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How to Successfully Update Your HOAs Governing Documents
How to Successfully Update Your HOAs Governing Documents
By Kumar S. Raja, Esq.
Doesn’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HOA laws; to retype the language because the original text appears as if it was written in the Stone Age; and to delete outdated provisions which are no longer necessary.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 amendment language (legal expense) and then sending the amendment materials to the membership (copy and postage expense), among other things.
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
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 without member approval provided that they do not conflict with the current language of the CC&Rs.
CC&R UPDATE STRATEGY CONSIDERATIONS
When a decision is made to perform a CC&R Update, it is often believed that an A to Z revise is necessary where all new California laws are to be incorporated into the CC&Rs, code references are updated, and outdated provisions are removed. Member approval of such comprehensive updates can be harder to achieve because many homeowners do not have the time to comprehend the proposed ballot and amendment materials which typically include several pages of documents. To avoidimmediate filing of the same into the round filing cabinet (i.e. waste basket), HOAs may want to consider a more strategic approach to secure homeowner approval for an update requiring homeownerapproval.
One approach is to amend and restate the CC&Rs by targeting one (1) or two (2) pressing issues which are most important to the community or which are historically present, in lieu of a comprehensive update. Examples include increasing violation fine amounts, reducing quorum requirements, or removing the cumulative voting provision. By focusing on a few select items, the HOA is potentially increasing the probability of a successful member-approved CC&R Update because the ballot measure has been presented to the homeowners in relatively clear and simple terms. The HOA can consider a series of individual CC&R amendments over a period of time (e.g. bi-annual or annual basis) if several CC&R Updates are considered to be important to the community. For ease of reference, those amendments can then later be incorporated into a single amended and restated declaration without member approval.
UPDATING GOVERNING DOCUMENTS TO REFLECT CURRENT HOA LEGISLATION?
Community association law is constantly evolving and expanding. On an annual basis, the California legislature passes new legislation that is designed to benefit HOAs and homeowners throughout the state. Does that mean that HOAs should consider amending their governing documents to reflect those new changes on a regular basis? The answer is, not necessarily; otherwise, community associations would be burdened by the financial expense of endless CC&R Updates.
HOAs might be able to address recent changes in the law by adopting reasonable operating rules. For instance, policies relating to “Solar Energy Systems” and “Rights of Assembly and Non-Commercial Speech” are becoming more common in the HOA space in response to AB 634 and SB 407, respectively, both of which became effective on January 1, 2018.
Typically, new legislation is designed to supplement or clarify HOA industry practice. In the event of conflicts between the law and the governing documents, Civil Code §4205 (a) provides that the law shall prevail. Should the legislature adopt new HOA laws that potentially conflict with the governing documents, those new laws will likely supersede the governing documents unless otherwise provided by the text of the statute. An example of that sort of text is set forth in Civil Code §4775 (revised by AB 968, effective January 1, 2017) (Association and Owner Maintenance Responsibilities) which seeks to address ambiguities between the Civil Code and governing documents by including the following language: “Unless otherwise provided in the declaration…”. Resolving application of new HOA law to HOA governance and questions of interpretation between statutory law and an HOA’s governing documents should be referred to the HOA’s general counsel for a legal opinion.
Diagnosing the core purpose behind a proposed update to the governing documents is critical to identifying creative solutions that might be available for the board’s review. If a CC&R Update requiring member approval is necessary, the HOA should develop a clear strategy to maximize the possibility of member approval by evaluating the existence of member apathy and then identifying the most important issues facing the community at that time.
Kumar S. Raja, Esq. is a senior litigator with the Tinnelly Law Group. Mr. Raja handles a wide variety of the firm’s litigation and general counsel matters. With offices throughout the state of California, the Tinnelly Law Group has exclusively represented community associations for the last thirty (30) years. You can reach Kumar at (949) 484-4223 or kumar@tinnellylaw.com.
