– By Laurie F. Masotto, Esq. (originally published in October 1998)
Are there provisions in your Association’s CC&Rs that are too restrictive, outdated, developer-oriented, or are not detailed or clear so that they are difficult to interpret? Is there a provision regarding leasing, pets, or parking, that would better serve the Association if changed? Is a change needed? If your Association esires to amend its governing documents, the Board should consider the following:
Is an Amendment Needed? If your CC&Rs are unclear, for example, on what “ingress and egress” means for purposes of allowing garage doors to remain open, this is a question of how the restriction can be interpreted, without the need for an amendment. If the concern is defining what time trash cans can be placed outside, what pool hours are, or whether parking permits can be issued, these types of matters are properly addressed by adopting a rule to supplement the CC&Rs. Except where required by the governing documents, no membership approval is needed to adopt rules. However, if the rule attempts to change the CC&Rs, an amendment is needed, which requires membership approval as mentioned below. The fact that many homeowners, or board members, desire a particular amendment should be viewed secondary to whether the amendment is in the best interest of the project as a whole. The goals of protecting, promoting, preserving and maintaining the value and attractiveness of the project should be the focus. In addition, the nature of any proposed amendment should be reviewed by legal counsel, to ensure it does not violate laws applying to associations, and will be enforceable.
Membership Approval. Nearly all CC&Rs and Bylaws state a certain percentage of membership approval that is needed to amend those documents. For those that do not, California Civil Code Section 1355(b) permits amendment upon approval of more than 50% of the membership. The Board should consider the type of amendment that is being proposed, and whether it is likely to be passed. The Board can seek approval either by holding a members’ meeting (or including voting on this issue as part of the annual meeting), or by sending out a written ballot. In either case, the notice or cover letter should advocate the amendment, by explaining why the amendment is important, and how the Association will benefit. The ballot and solicitation must contain certain information as provided by the Corporations Code, such as the opportunity on the ballot to specify approval or disapproval, the number and percentage of approval needed, and the time by which to return the ballot. The exact wording of the amendment should be included to clearly inform voters what they are voting on. In some cases, it may be helpful to highlight or provide a summary of the changes.
Lender Approval. Some amendments require lender approval, which is typically when the amendment “materially affects” lenders’ rights. Your governing documents will usually specify what is considered a “material” amendment, such as changing maintenance responsibilities, changing the pro-rata obligation to pay assessments, and eliminating or changing provisions which benefit lenders. Some documents only require approval from those lenders who have given written notice to the Association. Otherwise, the Association would need to identify each lender, and provide notice. Obtaining this approval can be time consuming and expensive; these factors should be considered in making the decision to amend your documents.
Petition In Superior Court If Amendment Fails to Pass. Many associations have difficulty getting members to participate in meetings or other association matters. Amendments are no exception. Where the CC&Rs require a high percentage of approval to amend, such as 75%, it sometimes seems nearly impossible to obtain approval. Such a high percentage can be excused, if the Association is able to get approval of at least a majority. A petition must be filed in the Superior Court under Civil Code Section 1356, to request approval. That section lists the criteria the court will use to review the amendment, such as whether the amendment is reasonable.
Please contact our office to discuss the appropriateness and requirements as to the change the Board has in mind.