My association board relies on our manager to advise and assist us in conducting association business. We requested that she revise our bylaws and draft our required policies to ensure compliance with SB 100. She refused saying that, among other reasons, she feared that doing so would create liability for her and her management company and would be practicing law. We offered to pay her, but she still refused. This refusal has angered several board members, who believe that revising the bylaws and drafting policies and procedures to reflect current law falls within our manager’s job description.  What is the unauthorized practice of law anyway? And what other reasons could she have for not revising our bylaws or drafting our policies and procedures?

In recent years, the “unauthorized practice of law” has been a very sensitive and hot topic in Florida for both attorneys and mangers. It has, however, yet to be raised in Colorado – at least publicly. From a practical point, managers for a long, long time have been “practicing” law in one form or another depending on the problems they need to solve daily.  The necessity of such activities may not make it right or advisable, but to a large extent, it is the nature of the management business. Do attorneys have a problem with or resent that? As a general rule, no, but there are exceptions depending on what issues the manager’s activities involve.  Attorneys, often reluctant to discuss the topic of unauthorized practice of law, fear the “self-serving” nature of their comments and opinions. So, what’s the problem then? The answer to this question warrants an explanation of the “unauthorized practice of law.”

Colorado law provides that an individual practicing law without a license issued by the Colorado Supreme Court is guilty of contempt. Often it is difficult to determine if completing certain tasks that arise in a non-lawyer’s business constitutes the unauthorized practice of law. The leading Colorado Supreme Court cases on this issue look towards certain factors to ascertain if an activity qualifies as the unauthorized practice of law that must be enjoined.   These factors include the following: 1) whether the activity is incidental to the individual’s business and whether a separate fee is charged for it; 2) whether it was realistic or practical to require an attorney exclusively to perform the activity; 3) whether the activity involves filling information into preprinted forms approved by the legal community; and 4) what is the nature of the relationship formed by the individual performing the activity on behalf of another.

A manager has good reason to fear that revising an association’s bylaws may constitute the unauthorized practice of law. Revising bylaws in accordance with a non-lawyer’s interpretation of a statute is far from “filling in the blanks” and is arguably not incidental to the management business – especially if the manager is charging a separate fee for the revisions. In addition, a manager’s advice to an association about what portions of its bylaws need revision and the possible legal effect of such revision may be interpreted as the formation of a type of attorney-client relationship between the manager and the association.

Writing policies and procedures that expand upon and interpret governing documents or statutes carry similar risks to an association manager.  The writing of policies and procedures typically involves a lot more than filling in blanks and does not readily fit within tasks incidental to the association management business.  In addition, due to the time and effort required to write policies and procedures, managers will likely charge a separate fee for this service.  When drafting policies and procedures, the manager will have to ensure that they comply with numerous federal and state laws, which will be based on a non-lawyer’s interpretation of statutes.  Obviously, instances often occur where a bylaw revision or policy/procedure/rule is minor in nature and does not require extensive interpretation of laws. (i.e. increasing the size of the board from three to five or changing the time frame for putting out trash cans.)  However, as a general rule, a manager would be wise to avoid the risk of being accused of the unauthorized practice of law, which is inherent in revising bylaws and writing policies and procedures for their associations.   

Perhaps the greatest impetus for avoiding revising bylaws and drafting policies and procedures is the potential for liability on the part of the manager or management company if these tasks are done incorrectly.  Just as an accountant should not give legal advice, or an attorney tax advice, or a roofing contractor advice regarding paving and so on, a manager should not give advice outside of her or his expertise.  While the experienced manager may feel qualified to do so, interpreting statutes and governing documents is a job better left to attorneys who are trained to do so.

The association’s contract with its manager may provide another reason for a manager to decline to revise bylaws or draft policies and procedures. Depending on a manager’s knowledge of an association’s bylaws, the new requirements of SB 100, and the procedure to follow to revise bylaws, the task may take a significant amount of time. A manager may believe that such a project is not included in his or her contract to manage the association. Further, the manager only has the authority to act as is specified in the management contract. If the contract does not specifically authorize a manager to revise bylaws, draft policies and procedures, or interpret statutes and governing documents, managers who proceed to do so exceed the scope of their authority and expose themselves to liability if these are done improperly.

Boards themselves may wish to think twice about having managers revise bylaws, draft policies and procedures, or do other work outside of their manager’s professional competence. Board members have a fiduciary duty to make prudent and informed decisions in the best interest of the association. In doing so, board members are entitled to rely on the statements of others (such as managers) only if such statements concern a matter within that individual’s professional expertise.  Thus, unless the manager is an expert or has professional competence in this area, the board would be breaching its fiduciary duty to the association if it relies on its manager to perform such tasks as revising bylaws and drafting policies and procedures etc.

In all likelihood, managers have many other good reasons why they prefer not to revise an association’s bylaws or draft policies and procedures for them. If a board doesn’t understand why the association’s manager will not complete the revisions, it is advisable simply to ask.  In this way, the manager can explain why he or she has decided that the revisions, drafting policies and procedures, interpreting governing documents, etc. should be done by another.  Understanding your manager’s decision can go a long way to maintaining a successful relationship between association and manager.