Cooperative and condominium bylaws are foundational to a well-regulated residential community. These governing documents outline the roles, responsibilities, and rights of board members and residents while defining the parameters within which the community operates. However, over time, these bylaws can become outdated due to changes in legal rules and regulations, evolving industry practices, or shifting community needs.
Because of this, it’s crucial for co-op and condo boards to regularly review and update their bylaws to ensure they remain relevant and effective. Learn more about the importance of keeping bylaws up to date, the risks of neglecting this important task, and the key areas board directors should consider when making amendments.
Additionally, we’ll highlight Belkin Burden Goldman LLP’s expertise in cooperative and condominium law, with specific insights from Lloyd Reisman, a Partner at the Firm.
Why Regular Bylaw Updates Are Necessary
Co-op and condo boards are responsible for managing complex communities where a balance between individual and collective interests must be maintained. Bylaws are the guiding framework for these communities, offering clarity on critical issues such as governance, resident responsibilities, election procedures, and dispute resolution. However, societal, legal, and business environments are constantly evolving.
New legislation, such as changes to real estate laws or new technology-driven expectations (like virtual meetings), can make older bylaws obsolete. For example, many co-ops and condos implemented virtual meeting procedures during the COVID-19 pandemic, but some have yet to reflect this shift in their formal bylaws. Failure to update these documents can lead to inconsistencies with current laws and even legal challenges that put boards and communities at risk.
Additional common elements that influence the need for co-op and condo bylaw updates include the following:
Legal Compliance
Bylaws must comply with federal, state, and local laws. Changes in housing regulations, tax policies, and even municipal codes can impact how co-ops and condos function. If a co-op or condo board fails to amend its bylaws to reflect these changes, it risks violating the law and facing costly litigation. Boards must stay current with amendments to the Business Corporation Law (BCL) and the Condominium Act, as these statutes often affect the governance of co-ops and condos.
Enhanced Transparency and Governance
Transparent governance is essential for maintaining trust between residents and the board. Clear and up-to-date bylaws ensure that all members of the community understand their rights and obligations. Regular bylaw updates foster a healthy and transparent governance process, helping to avoid disputes over unclear or outdated regulations. In fact, one of the most common causes of conflict in residential communities arises when bylaws don’t address modern issues, leaving room for interpretation or inconsistent enforcement.
Risk Mitigation
Outdated bylaws pose a risk to both residents and board members. For example, outdated election procedures could leave a board vulnerable to legal challenges. Similarly, unclear indemnification provisions might not adequately protect board members from personal liability, exposing them to financial and legal consequences.
Updating bylaws proactively mitigates these risks by ensuring that the rules governing the community are fair, current, and protective of all parties. Additionally, boards that fail to address potential vulnerabilities in bylaws may find themselves at a disadvantage if a legal or compliance issue arises.
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Key Areas to Address in Bylaw Updates
When co-op and condo boards take on the task of updating their bylaws, there are several key areas they should prioritize. These areas often evolve as laws change or as new issues arise within the community. Below are some of the primary considerations:
Election Procedures
The process by which board members are elected can be a contentious issue in co-ops and condos. As election laws and community dynamics change, boards should regularly review their bylaws to ensure that their election procedures are clear, fair, and compliant with the latest legal requirements. Ambiguities in election processes can lead to disputes, reducing confidence in the governance of the condo or co-op.
Indemnification Provisions
Boards must protect their members from personal liability in their governance roles. Indemnification provisions, which shield board members from personal financial responsibility for actions taken in their official capacities, need to be regularly reviewed. This is especially important as litigation risks in co-ops and condos continue to rise.
Virtual Meetings and Voting
The COVID-19 pandemic accelerated the adoption of virtual meeting platforms, but many co-op and condo bylaws still do not reflect this change. Boards should consider amending their bylaws to explicitly allow for virtual or hybrid meetings, especially as these practices have been permanently adopted in many areas. Virtual voting is another key area to address, as it offers a convenient and efficient way for residents to participate in decision-making.
Enforcement of House Rules
Boards must also ensure that their bylaws allow for the enforcement of house rules. Some boards have considered adding provisions that permit the denial of access to non-essential amenities for residents who violate house rules or fail to pay common charges. This type of enforcement has become a hot-button issue, and updating bylaws to address these measures ensures transparency and accountability.
