Condominium boards are constantly struggling with the question: Can we impose this rule? Further, they want to know how to impose it: what votes or amendments are required. Finally, they want to know how to enforce those rules legally and effectively. There are a few reasons why a Condominium Board would want to run these issues past their attorney: to ensure they notify owners properly, to avoid future challenges, and to be sure that any disputes are likely to be resolved in their favor.
Board of Directors and Rulemaking
But what really can (and should) a condominium board do when setting policy? We talked a little about this question here:
The analysis starts with the law, and goes to case law and the condominium documents as well. But sometimes the devil can be in the details, and it may still be unclear to a board if they have the power to take a certain action. Especially important in our discussion above is that idea of case law: does a binding case already answer the question we are asking? Here we get into the job of legal interpretation, and it is a good time for a community to consult with their attorney.
Facts of the Case
Condominiums in the District of Columbia may look to the case of Johnson v. Hobson for guidance and answers. Decided by the Court of Appeals in 1986, this case constitutes binding precedent on trial courts in the District of Columbia. So if a Board of Directors for a condominium imposes a certain rule and it is subjected to legal challenge, this case may inform the outcome.
In Johnson, the condominium board of directors decided that they needed to impose a new parking and towing policy to restrict and properly regulate the use of the common element parking area. They notified owners, described the process, and set up enforcement. When several owners had their cars towed, those owners filed suit against the condominium (as well as the board members individually, though of course they have no personal liability), claiming that the policy was illegal and carried out improperly. The trial court granted summary judgment in favor of the Condominium, meaning that based solely upon the uncontroverted facts as set forth above, there was no liability on the part of the Condominium and the case was ended. In so doing, the trial judge indicated that the policy adopted was “reasonable.”
The Appeal and Analysis
The owners whose cars were towed filed an appeal. The Court of Appeals indicated that to resolve the matter the needed to “determine whether the parking regulation implemented at the Condominium was a proper exercise of the Board’s power.” Of course this is a key question that association boards are often asking their legal counsel in advance of such a policy, so the response of the Court of Appeals here is most instructive.
The court began with the concept that the condominium board does have broad powers:
It is well established that the governing body of a condominium enjoys broad authority in regulating the affairs of the property. Indeed, a leading case in the area of condominium governance explains that inherent in the condominium concept is the principle that to promote the health, happiness, and peace of mind of the majority of unit owners since they are living in such close proximity and using facilities in common, each unit owner must give up a certain degree of freedom of choice which he might otherwise enjoy in separate, privately owned property. Condominium unit owners comprise a little democratic sub-society of necessity more restrictive as it pertains to use of condominium property than may be existent outside the condominium organization.
Editorializing here just for a moment: owners and boards would all be wise to keep this concept in mind generally. In the law, the freedom to swing your fists stops at the other man’s nose, but when the other unit owner’s nose is directly adjacent to your fist-swinging area, the onus is at least somewhat on you to control your conduct. Community living and the conveniences it offers entails some minimal measure of trade-off.
More broadly, however, the court was saying here that the condominium board has significant ability to put in place rules and regulations. The court did not stop there however; they went on to point out that the board’s power of rulemaking does in fact have limitations; the condominium is not an authoritarian state:
While the governing body of a condominium has broad authority to regulate the internal affairs of the development, this power is not without limit. Indeed, courts have used their equitable power to review the regulatory actions of condominium governing bodies. In so doing, courts have adopted a “reasonableness” standard of review. Under this standard, if a rule is reasonable the association can adopt it; if not, it cannot. Of course, this means that each case must be considered on the peculiar facts and circumstances thereto appertaining.
Reasonableness is, of course, an excellent aspiration and benchmark. However, in terms of providing actual clear guidance for associations, it sometimes falls short, as the court itself recognizes. “Each case must be considered on the peculiar facts and circumstances” does not provide the bright-line rule that boards so often seek.
Fear not however; the Court of Appeals did lay out a framework for the analysis. The court discussed both procedural implementation and substantive validity of the rules at issue.
Procedural Implementation of Rules
The court begins with substance and then goes to the procedure. Analytically that seems correct; first see if the rule implemented was permissible at all, and then make sure it was done by the book. But boards trying to use this as a guidepost confront the question of procedure first, so we will as well. The Johnson court set out two big concerns for procedural rulemaking. First:
In their analysis of reasonableness, courts have also scrutinized procedural aspects of condominium rulemaking. In this area, courts have sought to determine whether unit owners had notice of the governing body’s authority to regulate in the area at issue.
