A reader asks: Do you see the new fee on refinancing mortgages being permanent?
What are bylaws?
Bylaws are the written rules that govern an organization. These guidelines control how the organization will operate and outline what is or isn’t permissible for members. Bylaws work in tandem with two other sets of rules to regulate an organization: covenants, conditions and restrictions (CC&Rs), and rules and regulations.
A good illustration of how bylaws work is in the everyday activities of a homeowners association. HOAs are normally set up as nonprofit corporations to manage private communities. Like other corporations, HOAs are overseen by an elected board of directors. Some of the rules created by board members are included in the bylaws.
The terms “bylaws,” “CC&Rs” and “rules and regulations” are frequently confused. To understand how bylaws work, it helps to understand the other two terms.
CC&Rs cover the rights and obligations of the HOA to its members. The legally binding document is recorded and filed with the state. It covers issues such as:
- Restrictions on property use.
- Maintenance obligations, for both the HOA and members.
- How rules will be enforced.
- How disputes will be resolved.
- Provisions that protect lenders.
- Assessment obligations on the part of the HOA and individual members.
- Insurance issues.
Bylaws highlight how HOA governance will work on a day-to-day basis. They set forth voting rights and procedures, including:
- How often elections will be held for board members.
- The process by which new board members are nominated and elected.
- How many board members will serve at any given time.
- How long board members serve.
- How often board meetings will be held.
- Quorum requirements.
- Specific board member duties.
CC&Rs and bylaws are difficult to change once they are in place because both require a vote by HOA membership. Board members have no authority to unilaterally make changes without such a vote.
If CC&Rs represent the “what” and bylaws the “how,” rules and regulations represent the safety net that catches anything not covered by CC&Rs or bylaws. Because CC&Rs and bylaws are so difficult to change, corporations like HOAs have rules and regulations in place that can be altered with a simple board vote. For example, the HOA might have a rule stating that no one under the age of 18 is allowed on the tennis court after dark. As seasons change and more children move into the neighborhood, that rule can be changed to adapt to shifting circumstances.
Example of bylaws
Bylaws are written primarily to help every member of an organization understand how their corporation works. If individual members do not like something that is going on, the bylaws tell them when the next board election will be held and allows them to run for a board seat and have a voice in the decision-making process.
Bylaws are also in place to support CC&Rs, which in turn, preserve the value of a corporation. In the case of an HOA, rules add a layer of protection against neighborhood degradation by holding individual HOA members responsible. If HOA guidelines require homeowners to mow their lawns once they are taller than 2 inches or to repair peeling house paint, the entire neighborhood benefits by having a more attractive community.
If anyone is unhappy with the way the CC&Rs or rules and regulations are being carried out by board members, he can check the bylaws to find out if the board is acting within the scope of its duties. If not, the same bylaws describe how he would go about remedying the situation.