 Good afternoon everybody and thank you for joining us for another segment of condo insider it is our weekly show that is put on by White Council of White Council of Community Associations. And so today, I have with me as my host, my guest is john Morris, whose attorney with a kimono and Morris Morris and a kimono, but he's been a condo attorney for for a long, long time. And we're going to talk today about the importance of restating our condo condominium documents. So we start off with decorations and bylaws. So, john why don't you explain to us because I know we have some viewers that are that are new to being on their board. Why don't you explain to us what those two documents are. Okay, well, generally the condominium declaration is what divides up the project. So the whatever the form of your condominium. It will be a single or one project and so what the declaration does is divide up primarily divides up the project into units, common elements which is areas owned by everyone. And then limited common elements which are part of the common elements which which are designated for the use by fewer than all owners sometimes one owner sometimes a group of owners so essentially that's the primary purpose of the declaration and the condominium law does state certain things it has to include has to cover certain topics. For example, we'll state the common interest for each unit that type of thing. The bylaws are primarily focused on how the association runs how it operates, what it can do what the owners can do that sort of thing so the bylaws are primarily to do with operations. In real life terms it often depends on the developers attorney. Sometimes the developers attorney will put what you might consider operations issues into the declaration. Sometimes the bylaws will include more about use of units dividing up the project, how the project use and then typically the house rules. In the condominium law they are primarily supposed to focus on controlling the use of the common elements, not as much controlling the use of the units although sometimes they can be used for that purpose. But that's primarily what the house rules are supposed to be, which is controlling the use of the common elements by the residents of the project and the distinction really is that the common bylaws usually require owner approval. 67%, sometimes 75%. Whereas the house rules can usually be amended by the board alone without any owner approval although the board often has to present them as a draft to the owners before the house rules to give the owners a chance to provide input but primarily house rules. The board can amend without owner approval declaration and bylaws requires owner approval. So that's the primary three main documents you sometimes have other documents, but if you're a condominium. Those are the three main documents that govern your condominium project. I've owned condos since way back and I often heard, even being on a board member, I've often heard a discussion about restating our documents. So what exactly does that mean. Yes, that was added to the condominium law a long time ago back in 1989. Basically what it allows is two things it allows. And again, this is where it allows the board alone to restate doesn't need owner approval so it says I think the purpose the reason restatement came about was because almost every year. The legislature changes the condominium law. So a lot of buildings would have something in their bylaws say on how the annual meeting space be conducted. How the proxies are supposed to be written, and it would be out of date because the legislature would have changed the law so one of the main purposes of the restatement process is to allow the board to restate the declaration and bylaws so that what they state is consistent with the law which often means changing provisions in the declaration bylaws, because they are no longer consistent with the law so that's one purpose. This was quite a bit of a problem at the time because owners would accuse the board of violating the declaration and bylaws when in fact the board was following the changes to the law. And then the second main reason for restatement is in buildings where there have been a lot of amendments, you know you start off with your declaration your bylaws, but then unfortunately, there can be a lot of amendments and those can be very confusing because on a particular topic you can't just look at the declaration or the bylaws. You have to look at the amendments to the declaration of bylaws. And sometimes a section in the declaration and bylaws has been amended more than once. So you have to search through this numerous amendments to get the final version. And that was the second purpose of restatement that you could take all those amendments and incorporate them into a single document so that when you looked at the restated declaration restated bylaws. You would see all the all of the amendments incorporated into that single document so that that's the primary two purposes of restatement. And there is when they when they adopted the new condominium law 514 baby added a third purpose for restatement. So, the current law which is five four to be 109 says the board can also restate the documents. If the common interest do not add up to 100. Sometimes I guess the developers arithmetic skills are not as good as they should be. And they give everybody a common interest but when you add it all up. It's not a doesn't equal 100 which it's supposed to. The third part of the restatement process it allows you to restate the declaration to correct the common interest