Before Amending CC&Rs, Avoid “Ready, Fire, Aim!” [10 Tips]

Before Amending CC&Rs, Avoid “Ready, Fire, Aim!” [10 Tips]

First, check with the members Amending CC&Rs usually takes a supermajority (i.e. more than simply a majority of the quorum), so strong membership support is essential. Drafting a great amendment is meaningless if the homeowners will not vote for it. Avoid controversial amendments Amendments changing assessments so that some members pay a higher or lower amount or unpopular use restrictions should be avoided. Some amendments do not require a membership vote Under the Civil Code, amendments deleting developer marketing provisions (Section 4230) or removing illegal discriminatory restrictions (Section 4235), or simply changing the old Civil Code references to the current (Section 4235), are all amendments which can be adopted by the board of directors in an open meeting. Get out the vote Explain to the members that the failure to vote (abstaining) is the same as a “no” vote. Divide up the community into sectors and divide those sectors among volunteers. CC&R amendments are not often very interesting, and apathy is usually their greatest enemy. Missing supermajority If you cannot meet the supermajority required by your CC&Rs, Civil Code 4275 allows the HOA to file a court petition to seek judicial approval – however, to petition, more than 50% of all members, not just a majority of the quorum, must vote in favor. These petitions really should be viewed as a last resort, due to the legal, mailing, and copying cost involved. Verbatim The EXACT text of the amendment must be sent out with the ballots – even if it was already previously distributed. This is required by Civil Code 5115(e). When sending amendments to members, help them by...
The Rules on Rules

The Rules on Rules

It is important to create good association operating rules and to make sure the rule topics required by statute are also covered, but all that is wasted if the association fails to follow the required rule amendment process. Because rules are amended only by the board, the Civil Code requires special procedures to alert members in advance when boards consider changing or creating rules. Civil Code 4360 sets up the following two meeting process: The board must give members at least 30 days advance written notice, with a copy of the verbatim proposed change and a statement as the purpose and effect of the change (first meeting). At the second board meeting, considering the rule change, the board must receive member comments (if any). Notice must be given to members within 15 days after the meeting if the rule change is adopted If the change is controversial, 5% or more of the membership may, within 30 days of notification of a rule change, demand a membership meeting to vote upon its reversal. If a majority of a quorum vote to overturn it, the rule change may not be reinstated by the board for one year. The law allows for emergency rules, if immediate action is necessary to avoid imminent threat to health, safety or to substantial economic loss. Boards may pass emergency rules for up to 120 days but they cannot be renewed. In making changes to association rules, consider these five process tips: Discuss the rule. If the rule change is too complicated to draft during the board meeting, then delegate someone (the attorney perhaps?) to draft language to...

Legislation Update

The Legislature has been in high gear in the past month, and the legislative “season” is a few weeks from its end. Some bills affecting common interest developments (aka “HOA’s”) have already become law and a few are very likely to also pass in the coming weeks. AB 968 This is an innocuous bill, sponsored by the Executive Council of Home Owners (“ECHO”), which makes explicit what the mainstream legal community knew was implicit. Under current Civil Code 4775, associations maintain and repair common area, and homeowners maintain exclusive use common areas. The statute does not say who repairs exclusive use common areas. This “hole” in the statute has existed for many years but never was a problem, since most attorneys know that exclusive use is a subset of common area, and so the HOAs obviously would repair them. This bill would make the statute say that explicitly, and so changes nothing. If people say or write that this bill is a big deal, they are trying to panic you, or they don’t understand the law, or… both! This bill passed the Assembly and is now in the Senate and is expected to pass. Expect it to become law, and not to change anything. AB 2430 This bill, sponsored by the California Association of Realtors®, passed this year with little opposition, was signed by the Governor in July, and will take effect on January 1, 2015. This bill is directed toward the cost of HOA disclosure documents, often billed to the buyer, and primarily shifts the initial cost responsibility to the sellers. However, the seller still may negotiate and...

Exactly Who Can Attend Board Meetings?

A longstanding issue of ambiguity and occasional dispute arises regarding when a common interest development member tries to designate someone to attend a board meeting for them. The Davis Stirling Act, at Civil Code 4925(a) (its “Open Meeting Act”) says only that “any member of the association may attend meetings of the board of directors of the association.” What if a homeowner brings an attorney with them, or has an attorney attend a board meeting in their place? If the member is an entity (LLC, or Trust, for example), who can attend and represent the entity/member? If the member executes a “power of attorney”, what would that need to include in order for someone to attend in place of the member? These questions were finally answered in the case of SB Liberty LLC v. Isla Verde Association, in an opinion released for publication June 18, 2013. As a “published” opinion, it can be used for precedential value to guide associations in the future. Isla Verde is an association of 87 homes in Solana Beach, into which Gregg and Janet Short bought a residence in 2006. They put ownership of the property first in a family trust, and later in an LLC called “SB Liberty LLC”. For reasons unexplained in the appellate decision, the Shorts sought to have their attorney attend a board meeting on their behalf. The association’s attorney told the Short’s attorney that he would not be permitted to attend. The Short’s attorney attempted to attend the meeting anyway and then refused to leave the meeting, which was adjourned to a director’s residence. The Shorts then executed a...

Open Meeting Act

Mr. Richardson, Our HOA has regularly scheduled, monthly, closed meetings. Based on your columns this doesn’t seem right to me. What types of topics are to be considered in closed session? S.C.,Temecula Dear S.C., Closed session is strictly limited to a very few topics. It is for discussion of personnel matters (if the HOA has employees), litigation, certain member issues (discipline, foreclosure votes, or payment plan proposals), and “formation of contracts”. If it is not under one of those four categories, it cannot be discussed in closed session. Some associations construe “formation of contracts” very broadly, and change vendors in closed session. However, the formation of contract is different than the selection of the vendor. The vendor selection comes first. That discussion should be in open session. After selecting the vendor which the Board prefers, then the negotiation of the contract ensues, and discussion of negotiation terms should be in closed session. The fact that your HOA board meets in closed session each month does not necessarily mean it is abusing closed session. Larger associations often need a closed session each month, because they have disciplinary hearings and foreclosure votes almost every month. Thanks for your question,Kelly Dear Kelly, We are probably the first (mobile home) park in California to be owned by the members. The corporation which we are now governed by a Board of Directors and our meetings are held every month. We have a nine member Board of Directors voted by the members of the park. Your article regarding Open Forum is at question to some of the members. Our important question to you is, are...