Habit #1 Know Your Documents

Why?

The legal authority or power of an association is derived from various sources, which are commonly referred to as ―legal documents‖. These documents may include trust indentures, covenants and restrictions, articles of incorporation, and bylaws.

Trust indentures typically contain the basic legal structure of the association, usually define the powers of the association, and include covenants and use restrictions that control important aspects of the subdivision.

Articles of Incorporation are executed and filed with the state government if the association is a corporation.

Bylaws of an association contain the basic rules for operating the association. They tend to be more of a working document than trust indentures and articles of incorporation. They are generally easier to amend than other documents.

In St. Louis County, a trust indenture must be recorded with the Recorder of Deeds if a subdivision in an unincorporated area includes common land, private streets, street lights, drainage and detention facilities or other improvements that require continuous maintenance. The indentures must provide for the maintenance of these facilities by trustees who are selected in accordance with the terms of the trust indenture.

Key Points

Read Your Documents - It is the responsibility of trustees to read and become familiar with the legal documents of their association. They should be familiar with the major components of the trust indentures, such as covenants (promises to do or refrain from doing something), use restrictions, amendment procedures, elections, assessment fees, etc. Particular attention should be paid to ―words of authority‖ in the documents, such as ―shall‖, ―may‖, and ―shall not‖. An attorney may need to be consulted to interpret specific provisions of the trust indenture.

Private Agreements - Trust indentures are private, contractual agreements between homeowners and associations. The enforcement of covenants, use restrictions, and association rules are civil matters. County and municipal ordinances are separate from trust indentures and government personnel can only enforce their jurisdiction‘s public ordinances, not private trust indentures.

Enforcing Subdivision Restrictions – Restrictions identified in the trust indentures must be enforced fairly and consistently to withstand legal scrutiny. Instances where there is no objection to violations of restrictions or they become unenforceable may constitute an abandonment or waiver of the restriction. An attorney should be consulted regarding the enforcement of indentures.

Collecting Assessments - Subdivision trust indentures provide that each owner of a lot agrees to pay to the association annual assessments and special assessments. Annual assessments are to cover the cost of the maintenance and operation of common property, while special assessments can be made for the purpose of construction, repair or replacement of common property. When a homeowner fails to pay their required assessment, it may be necessary to file a lien against the property. A lien is a legal document that becomes a monetary encumbrance on the property deed and is required to be paid as part of the closing when the property is sold. Liens are filed with the Recorder of Deeds. The assistance of an attorney is generally necessary when drafting a lien, especially if the association has not filed liens in the past.

Amending Indentures – As a general rule, unless a subdivision indenture expressly provides otherwise, the indenture may not be amended without the consent of ALL of the owners of the subdivision lots. A trust indenture may specify a time and procedure for making amendments. For example, “these covenants are to run with the land and shall be binding on all parties and persons claiming under them for a period of thirty (30) years from the date these covenants are recorded, after which time the said covenants shall be automatically extended for successive periods of ten (10) years unless . . . ― It should be noted that even if indentures permit approval of an amendment by less than 100% of the lot owners, a new restrictive covenant that imposes a new burden on the lot owners must be approved by owners of the ALL the subdivision lots. An attorney should be consulted when amending indentures.

County Ordinances – St. Louis County has the responsibility of enforcing its ordinances to ensure the health, safety and welfare of the public. There are many ordinances that directly affect subdivisions in unincorporated areas, including zoning regulations, building codes, property maintenance standards, parking and traffic restrictions and regulations, and nuisance controls. In some cases, the rules and regulations in a subdivision‘s trust indentures may be more restrictive than County ordinances. It is the responsibility of the association to enforce its restrictions; an attorney may need to be consulted to determine the enforceability of some restrictions.

Self Assessment

Does your association keep copies of their legal documents on file?

Are they easily available to residents? _____Yes _____No

Does your subdivision have an attorney on call for legal purposes (amending indentures, enforcing restrictions, filing liens, etc.)? _____Yes _____No

Do you know the rules for amending your indentures? _____Yes _____No

Is your association aware of the process necessary to place a lien on a property for unpaid assessments? _____Yes _____No