If I were, perhaps, not a lawyer and prone to using too many words, I might just boil that paragraph down to one word: NOTICE. Unit owners within condominiums are entitled to advanced notice of any rulemaking by the board, as well as to know in advance that the board has such rulemaking authority in the given arena. This manifests in a few ways.
First, the authority for the board to act on a certain issue must be in its governing documents and/or the relevant statute; courts rightly want to protect buyers from unwittingly purchasing a unit in a condominium where they may be subject to subsequent rules that they disagree with and had no way of knowing to expect. In Johnson, both the bylaws and the statute gave the board the authority to regulate parking. Second, the board has to notify the unit owners of their intent to put forth a regulation so that owners may voice any concerns or opposition. It is important to note that even if unit owners vocally disagree with some or all of the rule the board is proposing, it may still be adopted if the board has the rulemaking power as set forth above. However, notifying owners and allowing them to comment, object, or even suggest alternatives is not only the proper thing to to legally, it is also most likely to result in better policy. Third, unit owners must be placed on notice of any upcoming policy change in advance to allow them time to get into compliance. This is obvious not only in the parking situation present in Johnson, where owners may need to secure alternate parking arrangements, but also in cases of renting, exterior maintenance, and other commonly regulated issues.
The second procedural concern, after notice, is following the procedures set forth in the documents:
Finally, courts have found regulations unenforceable where the governing body failed to follow the procedures mandated by applicable condominium documents in promulgating regulations.
Many of the cases cited on this issue also go back to the concern about notice, cited above. The other issue that the court touched on here is that of authority; a condominium board may not impose rules or regulations that alter or conflict with the bylaws. That may only be done by a bylaw amendment, which usually requires a vote of two-thirds of all owners.
Substantive Validity of Rules
Once a board has utilized proper procedure to implement its rules, it must also consider whether the effect of those rules is substantively permissible. The Johnson court discussed these concerns in three different aspects. First:
In reviewing the substance of condominium regulations, courts have sought to determine whether the action taken was within the legal powers granted the governing body by relevant statutory or condominium document provisions.
The Board must have the right to enact this rule. This is the logical extension of the second procedural concern above. Not only must the board be acting in a manner permitted by its documents, but it also must be acting on a subject and issue where it is permitted to act. Examples of permissible board action include the Johnson action of regulating parking on general common element lots, putting out rules on cleanup or exterior maintenance, and regulation of leasing where authorized by the documents. Examples of impermissible regulation include revocation of parking for nonpayment if not authorized by the documents and requiring internal cleaning of units without specific authority. This is the number one way that a board can inadvertently pass an illegal rule: they overreach without confirming the authority for their action exists in either their documents or their bylaws. And the thing about this is it is so easy to do; the Elvaton case in Maryland flew in the face of decades of assuming that this was a permissible action. So boards should absolutely clear their rules with legal counsel before imposing them.
Second according to Johnson, “courts have also examined the substance of condominium regulations to ensure that they bear a relationship to the ‘health, happiness and enjoyment of life of various unit owners.'” Kind of a nebulous one here, and also a no-brainer: boards should not pass rules or impose policies that do not fit this pretty simple and obvious test.
Third and finally, the Johnson court indicates that condominium boards must consider the impact of their rules:
Thirdly, courts have analyzed the substance of condominium regulations to determine whether they have an unfair or disproportionate impact on only certain unit owners.
The most obvious ones here are protected classes: if a rule treats certain races, genders, age groups, or other protected classes disparately, then it is going to be subject to very legitimate legal challenge. But this can also apply to rules that apply unfairly to renters or owners of townhouse versus garden-style units. Two important points to remember here are (1) the question of disproportionate impact can be raised even if the rule is facially neutral; and (2) simple disproportionate impact does not necessarily invalidate a rule – there generally needs to be an unfairness component as well.
Rulemaking Points to Remember
The Johnson case we are discussing here was decided by the District of Columbia Court of Appeals, but they cited cases from around in the country in setting forth their analysis. So the discussion herein may generally be useful for any community board; many of the concepts are universal. The important points are:
— Follow the proper procedure
— Be sure the rule is within the board’s power
— Design the rule to benefit the community
— Make the rule as fair as possible to all owners
One final thing to consider when creating rules is enforcement. After all, it would be great if we all lived in a world where everyone abided by the rules at all times – but perhaps your condominium is located on Earth, where that is not always true. So boards would be wise to consider when making rules what the “or else” is: will they impose fines, do they have the ability to revoke privileges, will there be an emergency self-help provision, and what due process will owners receive? Knowing this in advance is the best way to avoid being the subject in one of these legal challenges.