The number of common-interest communities governed by associations such as homeowners’ associations has exploded in recent years. These communities take many forms: from large, master-planned communities, to communities that share an amenity such as a lake, golf course or other physical feature, to a simple collection of lots or residences that join together to share expenses related to roads and other improvements, these association-led communities are everywhere. These associations are particularly prevalent in single-family residential, condominium and townhome communities, but also impact commercial and industrial developments. One may encounter governing documents in retail developments, office projects, industrial projects, residential communities and even agricultural land developments.

The documents and boards that govern these communities are just as varied. Some restrictive covenants approach 100 pages, create huge boards and control every aspect of a community. From decorating standards to architectural controls, and even so far as paint colors and the use of commercial properties, some documents control everything a property-owner may or may not do with their property. Others are, of course, less restrictive and run as little as a page or two that outline simple rules.

The one constant, however, is that the boards, property managers, members and service providers who rely on these documents treat them as if they are written in stone and may never be amended or changed.  That is because most of the governing documents are written in a manner that requires the approval of every single owner or the vast majority of owners in the community to amend the documents. Obtaining 80, 90, or 100 percent agreement on any topic is difficult among even a handful of owners. Unanimous or 100 percent consent is arguably the most common threshold in these documents. Among any more than a handful of owners, obtaining the necessary percentage to amend or revise the documents that govern an association and common-interest development is nearly impossible.

Within the last decade, the Indiana Legislature recognized that the near-unanimous requirement to amend restrictive covenants and other documents that govern associations and common-interest communities is not necessarily a good thing. As a result, Indiana Code Section 32-25.5-3-9 became effective on July 1, 2016. Although the law has been in effect for seven years, the new construction of single-family, condominium, commercial and industrial common-interest developments over that seven-year period and a continued lack of awareness regarding the law’s practical impact make it particularly noteworthy in today’s real estate climate.

Indiana Code Section 32-25.5-3-9 governs the amendment procedure for an association’s governing documents and restrictive covenants. A portion of that statute specifically states, “the (association’s) governing documents may not require that the consent of more than seventy-five percent (75%) of the owners is required for (amendment) under this subdivision”. As a result, association boards, members, property managers and the various service providers who work with associations must understand that restrictive covenants that previously required unanimous or near-unanimous consent to amend may now be amended with as little as 75 percent consent. Of course, obtaining 75 percent consent is still a substantial majority and is not as simple to obtain as a mere 51 percent majority. It is not, however, the near-impossible 100 percent amendment standard that appears in many governing documents and restrictive covenants. Associations and those who deal with them should be aware that, while amendment is not simple, it is possible that an association’s governing documents are subject to change.

Neither Indiana Code Section 32-25.5-3-9 nor any other statutory provision address whether Section 32-25.5-3-9 impacts and amends an association’s governing document in place before July 1, 2016. No Indiana cases have challenged or addressed the issue. Given the lack of case law or statutory exemption for prior existing association governing documents, Indiana Code Section 32-25.5-3-9 likely applies to all existing restrictive covenants and association governing documents. Developers, property owners, tenants, association boards, their members, property managers and those who regularly deal with associations should seek professional advice and guidance in drafting and changing such governing documents or dealing with such organizations when those documents are in flux.