After the Mortgage is Paid Off Changes to the Governing Documents

By Randall A. Pentiuk

When HUD is no longer involved, there are two schools of thought as to whether the governing documents should be amended. There is the “Do Nothing School.” The rationale given is that by operation of law, the obsolete references in the articles and bylaws are void; thus, it is unnecessary to amend them.

Then there is the Avoid Confusion School.  The rationale for this position is that few people, including members, judges and future boards understand cooperative law; thus, it is best to eliminate unnecessary confusion where possible. In addition, when the mortgage is paid off, most members are excited and expecting to address the future of the cooperative, and are usually receptive to change.

Matters that may be addressed if you ascribe to the Avoid Confusion position include remove references to HUD, the Regulatory Agreement, FHA Commissioner as these are now obsolete and will simply confuse and mislead people in the future.

Consider cleaning up problems that have occurred over the years, while you are making changes. These include issues involving quorum, voting procedures – such as allowing for absentee ballots and day-long voting, proxies – such as eliminating the marital discrimination that is prohibited by the Michigan Elliot Larson Civil Rights Act, and any other concerns unique to your cooperative.

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