RE: Seven legal rules
From: Rob Sandelin (
Date: Fri, 27 Dec 1996 13:55:41 -0600
Robs seven "legal" rules: Not in order of priority.

1. Indemnification. This means if a board member is acting in good faith, they 
can't be sued for screwing something up.  This is key, otherwise nobody will 
serve on your board (This may not be a big deal in your country, in our 
country it is critical for non-profit boards, given the lawsuit happy bunch of 
idiots we are)

2. Insurance. Pay attention to who pays for what insurance, and especially who 
is responsible for maintaining it. Your insurance needs change over time and I 
would put a clause in to review insurance coverage annually as a duty of the 

3. House rules. The association membership is empowered to pass, amend, and 
revoke detailed, reasonable administrative rules and regulations, or "house 
rules" necessary or convienant from time to time. Such house rules shall be 
binding on all Unit Owners, lessees, guests, and invitees. The board may at 
its descretion assess appropriate fines for non-compliance of "house rules" 
and these shall have the same authority as regular assessments.

4. Liens.  The association has a lien on a unit for any unpaid assessments 
levied against a unit from the time the assessment is due. This lien is 
primary and has priority over any other mortgage or lien on a unit.

5. Architectural uniformity.  The association may at its descretion, create a 
set of architectural rules applying to the exterior of all units, and any 
limited common elements. Failure to comply with architectural standards shall 
be grounds for actions by the association, or its agent, including removal of 
any and all non-compliant structures, additions, or modifications of a unit, 
at the total expense of the unit owner.

6. Mortgagee protections (check with your local banks for this stuff)

7. Easements. (Think about 15 years in the future and what you might want to 
do and be sure that you have the appropriate easements through the property)

8. Authority of Association and board. (Set limits and terms for how much the 
board can spend or decide and what kind of expenditure needs membership 
approval. In general make this pretty large, like $5,000. You can make other 
house rules later to govern this. I would advise to not allow the board to 
make property exchanges without a significant majority percentage. For 
instance, at Sharingwood, 80% of the total membership (not a quorum, the total 
membership) has to approve the transfer of any association property.) Also 
borrowing authority should be clearly defined.

9. Responsibilities of Association. (Figure out what things the association 
pays for and what unit owners pay for fixing, replacing etc.)

10. Conflict resolution. Create a fall back, such as: The association shall 
hire Marks and Smith mediatiors ,or another equally qualified firm, to mediate 
conflicts between the association and its members.

Another final note, be carefull about percentages and quorums. If 25% of the 
membership is a quorum, and it takes 2/3rds of the membership vote to transfer 
property, a small minority (16% of the total membership) can actually sell 
your project out from under you. This has happened in other intentional 
communities so think about where a quorum would be usefull, and where it would 
not. I  would advise that any house rules, transfer of property or expenditure 
greater than X, be total membership decisions, not based on quorums. You have 
the write those rules specifically to say, X% of the total membership.  Your 
attorney can help you with the language and what a quorum can apply to.
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