Governing Documents for Managed Communities in Florida: Differentiating Articles of Incorporation, Bylaws, and Declaration
As a member of a condominium or homeowners association board in Florida, it's crucial to clearly understand the legal documents that govern your community's operations. The Articles of Incorporation, Bylaws, and Declaration of Condominium form the cornerstone of your association's governance structure, each serving a distinct purpose under Chapters 718 and 720 of the Florida Statutes. For those directors who are less familiar with corporate structure, understanding the differences between the types of governing documents and their functions can be difficult. We will attempt to explain some general differences in this article with the intent of helping directors obtain a more complete understanding of just what their documents are supposed to do.
Articles of Incorporation: Establishing Legal Existence and Providing Public Information About the Corporation
All types of community management associations in Florida are corporations (usually not-for-profit corporations). For associations, like any other corporation, the Articles of Incorporation establish the corporate identity and existence. Filed with the state's Division of Corporations, these documents formally establish the association as a legal entity. They contain essential information such as the association's name, purpose, initial board members, and any restrictions on its powers as outlined in Chapters 718 or 720. The Articles of Incorporation define the association's legal existence and provide the framework within which it operates. While your Articles are, from a corporate standpoint, one of the most important documents your association requires, you probably will not be spending a lot of time reviewing them on a day-to-day basis. You may need to amend your Articles from time to time for certain purposes, but this is far less common than amending your association's Bylaws or Declaration, as each of those documents deal more with practical concerns, as discussed below. It is common for the Articles of any given association to allow for amendment by vote and approval of the Board of Directors only (rather than the members/owners), but if the Articles do not say that or are silent on the issue, then amending the Articles would require approval of at least two-thirds of all the members of the corporation.
Bylaws: Blueprint for Operation of the Board of Directors.
The primary purpose of an association's Bylaws is to lay out the duties, responsibilities, and operational requirements of the corporation. Bylaws detail procedures for important matters such as the required types of meeting notices, how elections are conducted, budgeting, and the powers and duties of the board of directors. They also address issues such as membership qualifications, voting rights, and the process for amending the Bylaws. Think of Bylaws as the rulebook that guides the day-to-day functioning of the association, ensuring transparency, accountability, and compliance with Florida law. In Florida, these Bylaws must adhere to the provisions outlined in Chapters 718 or 720, and if written correctly, the Bylaws should also fit together with the Articles. Otherwise, many people forget that an association's Bylaws must also comply with Chapter 617 of the Florida Statutes - Florida's Not-For-Profit Corporation Act. Bylaws can be one of the more complex documents that directors must deal with, and directors may want to consult association counsel if they have questions about interpretation. Failure to adhere to the requirements of an association's Bylaws can have serious repercussions.
Since the Bylaws deal with corporate operations, they often need to be amended to reflect changes in the community. For example, if an association wants to implement staggered terms of office for directors, that would most typically be done through an amendment to the Bylaws. That said, certain provisions of Bylaws also overlap with either the Articles, the Declaration, or both; under certain circumstances, amending your Bylaws can also require amendments to your other governing documents. As with any governing document of an association, the statutory default is to require two-thirds of the membership to approve amendments to Bylaws. However, this amendment threshold can be changed by the Bylaws' terms, and we often see that only the corporation's directors are required to vote and approve such amendments, meaning members are often excluded from this process.
Declaration of Condominium: Laws Governing the Members
Declarations are the most used document in the governance of a managed community. Your Declaration outlines the rights, responsibilities, and restrictions that apply to unit owners within the community, whether you are a condominium or HOA. Declarations cover essential aspects such as the use and maintenance of common areas, maintenance obligations of both the association and the members, the obligation of members to pay assessments, and rules governing the use of individual units, lots, and shared spaces. Additionally, the Declaration addresses issues such as insurance requirements, architectural guidelines, and dispute resolution mechanisms. It serves as the legal framework for the relationship between the association and its members and establishes the rights and obligations of both. People often refer to declarations as the community's "Constitution" or "Bible." Regardless of how people think of their Declaration, Florida courts have held that an association's Declaration is a binding contract between the Owners and Association, and the vast majority of lawsuits between an Association and its members stem from this contractual obligation.