because the common interest is stated in the declaration not the bylaws. So that's the third purpose for restatement. And you and again that I should emphasize that as long as the board follows the law, they can restate the documents without any owner approval. There is a procedure they have to adopt a resolution saying that's what they're going to do. And that's something they do do as part of the process but also maybe the next question would be what are the downsides of doing this. And I guess the biggest downside tends to be the cost. You have to take the old declaration you usually have to scan it on converted to a word or word prep document. So you can start the restatement process. And that can take a while. Incorporating the prior amendments into the restated declaration of bylaws is not too difficult. The hard part is when the attorney. Some boards try this to you have to look at what's in the declaration what's in the bylaws, and then compare it to what's in the law. You have to actually amend that provision in the declaration of bylaws to be consistent with the law, which isn't always that easy so it's a little like freehand it's not where it's necessarily that simple so that that's what can take the time. So the restatement process can cost the association, depending on whether they do both the declaration and the bylaws, maybe 6789 thousand dollars because it'll take an attorney quite a while to incorporate the prior amendments. So you have to do his or her creative selecting those provisions of the declaration bylaws which are not consistent with the current law and making the changes necessary to to do that. And so that that's the, that's the main downside it is quite a laborious process I usually try and avoid it if I can. And it does have its advantages you get a nice clean document with all the current requirements of the law and all the prior amendments, and that's really what you're trying to achieve. And again you are supposed to the board is supposed to adopt a resolution saying, this is what we're planning to do. And the new law does actually have a few little requirements it states in subsection be. So the restated declaration by us has to identify each portion that's restated. So when you change a section in the declaration by those, you have to identify that. How that's usually done is with little end notes at the end of the restatement you'll put these end notes saying section such and such was amended to be consistent with this provision of the condominium law, or to take out something which may no longer be permitted by law such as restrictions on children or things like that. So that's the first thing you have to do to do this right, identify each provision in the or declaration of by those that has been restated. And then you have to say in the document this is usually put this in front. These provisions have been restated solely for purposes of information and convenience. So this is something the law requires and again you can put that in the front, and you have to identify this again is not when you're not when you're amending to put in the old amendments but when you're amending to comply with the statute, the ordinance or a rule. You have to identify in these little end notes a little number by what you're changing and then in the end note you explain this is being changed to comply with such and such a portion of the condominium law, or sometimes it's an ordinance. Sometimes it's a rule. So that's what you have to do that's the third thing. And then you have to put a statement in the restatement and if there is a conflict between your restated declaration or bylaws and this is of course stated in law. The restatement is subordinate to the statute you cite or the ordinance of the rule so they don't want you getting too carried away and saying oh well this this this is not as good as it should be let me do a little bit of creative work. You have to say that you are following in your restatement the statute the ordinance and the rule and if if what you say in the restatement is inconsistent, the statute the ordinance of the rule will control. And that's something you have to specifically include in the restatement when you're doing the restatement to make sure you comply with the law and the law is very clear as well. If there's a conflict between your restatement and the original declaration, then your your restatement is still subordinate to the declaration and bylaws is originally written. Of course, that would be subordinate subject to what the statute now says, but essentially that is the process you have to follow and you're trying to do that. To cross all your T's dot all your eyes you need the board resolution saying the board has decided our documents for out of date they need work. We are going to be restating them. And then you have to have those points I mentioned, and then you have to record them of course you have to record the declaration and bylaws to make them fully effective. Until they're recorded they're not necessarily fully effective. So, so that's essentially the process it is set out if you're interested in section 514b 109. And it does give you a fairly detailed outline says you can restate to incorporate old amendments and restate to incorporate newer provisions in the law. That's essentially the process. And it is rather laborious it's not something you to look forward to. Now of course are worried about costs they may say what $6,000 $9,000. They can get a head start by scanning the document and converting it to a word document so that the attorney doesn't have to do