Chapter 6 - § 6.10 • BYLAWS

• Jurisdiction: Colorado

§ 6.10 • BYLAWS

The "bylaws" are any instruments by whatever name they are called that are adopted by the association for its regulation and management, including any amendments to those instruments.²³³ They constitute "the code or codes of rules . . . for the regulation or management of the affairs of the . . . corporation."²³⁴ If a common interest community is organized pursuant to the Colorado Business Corporation Act²³⁵ or the Colorado Revised Nonprofit Corporation Act,²³⁶ the bylaws must comply with any applicable provisions of those laws. Under the CCIOA, the bylaws must provide for:

• The number of members of the executive or governing board and the titles of the association officers.
• Election by the executive or governing board of a president, treasurer, secretary, and any other officers the bylaws specify.
• The qualifications, powers and duties, and terms of office of, and manner of electing and removing, executive or governing board members and officers and the manner of filling vacancies.
• Which, if any, of the association's powers the executive or governing board or officers may delegate to other persons or to a managing agent.
• Which of the association's officers may prepare, execute, certify, and record amendments to the declaration on behalf of the association.
• A method for amending the bylaws.²³⁷

Additionally, if an association of 30 or more units delegates powers of the governing board or officers for collecting, depositing, transferring, or disbursing association funds to other persons or to a managing agent, the bylaws of the association must require that:

• The other person or managing agent maintain fidelity insurance coverage or a bond in an amount not less than $50,000 or any greater amount the board may require.
• The other person or managing agent maintain all association funds and accounts separate from those of other associations managed by that person or managing agent and maintain all reserve accounts of each association separate from operating accounts.
• The managing agent, a public accountant, or a certified public accountant prepare and present to the association a financial statement and an annual accounting for association funds.²³⁸

Subject to the provisions of the declaration, the bylaws may also provide for any other matters the association deems necessary and appropriate.²³⁹ However, anyone drafting bylaws must keep in mind that there are certain matters that can only be addressed in the declaration.²⁴⁰ Additionally, as discussed below, there are some matters that must be addressed in the bylaws and others that either must or may not be included in them.

§ 6.10.1—Permitted Bylaw Provisions

Several CCIOA statutes invite the drafter to address operational issues. Those statutes refer to matters that may be either "specified" or set forth" in the declaration.

• When a vote is to be taken on a proposed extension of the term of a declaration at a unit owners' meeting, the secretary or other officer specified in the bylaws must provide written notice of the meeting to each unit owner. The notice must be given in the time and manner specified in the CCIOA or the association governing documents including the bylaws.²⁴¹
• The declaration, bylaws, or association rules may specify that certain disputes must be resolved by binding arbitration or another means of alternative dispute resolution.²⁴²
• Decisions to approve or deny a unit owner's application for architectural or landscaping changes must be made in accordance with standards and procedures set forth in the declaration or in duly adopted rules and regulations or bylaws.²⁴³
• Special unit owners' meetings may be called by unit owners having 20 percent of the votes in the association or any lower percentage specified in the bylaws. The secretary or other officer specified in the bylaws must cause notice to be delivered or sent to each unit owner.²⁴⁴
• Within 90 days after the governing board adopts a proposed budget, it must deliver a summary of the budget to all the unit owners and set a date for a meeting of the owners to consider the budget, which must occur within a reasonable time after delivery of the summary or as allowed for in the bylaws.²⁴⁵
• The maximum percentage stated in the CCIOA for declaration amendments does not apply to any common interest community in which one unit owner, by virtue of the declaration, bylaws, or other governing documents, is allocated 67 percent or more of the votes in the association.²⁴⁶

§ 6.10.2—Draft or Be Bound Provisions

Some CCIOA statutes establish what is in effect a "default position," that is, the statute governs unless the bylaws — or the declaration as well, in most cases — provide otherwise. Thus, anyone drafting the bylaws who does not want to be governed by the CCIOA requirement must act or be bound by the CCIOA. These statutes concern:

• Allocation of a portion of the votes in the association.²⁴⁷
• The governing board's ability to act on behalf of the association.²⁴⁸
• The required quorum for association²⁴⁹ and governing board²⁵⁰ meetings.
• The method for appointment of unit owner proxies.²⁵¹
• Escrow agreements between an association and a mortgagee allowing assessments to be combined with a unit owner's mortgage payments and paid at the same time and in the same manner.²⁵²