Declarations are one of the most frequently amended documents in an association's library. Since they deal with the items that members often view as the most important, they are subject to changes whenever any particular community standard, policy, or process is changed. For example, a common trend in associations is to implement restrictions on the rental of Lots or Units, and such changes can only be implemented through an amendment to the Declaration. Declaration amendments always require a member vote (though the required percentage of votes to approve a Declaration amendment can vary from association to association). If the governing documents do not include a specific declaration amendment requirement, the default is two-thirds of the membership, which can be difficult for many associations to achieve. Amending the amendment threshold is often required before any meaningful changes to the Declaration can go forward.
Rules and Regulations: Clarifying Details and Procedures.
A sometimes-overlooked governing document, the Rules and Regulations of an association are just as binding and legally enforceable as the Declaration, Bylaws, and Articles. The Board has the sole authority to enact Rules – no member vote is required unless the Bylaws (or other governing documents) state otherwise. (This is rare, but a good example of why it is essential to understand how all of these documents fit together). Rules and Regulations are a tool by which the Board can clarify details about the governing documents and restrictions. For example, let's say a Declaration requires that members apply to and obtain prior permission from the Board before any material changes can be made to their Lot or Unit. The Board can enact rules that specify the type of application to be used and the documents the Board can request when reviewing an application. It is important to note that the Rules and Regulations cannot create new restrictions (an association cannot implement rental restrictions through a Rule amendment, for example); it can only clarify rights, restrictions, obligations, etc., already found elsewhere in the governing documents. (The Declaration may present a general restriction, and the Rules can then provide details about how that restriction is applied). Inexperienced Boards often attempt to overreach their authority by implementing new restrictions via Rule changes to avoid a member vote, but that is not legally permissible. If you have questions about whether a proposed change can enacted through a Rule change or requires a member vote and/or Declaration/Bylaw amendment, you should consult with your association's attorney for clarification. (Generally, counsel should be consulted whenever a change to any governing document is considered.)
Rules and Regulations provide a quick and effective way for the Board to fine-tune or clarify procedural and technical issues without requiring a member vote, but they should never be used as an end around to implement a new restriction or as a tool to avoid a member vote on what otherwise requires a Declaration amendment.
Understanding the Interplay: The Hierarchy of Governing Documents.
While each of these documents serves a distinct purpose, it's key to recognize their interplay and ensure consistency among them. The Bylaws must align with the provisions of the Articles of Incorporation and the Declaration of Condominium to avoid conflicts and ensure compliance with Florida law. Working with counsel is important, too, as there are a lot of little details that need to be observed. For example, amendments to the Articles are not effective until filed with the state, and Declaration amendments are not effective until they are recorded in the county where the association is located. If you're not careful, these things can be missed.
At the end of the day, there is a hierarchy of documents – though, like so many other items in managed communities, this can be changed by the terms of an association's governing documents themselves. This means that if there is a conflict between the terms of any of your governing documents, one document's terms will prevail over the others. By default, the Statutes trump any documents – after that, your Declaration is the document that usually prevails over any other. Next, the Articles of Incorporation prevail over the Bylaws, which trump any Rules and Regulations. This can be important when an amendment to one document changes a right that is also discussed in another. What would be required if your Bylaws set one requirement to amend them, and the Articles provide a different requirement to amend the Bylaws?
Conclusion: Understanding Documents as a Key to Successful Association Operation.
As a member of an association board in Florida, your understanding of the Articles of Incorporation, Bylaws, Declaration of Condominium, and Rules and Regulations is paramount to effective governance. By familiarizing yourself with these legal documents and their requirements under the Florida Statutes, you can ensure that your association operates smoothly, transparently, and in compliance with state law. Additionally, seeking legal guidance and regular review of these documents can help address any potential issues or updates needed to adapt to changing circumstances. With a solid grasp of these foundational documents, you can confidently fulfill your role in serving your community's and its residents' best interests.
