FEATURE
How to Successfully Update Your HOAs Governing Documents By Kumar S. Raja, Esq.
D
oesn’t it seem that there is always a need to update your community association’s governing documents for one, if not more, of the following reasons: to incorporate new HOA laws; to retype the language because the original text appears as if it was written in the Stone Age; and to delete outdated provisions which are no longer necessary. The purpose of this article is to outline general considerations for boards and management to review before embarking on the process to update your HOA’s governing documents by amending and restating the CC&Rs or approving an amendment to the HOA’s current CC&Rs (collectively, “CC&R Update”). Subject to a few exceptions set forth within the Civil Code, member approval will be necessary for a CC&R Update (Civil Code §4270(a)(1)). Most sets of governing documents state that CC&R Updates must be approved by sixty-seven percent (67%) of the members. Achieving that “super-majority” approval by the membership can be a challenge, particularly in communities where large numbers of homeowners do not routinely participate in HOA affairs. Accordingly, boards and management must carefully weigh the cost and time investment associated with a CC&R Update project against the possibility of membership approval. CC&R updates will require a significant investment of resources in terms of preparing the
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amendment language (legal expense) and then sending the amendment materials to the membership (copy and postage expense), among other things. To that end, there are a few key factors that should be examined before a decision is made to update an HOA’s governing documents.
IS YOUR COMMUNITY SUBJECT TO MEMBER APATHY? If so, boards and management should reflect upon the decision to spend association resources on a CC&R Update project. Imagine the conversation with the membership when attempting to justify the cost of a CC&R Update after receiving only seven (7) ballots. A good measure of community apathy is to look back at recent director elections. If quorum has been reached at annual member meetings, then your community may be well-positioned to approach the membership for approval.
WHAT IS THE INTENT OF THE CC&R UPDATE? Understanding why the board wishes to proceed with a CC&R Update can be useful because it would provide management and the legal practitioner with an opportunity to develop the best course of action for the board’s consideration. For example, an identification of the board’s objectives might eliminate the need for the CC&R Update altogether because legal counsel could potentially achieve the board’s goals through an operating rule adoption or revision. Unlike CC&R amendments, operating rule changes can be approved by the board without member approval subject to at least a 30-day member notice and comment period (Civil Code §4360) (Note: Effective January 1, 2019, that general notice period will be at least 28 days as a result of SB 261 which revised Civil Code §4360). Under Civil Code §4355, an HOA can adopt operating rules relating to a broad range of community issues, such as common area use, member discipline, and ADR procedures. A common belief is that CC&R Updates are necessary to incorporate significant policy matters, such as election rule and architectural guideline changes. However, those topics are considered to be operating rule subject areas, and therefore, could be incorporated into the governing documents by way of an operating rule