The Risks of Neglecting Bylaw Updates
Neglecting to update co-op and condo bylaws can have serious consequences. From legal disputes to financial penalties, the risks are numerous. Boards that fail to act may find themselves facing conflicts with residents, challenges to board authority, or fines for non-compliance with updated laws.
Furthermore, outdated bylaws may create a governance vacuum, where the board is unable to effectively manage the community. This can lead to a loss of confidence among residents, reduced property values, and an overall decline in community cohesion. Legal risks aside, boards have a fiduciary duty to act in the best interests of the community, and failing to update bylaws in response to changing conditions could be seen as a breach of that duty.
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Witness Belkin Burden Goldman’s Expertise in Cooperative and Condominium Law
Belkin Burden Goldman, LLP (BBG) is an expert in assisting co-op and condo boards with bylaw updates. Our extensive knowledge of cooperative and condominium law ensures that boards receive the guidance they need to maintain legally compliant and well-functioning communities.
BBG’s attorneys are deeply involved in the cooperative and condominium landscape. Our insights are highly sought after, especially in guiding boards through the complexities of updating bylaws. For example, take Lloyd Reisman’s expertise in bylaw amendments and board counsel.
Lloyd Reisman on the Importance of Condo and Co-Op Bylaw Updates
Lloyd Reisman, a Partner in the Firm’s Cooperative and Condominium Practice Group, was quoted by Habitat Magazine in the February 2024 article titled “Refreshing the Rules.” The article emphasizes the critical importance of regularly updating and modernizing co-op and condominium bylaws. The article urges boards to proactively address potential vulnerabilities, such as election processes and indemnification provisions, highlighting the evolving legal landscape and the need for updates to reflect changes in business practices and newly adopted laws.
Fines and House Rules, “A Hot-Button Issue”
The ability of cooperative and condominium boards to levy fines for breaking house rules is another change to take into account. “That’s become a hot-button issue,” Reisman says. “I’ve even seen condo boards think about putting in language that if you’re late in paying common charges or violating bylaws or house rules, they will deny access to non-essential amenities and services by disabling fobs for the laundry or fitness rooms.”
Strategic Timing for Bylaws Amendments
“It might not be a bad idea to do it every time the board changes attorneys because a new set of eyes sometimes provides a new perspective,” Reisman says. “Otherwise, every three to five years is probably a good period of time, since statutory changes do pop up periodically that might require a change here and there. Beyond that, amendments are most frequently need-driven. The board is running up against some limitation in its power or some issue in the building that needs to be addressed.”
Virtual Meetings
Mr. Reisman also notes that, because the legal landscape for holding annual meetings has changed from in-person only to either virtual or hybrid versions — the temporary amendment to the BCL that allowed all-virtual meetings was made permanent in 2021 — co-ops should check their bylaws to make sure there is no conflict with the BCL, and consider amending them if there is. The Condominium Act also now permits all-virtual meetings, so condo boards should do the same.
Lloyd Reisman’s Expertise in Counseling Boards
With a wealth of experience, Mr. Reisman counsels boards of cooperatives and condominiums throughout New York City. Mr. Reisman also represents developers in the preparation, filing, and administration of offering plans. These dual facets give Mr. Reisman a unique perspective on the industry.
The Bottom Line
For co-op and condo boards, maintaining up-to-date bylaws is not just a best practice—it’s a necessity. By regularly reviewing and amending their bylaws, boards can ensure legal compliance, mitigate risk, and enhance governance. Given the complexities of modern residential communities, seeking expert counsel, such as that provided by Belkin Burden Goldman, is crucial for ensuring that bylaw amendments are thorough, strategic, and aligned with current laws.
Boards should adopt a proactive stance, setting a regular schedule for bylaw reviews and engaging legal professionals who are well-versed in cooperative and condominium governance. This approach works well toward protecting the community and fostering a stronger, more transparent, and harmonious living environment.
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BBG counsels more than 300 boards and their management companies in the greater New York area, as their go-to legal advisor due to our attorneys’ extensive knowledge of cooperatives and condominiums and the broader industry. Please do not hesitate to contact us if you would like to discuss amending your bylaws.