Covenants Amendment Voting Question

I am the president of a small, self-managed HOA that is about to conduct a vote to amend our covenants in order to allow small, non-household “pets” such as chickens, rabbits and honey bees. To facilitate future adjustments, we plan on publishing a resolution at the same time (if the amendment passes) to outline the necessary restrictions on how many small, non-household “pets” are permitted, confinement requirements, etc.

I wonder if someone can help me interpret the wording in our covenants and bylaws that covers voting. We were established over 30 years ago, so we are not subject to the North Carolina Planned Community Act in its entirety, and I believe only our own governing documents (see below extracts) apply to voting on Amendments. Specifically, my questions are:

1. Given that our Declaration is dated June 12th 1987 and we are far beyond the 20-year period described in the covenants, how does this impact our ability to amend our Declarations?

2. Does the voting methods in our Bylaws apply for the amendment or do they not apply based on ARTICLE IX which says our covenant apply when there is a discrepancy between them?

Thank you...Keith

With respect to amendments, our Covenants says:

ARTICLE 18 -- DURATION, AMENDMENT AND TERMINATION
The covenants and restrictions contained in this Declaration shall run with and bind the land for a term of twenty (20) years from the date this declaration is recorded, after which time, they shall be automatically extended for successive periods of one (1) year. This Declaration may be amended in full or part during the first twenty (20) year period by an instrument signed by Owners representing not less than seventy-five percent (75%) of the Lots provided that no amendment shall alter any obligation to pay Community Expenses to benefit the Community Use Areas, as herein provided, or affect any lien for the payment of same. To be effective any amendment must be recorded in the Office of the Register of Deeds of Beaufort County, North Carolina, and a marginal entry of same must be signified on the face of this document.

With respect to voting our Bylaws says:

Voting of shares. Subject to the provisions of Section 4 of ARTICLE III., each outstanding share entitled to vote shall be entitled to one vote on each matter submitted to a vote at a meeting of members. Except in the election of directors as governed by the provisions of Section 3 of ARTICLE III., the vote of a majority of the shares voted on any matter at a meeting of members at which a quorum is present shall be the act of the members on that matter unless the vote of a greater number is required by law or by the charter or bylaws of this corporation.

Ouorum. A majority of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of members, except that at a substitute annual meeting of members the number of shares there represented either in person or by proxy, even though less than a majority, shall constitute a quorum for the purpose of such meeting.

ARTICLE IX. Any inconsistencies between the terms and conditions contained within these By-laws and the terms and conditions contained within the Declarations recorded in Book 882 at Page 49 of the Beaufort County Registry will be resolved in favor of the Recorded Declarations, which shall take precedence over these By-Laws.

Douglas...thank you for your input...I certainly see where you are coming from.

But...

I mistakenly dismissed the North Carolina Planned Community Act because I thought that it didn’t apply; however, I think one could argue that it does apply in this instance because our declarations no longer provide for the means to amend the declarations so they don't "expressly provide to the contrary"???

Extracted from North Carolina Planned Community Act

47F-1-102. Applicability.

(a) This Chapter applies to all planned communities created within this State on or after January 1, 1999, except as otherwise provided in this section.

(b) This Chapter does not apply to a planned community created within this State on or after January 1, 1999:

(1) Which contains no more than 20 lots (including all lots which may be added or created by the exercise of development rights) unless the declaration provides or is amended to provide that this Chapter does apply to that planned community; or

(2) In which all lots are restricted exclusively to nonresidential purposes, unless the declaration provides or is amended to provide that this Chapter does apply to that planned community.

(c) Notwithstanding the provisions of subsection (a) of this section, G.S. 47F-1-104 (Variation), G.S. 47F-2-103 (Construction and validity of declaration and bylaws), G.S. 47F-2-117 (Amendment of declaration), G.S. 47F-3-102(1) through (6) and (11) through (17) (Powers of owners' association), G.S. 47F-3-103(f) (Executive board members and officers), G.S. 47F-3-107(a), (b), and (c) (Upkeep of planned community; responsibility and assessments for damages), G.S. 47F-3-107.1 (Procedures for fines and suspension of planned community privileges or services), G.S. 47F-3-108 (Meetings), G.S. 47F-3-115 (Assessments for common expenses), G.S. 47F-3-116 (Lien for assessments), G.S. 47F-3-118 (Association records), and G.S. 47F-3-121 (American and State flags and political sign displays), and G.S. 47F-3-104 (Transfer of Special Declarant Rights) apply to all planned communities created in this State before January 1, 1999, unless the articles of incorporation or the declaration expressly provides to the contrary, and G.S. 47F-3-120 (Declaration limits on attorneys' fees) applies to all planned communities created in this State before January 1, 1999. These sections apply only with respect to events and circumstances occurring on or after January 1, 1999, and do not invalidate existing provisions of the declaration, bylaws, or plats and plans of those planned communities. G.S. 47F-1-103 (Definitions) also applies to all planned communities created in this State before January 1, 1999, to the extent necessary in construing any of the preceding sections.