that. And that will save some time and money. Now of course if they do a very poor job and the attorney has to proof it. Well that's not going to save as much time and money but that's one way of doing it. A very creative proactive board could probably take a first draft of the restatement look at the condominium law cross check that with provisions in the documents. And put it to their attorney for review to make sure that what they did is consistent with the restatement provisions in the law. To be honest, I don't recall a board really doing that maybe once or twice in my 30 odd years, because it is, it is pretty difficult for someone, a lay person and non attorney to try to make sense of the law and then try to mesh it with what's already in the declaration. But anyway, that is the basic process it is fairly clearly outlined in the law. And that would be what a board would have to do to be consistent with the requirements of law I personally have never restated a declaration to change the common interest I have seen that there are situations where the common interest add up to 100 but say they add up to 99. You just slightly increase the total amount you're assessing, and that takes care of the 1% discrepancy so it's probably easier than trying to restate your declaration to make sure that the common interest add up to 100. And it's it's up to individual boards, some people might be concerned when their common interest don't add up to 100. So that's the process. Okay, so to restate it does not require ownership of Google. No, that was one of the things that was, as long as you follow the process no owner approval is required. So you're going to take their and plus to when you, like an argument from the board. Okay, so I can I'm just imagining this. Well, it's going to cost us $10,000 on what won't be for it. But what, but as a condo attorney, you take on a client and got these old, old and a bunch of amendments, you know, for you to properly like enforce, say a, there's been numerous hospital violations about one one item or something. It was to an attorney. And now you're looking at their bylaws and the hospitals to see where, you know, you can legally enforce it, but you're having to search through all these amendments, and you're like, I'm thinking it's taking a lot of your time. You're kind of weighing the attorney time versus old documents versus paying the 10,000 or whatever it is for restating and being saving time in the future for any other issues. Yes, I think that's a valid point that when you do have to dig through. When you look at a set of documents and you see all these amendments. When I pull them up, I have to look through them all because you're never quite sure what's been done in the past and you might focus on the wrong one. You know, if something's been amended two or three times and you'll be citing something to the owner and then they'll come back and say well that's not what it says, which is pretty embarrassing so you, you have to be quite careful and the other problem you have is the owner will say well, where in the declaration and bylaws does it say that then you have to say well it doesn't because your declaration bylaws are no longer consistent with the law. The law now says this and the legislature takes the position the law overrides. You have to continue a declaration bylaws. If there's an inconsistency so yeah that's a good point it does. It does make life easier for the board to they only have to look at one document when they're trying to work out what they're supposed to do so there are benefits it isn't just an out of pocket cost that doesn't have any benefits you. That's correct. When you're reviewing all the documents and you're making sure all the language is consistent with 514b, but you're also looking at maybe state law like 515 discrimination for housing. Yes. Stuff as well. That is a good another good point. If you have, for example, in your documents. Maybe in your bylaws children under the age of such and such and not allowed in the pool area, or you have an occupancy restriction no more than two people in a one bedroom unit or something like that. Correct. That can be a problem because the way the Civil Rights Commission and even hard to often interpret it is even if you never enforce that provision on you know no children in the pool who are less than 14 years old, whatever it might say, even if you don't enforce it they take the position that just by having that in your documents you are. They will be preventing people people will look at that they will be prevented from exercising their fair housing rights, simply because you left something like that in your declaration of bylaws, and they think it still applies. So even though the law says they don't have to to abide by that restriction. But in your documents they'll say that that in and of itself, just having it in there can be a violation, because it, it dampens the willingness of people to exercise their fair housing rights because they say, Well I don't think this is right but this is what the bylaws say this is what the declaration says so. That's another good point that you do you have to. It's chapter 514b. It is chapter 515 which deals with discrimination and even some other provisions you have to be aware of so. They agree to the I mean you know they read all the documents. There's another statute that still obligates them to comply, even though it's not enforced they still have to comply so there's that you know that little gray area kind of a thing right. There can be. Not everything that a condominium owner is required