The Rule the Board Skipped
A 240-unit homeowners association has a declaration stating that units may be "leased for residential purposes" with no minimum term. At a regular board meeting, with four of seven directors present, the board votes 4–0 to adopt a rule banning rentals shorter than 30 days, effective immediately. The bylaws allow the board to adopt rules only after 10 days' written notice to owners and only if the rules are consistent with the declaration. Six owners currently operate short-term rentals. The president wants the manager to send violation letters and impose $100 daily fines retroactive to the meeting date. One director asks whether the vote was valid because three directors were absent. The manager must advise the board before any letters go out.
1. What governance defects should the manager flag before any enforcement letters are sent?
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The manager should separate quorum from authority. Four of seven directors is a quorum, so the vote itself was procedurally valid if the meeting was properly noticed. The larger defects are substantive and procedural:
- Hierarchy of documents. The declaration permits residential leasing and sets no minimum term. A board rule that conflicts with the declaration is generally invalid unless the declaration gives the board clear authority to restrict leasing. The manager should have counsel confirm this before enforcement.
- Rule-making procedure. The bylaws require 10 days' written notice. No notice was given, so the rule was not validly adopted on the meeting date.
- Retroactive fines. Fines cannot ordinarily be imposed for conduct that occurred before a valid rule existed or before required notice and hearing. Retroactive daily fines create legal and fairness problems.
The manager should recommend suspending enforcement, obtaining counsel's opinion, and either withdrawing the rule or re-adopting it after proper notice. If the board wants a 30-day minimum, it should consider a declaration amendment by the membership.
2. How should the board handle the six existing short-term rentals and communicate with owners?
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The board should first determine whether any enforceable rule exists. If the rule is invalid, the six owners are not in violation and should not receive violation letters. If counsel concludes the board has authority, the board should adopt the rule prospectively after the required notice, publish the effective date, and apply it uniformly.
For the existing rentals, the board should check the declaration and bylaws for grandfathering or transition provisions. Absent such provisions, the board can enforce prospectively-for example, requiring compliance when current bookings end-rather than imposing retroactive penalties. Each affected owner should receive a clear written explanation, a hearing opportunity if the governing documents provide one, and consistent timelines.
Communication should state what the board did, why, the effective date, and how alleged violations will be handled. The manager should document the board's reasoning and avoid ad hoc exceptions, which can create fair-housing or selective-enforcement exposure.