§ 47F-2-117. Amendment of declaration.

(a) Except in cases of amendments that may be executed by a declarant under the terms of the declaration or by certain lot owners under G.S. 47F-2-118(b), the declaration may be amended only by affirmative vote or written agreement signed by lot owners of lots to which at least sixty-seven percent (67%) of the votes in the association are allocated, or any larger majority the declaration specifies or by the declarant if necessary for the exercise of any development right. The declaration may specify a smaller number only if all of the lots are restricted exclusively to nonresidential use.

(b) No action to challenge the validity of an amendment adopted pursuant to this section may be brought more than one year after the amendment is recorded.

(c) Every amendment to the declaration shall be recorded in every county in which any portion of the planned community is located and is effective only upon recordation.

(d) Any amendment passed pursuant to the provisions of this section or the procedures provided for in the declaration are presumed valid and enforceable.

(e) Amendments to the declaration required by this Chapter to be recorded by the association shall be prepared, executed, recorded, and certified in accordance with G.S. 47-41. (1998-199, s. 1; 2012-18, s. 1.8; 2013-34, s. 5.)

67% need to approve an Covenant amendment is quite common. Also if your docs do not specify, turning to state rules/laws is the correct procedure.

Think it's a bad mistake not consulting an attorney. (Don't use a Real Estate one if you do). To save money, you may be able to do some of the work yourselves but not all. There was a package available for like $20 at office supply stores that comes with paperwork/CD's. It's along the lines of DIY rental agreements. Seen some for a variety of other subjects as well. So may want to do a search to see if one is available for your needs.

The best way to approach this as a DIY is a basic "cut/paste" job. Which I would make a separate document with reference to the changes so no one has the read the whole document. For example: If you change Paragraph 11.3 Voting to reflect 1 class voting instead of class A/B. Now the developer is gone there is no longer 2 classes. You want to delete the developer's class and then change to 1 class vote. However, you then want to copy the original to another document (Label example changes) and then copy what it is changed to. This is a great way to be able to proofread and provide quick references.

Now in the end, I would have a lawyer review the document to make sure it's legally compliant. Like the change made isn't against any laws. Plus you may need one to actually file it. Which there is an actual filing fee involved. It can be several hundred dollars to file. Plus you will need to provide your voting approval of the required vote attached.

Which brings me to the important part. You need to have a document drafted for the official vote for people sign for these changes. The "Changes" document may be useful in this area as the signers may vote they agree to those changes listed. That vote sheet has to be attached when filing.

Note: Our HOA it was required to have a special meeting to gather votes. We could not go door to door to get them. Our lawyer had to draft another vote for owners to agree to skip the special meeting requirement to cast their vote. So basically the owners/member had to give up their right to the special meeting to take the vote outside of that requirement.

We just made 5 changes to our documents. 1 was to change we are now individual water meters. 1 was for removing all the developer references. We also changed the voting classes. It took about 3 years and about 2 - 3K for lawyer/filing fees. That did not count distribution costs like paper/electronic copies. We just made them upon request. It was too expensive for us to provide. Plus they are public documents one can get a copy of at the courthouse or online.

Chickens?

I would recommend using what is contained in your CCR’s for the following reason:

§ 47F-2-117. Amendment of declaration.

(a) Except in cases of amendments that may be executed by a declarant under the terms of the declaration or by certain lot owners under G.S. 47F-2-118(b), the declaration may be amended only by affirmative vote or written agreement signed by lot owners of lots to which at least sixty-seven percent (67%) of the votes in the association are allocated, or any larger majority the declaration specifies or by the declarant if necessary for the exercise of any development right. The declaration may specify a smaller number only if all of the lots are restricted exclusively to nonresidential use.

Your State Statute clearly gives preference to a larger majority specified by your declaration. If you use the the lower percentage noted in the State Statute and if challenged in court by a homeowner ... the HOA could potentially loose that lawsuit due to what is stated in the above statute. If you are going to work hard for any amendment then you should make sure it is done right and not violate any laws.

Ahh ... I see your point in that potentially after 20 years from when CCR’s were recorded how you could potentially utilize the State Law minimum. I would recommend if you will have high turnout and votes that you potentially also try to amend your CCR’s to note the percentage required by your State Statutes for amendments as a CYA for future. If the owners amend now it could potentally help prevent a future challenge and court battle due to someone misreading. This would help the HOA avoid potential future legal fees for any challenge.