to do is in the condominium law. That's probably really the basic point you're making. They are the condominium law itself says it's subject to city ordinances other state laws. So it isn't the end of the inquiry, just because you don't find it in your bylaws. You don't find it in your declaration or even in the condo law doesn't mean you aren't subject to certain legal requirements because, like anybody else your subject to not just the condominium law as a condo owner but other laws that might apply to a particular situation. So that's true. Yes. Condo docs always seem to be a big hot topic or, you know, a topic with a lot of people especially realtors where they can't get it lender sometimes can't get it when they're trying to do a mortgage. So what's your take because you know with ACCA we've been trying to encourage them to put certain documents onto the website or like in town square or one of the other apps that they're starting to use now. So they don't have to go into these requests, you know, like your house rules decorations can be easily posted and they can access it themselves. You know, so what's your take on that. Yes, particularly with the declaration bylaws they are recorded so under the theory of the law, when something is recorded, even if you didn't read it. It still applies to you. So, there's really no reason if something's recorded in the Bureau of Convance is a land court there's no reason you can't put it on a website. Whether something like town square, or just if the association has its individual website. The governing documents are no secret, you know the house rules the declaration bylaws. Making them accessible you hope will make people more aware of them and more willing to comply with them, because it is as you say it is true. Some people never read them they don't even know about they buy in. And it's a big surprise even though they usually given them when they buy. They don't bother they just put that to one side. I have to say to people you remember that big stack of documents that you were given when you bought your unit. You might want to look in there and you'll see that what I'm saying is based on that. It is true. It's often not read but because it is recorded it's public public documents so there's no reason to hold it back from. We don't have a computer in it so I tell people like, you know, there's a magic keep a couple copies handy so that you can hand them out. And I have something that was like, you know they wanted to charge with households like a why you want them to comply. Why are you making it painful, you know, so yeah, just give it out freely. It is, it is worth letting people know because then they don't have an excuse, you can say hey, we gave you these. If you didn't bother to read them and that's your problem, not ours, you have to comply. Okay, so what's your advice to the boards that have old old outdated documents and then they have like beyond five amendments since then. Yes, I think, you know, probably the way to look at it is long term it may seem like a big charge up front and again as I say if they want to go to the trouble of scanning them on having a committee to prove them get them into good shape that can help. You probably want to look upon as a long term investment but okay you've had your documents have been in existence 3040 50 years. If you restate them they can at least be good for you hope another 1020 years so you should be dividing the cost. So for the future and looking upon the convenience that you will get from having a restatement that I think that's the way to look at it, but it is it is nice to look at when I look at a project I represent I look at it. I see a set of documents and I see two restatements I think oh thank God. I don't have to worry about all the rest of the stuff from this file, because the restatements are newer than everything else. So they should include everything else. And so it is a convenience yeah. And it actually means we might be able to do things quicker for them than if we have to wade through all the amendments they've made. But that's an attorney cost to the association. Yeah. Oh yeah it's time spent, which is really how it's built. So actually the restatement should also be a reserve item, because you want to kind of do it, look at doing it maybe every step. You could yeah you could make a contingency reserve because I think in the last 30 odd years that I've been involved with condominiums I can't remember a single year where the legislature didn't change the condominium anymore. So it is something you know that 10 years from now, your restatement will not be as current as it is today it's completed, simply because the law will keep changing so that's true to you can look upon it as a investment that you will put aside the money so you'll have the money on hand 10 years from now to do a second restatement or something like that. So we're out of time that went really quick. But John, I really want to thank you for spending your time today with me on condo insider and educating us on restating the importance of restating the documents, because ultimately it's really going to cost the association more in the long run they don't take the time and investment to do it periodically. Yes, I think that's true. Okay. Thank you so much. Thank you very much. Thank you so much for watching think tech Hawaii. If you like what we do, please like us and click the subscribe button on YouTube and the follow button on Vimeo. You can also follow us on Facebook, Instagram, Twitter and LinkedIn and donate to us at think tech Hawaii.com Mahalo.