Read More »" /> Knowing Your Governing Documents. Randal A. Pentiuk; Pentiuk, Couvreur & Kobiljak | National Cooperative Law Center - Part 3

Knowing Your Governing Documents

E. Federal, State & Local Regulatory Framework

        Again, it is important to recognize that cooperatives operate within the broader body of law and even though this is not generally regarded as governing documents the articles, bylaws, and other governing documents can be preempted by changes in these laws. For instance, the Michigan Elliot-Larsen Civil Rights Act impacts proxies that limit the right of a married member to appoint only his or her spouse, which is a violation of marital discrimination prohibition

F. Contractual & Covenant Framework

        As with federal, state & local laws, the cooperative must operate within the parameters of its contracts and covenants. Contracts can be breached but exposes the cooperative to liability for damages. One example is a covenant which run with the land, which limit the cooperative as to its use of property; thus, you may not be able to build or use an adjacent lot owned by the cooperative. Another illustration is if the cooperative refinances, the lender may impose some conditions that must be honored to avoid a default and foreclosure of the mortgage, such as retaining certain reserves.

G. The Hierarchy of Documents

        The hierarchy of the governing documents is complex, and the interplay between the them require legal expertise. With the foregoing caveat, the general hierarchy is:

1) Federal, state & local law, including corporate law

2) The HUD Regulatory Agreement and associated HUD laws Covenants & contracts

3) Articles

4) Bylaws Roberts Rules Board Policies

H. Amendments

        To amend the articles or bylaws, the cooperative must follow the process described within these documents themselves. If HUD is still involved, it must approve of them. If these documents do not proscribe the process, then you must resort to the state corporate law for direction.

I. Lessons to Learn

        There are important lessons to be learned about governing documents.

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