact the Husch Blackwell LLP Condominium and HOA Law Team.