On July 13, 2017, a new law was enacted in New Jersey amending the Planned Real Estate Development Full Disclosure Act (PREDFDA). While the new law was created in reaction to litigation involving a community called the Radburn Association, which lacked by-laws that mandated fair and open trustee elections, it also includes provisions relating to amendments of the by-laws which will apply to all community associations. Here is what you should know about these by-laws amendment provisions which are effective immediately:
- These provisions apply only to by-laws amendments. They do not apply to the amendment of a master deed or declaration.
- If the by-laws do not provide for an amendment method by vote of the members, the members may amend them by the affirmative vote of a majority of the total authorized votes in the association. It is rare for community association by-laws to lack an amendment provision so this will not apply to most communities.
- If the by-laws require amendment by a majority vote exceeding a 2/3 majority the members may amend them by the affirmative vote of a majority of the total authorized votes in the association. Many by-laws require at least 2/3 majority vote for amendment, however, that is not the same as exceeding a 2/3 vote. On the other hand, if the by-laws require a 75% affirmative vote for amendment, this provision would apply and that 75% voting requirement would be reduced to a majority of the total authorized votes.
- The number of total authorized votes in the association shall be based on the total number of units less the number of members who are ineligible to vote because they are not in good standing. Many by-laws are vague about whether to subtract out delinquent unit owners and this provision provides certainty. Good standing is also defined in the law but for only for voting in board elections, voting to amend the bylaws, and nominating or running for the board. The new definition states that a member is in good standing if she has paid assessments and other lawful charges; it does not include rule violations for these purposes. If the by-laws define good standing to include delinquencies and rule violations that by-laws definition would not apply to voting to amend the by-laws (or nominating/running for the board or voting in board elections).
- If the by-laws do not include provisions concerning the subject matter below or if the by-laws do not have procedures for calling a meeting of the association members to vote on by-laws amendments, the law mandates certain procedures. Keep in mind that if the by-laws do include provisions concerning the subject matter below, the by-laws would control. Most modern by-laws do have many of these provisions but because they may be missing some of the details it is important to understand these new requirements.
- 15% of the members of the association may request a meeting by executing a document demanding a meeting within 60 days (or if the annual meeting will be held within 60 days that the amendment vote be held at the annual meeting). However, if a by-laws amendment vote took place in the preceding 12 months of the meeting request, no additional vote is required.
- The amendment vote requested by the members must take place within 60 days of the request at a time likely to permit the most members to attend and members must be given notice at least 14 days before the meeting. The text of the proposed amendment must be provided at least 10 days before the meeting.
- The notice and proposed amendment may be emailed (if the by-laws permit notice by email), mailed, or hand delivered to unit owners.
- The notice of meeting must also include a proxy ballot or absentee ballot (if permitted by the association’s by-laws) with instructions for return. Note that this does not authorize the use of absentee ballots unless the by-laws expressly permit them. If the by-laws only permit voting in person or by proxy they do not permit absentee ballots.
- Associations must permit the return of proxy ballots and absentee ballots by fax or email in addition to other methods such as mail.
- Proxy ballots and absentee ballots cannot be required to be returned more than one business day before the amendment meeting.
- If sufficient ballots or proxies are not received at the amendment meeting to conclusively determine that the proposed amendment has been approved or rejected, the meeting shall be adjourned for 30 days or a longer period if approved by the unit owners by motion to extend the vote. The amendment vote cannot be extended longer than 11 months from when the notice of the amendment was sent. All proxies or ballots received shall remain valid if otherwise valid under the by-laws.
- When a by-laws amendment is approved a copy shall be provided to all unit owners and the amendment must be recorded with the county clerk.
The law also permits by-laws amendments by the Board in two circumstances: (1) when required by state, federal, or local law, or (2) when less than 10% of unit owners vote to reject the amendment. These Board amendment procedures are discussed in a separate blog which can be found here. Read the full text of the PREDFDA amendment here. The election provisions are discussed in a separate blog. There are bound to be questions relating to by-laws amendments now that these provisions are in effect. If your association is amending its by-laws you will want to talk to legal counsel before starting this process as you may not be able to rely entirely on the procedures set forth in the by-laws. If you have any questions about the new amendment requirements or other community association questions, feel free to reach out to our community association team.