§ 6.10.3—Prohibited Bylaws

There are some rights granted to unit owners by the CCIOA that may not be abrogated in the bylaws or other documents. These rights are found in statutes containing the language "notwithstanding any provision of the declaration, bylaws, articles, or rules and regulations to the contrary." Thus, if a clause in the bylaws attempts to change the right granted by the CCIOA, it is of no effect. The rights concern:

• Patriotic and political expression, parking of emergency vehicles on the property, fire prevention, renewable energy-generation devices, and reasonable modifications to a unit necessary to afford a person with disabilities full use and enjoyment of the unit in accordance with the federal Fair Housing Act.²⁵³
• Use of cedar shakes or other flammable roofing materials.²⁵⁴
• Installation or use of energy efficiency and water conservation measures.²⁵⁵
• Fines against unit owners.²⁵⁶
• Removal of members of the governing board.²⁵⁷
• Authorization to initiate a construction defect action.²⁵⁸
• Open meetings.²⁵⁹

There is also one right granted directors that receives similar protection. The statute says that notwithstanding any provision of the declaration or bylaws to the contrary, all members of the governing board must have available to them all information related to the responsibilities and operation of the association obtained by any other member of the executive board.²⁶⁰

§ 6.10.4—Nonprofit Corporations and Bylaws

The Nonprofit Corporation Act does not require any particular contents for bylaws. They "may contain any provision for managing and regulating the affairs of the nonprofit corporation that is not inconsistent with law or with the articles of incorporation."²⁶¹ The Act does, however, allow the bylaws to address several matters, although it should be noted that in some cases the CCIOA may conflict. The matters that the Nonprofit Corporation Act allows the bylaws to treat are: admission of members,²⁶² "delegates,"²⁶³ the record date for determining members entitled to notice and to vote,²⁶⁴ quorums,²⁶⁵ and voting for directors.²⁶⁶ There are also a number of matters in which the directives of the Nonprofit Corporation Act must be followed — and again, the CCIOA may conflict — unless the bylaws provide otherwise. These are: consideration for admission of members,²⁶⁷ rights of voting members,²⁶⁸ resignation of a member,²⁶⁹ expulsion or suspension of a member,²⁷⁰ purchase of memberships by the association,²⁷¹ the annual meeting,²⁷² special meetings of members,²⁷³ meeting notice,²⁷⁴ action without a meeting,²⁷⁵ meetings by telecommunication,²⁷⁶ action by written ballot,²⁷⁷ members lists for meetings,²⁷⁸ voting entitlement,²⁷⁹ proxies,²⁸⁰ and quorums.²⁸¹

§ 6.10.5—Amending the Bylaws

The CCIOA says little about bylaw amendments. It requires the bylaws to contain a method for their amendment,²⁸² and says that a notice of a unit owners' meeting must state the "general nature" of any proposed amendment to the bylaws.²⁸³ It also has a statute that governs amendments to documents, including bylaws, of any common interest community created in the state before July 1, 1992 (the effective date of the CCIOA), that has not elected treatment under the Act.²⁸⁴

Under the Nonprofit Corporation Act, the board of directors may amend the bylaws at any time to add, change, or delete a provision.²⁸⁵ There are three exceptions that limit that authority:

1) When the articles of incorporation or the Act itself reserve the power exclusively to the members in whole or part.²⁸⁶
2) A specific bylaw expressly prohibits the board from making any amendment.
3) The amendment would change the rights, privileges, preferences, restrictions, or conditions of a membership class in voting, dissolution, redemption, or transfer by changing the rights, privileges, preferences, restrictions, or conditions of another class.²⁸⁷

Even though the board of directors may have authority to amend the bylaws, the members may also amend them.²⁸⁸ In general, members representing at least 10 percent of all of the votes entitled to be cast on any amendment may propose a bylaw amendment for submission to the membership.²⁸⁹ The corporation must give notice to each member entitled to vote of the meeting where the proposed amendment will be considered. The notice must state that the purpose, or one of the purposes, of the meeting is to consider the amendment. The notice must also contain or be accompanied by a copy or summary of the amendment or state the general nature of the amendment.²⁹⁰ Certain actions require class voting in those corporations that have it.²⁹¹

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