FL HOA – Proposed Amendment that radically changes our Doc’s.

I’m in a quandary and could some advice, apologies for length but it paints the picture.

We’re a 90 home, over 55, FL HOA. At the Annual Meeting on Sat 02/15/20 the BOD is proposing a single Amendment that radically alters the percentage of Membership votes required to make Amendments to our Doc’s. The current requirements are:

• Articles of Incorporation – 75% of BOD and 60% Members, OR 80% of Members
• By Laws – 75% of BOD, 75% Members, and Mortgagees Consent, OR 80% of Members
• Declaration of Restrictions – 66% Members and Mortgagees Consent.
• Rule and Regulations – 60% of Members

The single proposed Amendment changes the Articles, By Laws, and Declaration to 50% of Members (a majority). It strikes out Mortgagees Consent and the rights of 80% of Members to Amend.

Our HOA membership has many snow birds and absentee owners who rent. So, the 7 person Board controls enough proxies to always have a Majority. Many view this as a power grab that will be difficult to reverse considering that 80% of the Members can no longer make Amendments. It’s easy to envision disasters, for example: The RR’s require 60% Member approval. Apparently, that’s too cumbersome for the Board as discussed in my recent post “Official Records”. So, they vote to eliminate 60% Member approval of RR’s – that solves their problem but a disaster for Members.

There have been 2 Amendments to our Docs in the last 50 years. The roadblock of Mortgagees Consent was mitigated with 720.306 (d) (1-6) limiting Consent to those prior to July 01, 2013. Our last Amendment was filed with no Mortgagees Consents BUT it was not contested within the 5 year limitation – so it’s Official. It worked once so why not try it again? Not this time, not with this Amendment – it’s too important.

This Board continually tries to circumvent compliance requirements. Here’s the questions I submitted 2 days ago at the monthly Board Meeting and requested a written response by Sat 02/15 Annual Meeting:

• Does the Board intend to make all Members aware that Mortgagees consent is required before it’s official?
• Has the Board identified all Mortgages prior to 07/01/2013?
• Has the Board received Consent from those Mortgagees?
• Does the Board intend to have the Membership vote on the Amendment without Mortgagees consent?
• Does the Board intend to file the Amendment, should it pass, with the County without Mortgagees consent?

As always, I really appreciate your thoughts, time and expertise.

Zach

I also agree with Zach's concerns. The higher percentages make it harder for a community to shoot itself in the foot and should not be abandoned for anything other than compelling reasons.

Some comments:

* As noted, lowering the percentages makes a community more vulnerable to voting blocks. During the previous housing bust, a number of communities found themselves taken over by groups of investors who would then vote to dissolve the condo structure and turn the community into rental property. Owners who hadn't seen the writing on the wall and bailed early were given the choice to either rent their units or sell them for a reduced price.

An HOA and one that is 55-and-older will probably be a less attractive target - but such a scenario could still play out if the property is appealing and the group of investors are the right age.

Do you have any reason to suspect something like this could be in play?

* Is there any way to break up the board's stranglehold on the non-residents' proxies? An informative Dear Neighbor letter?

This needs some thought. On the one hand, it makes sense for non-residents, who will be less informed about issues, to give their proxies to the board. On the other hand, it's only a good idea if the board has the community's interests at heart, which seems questionable here.

* Legal action!!! Even if the board is "only" trying to do an end run around the members, you could maybe make a good argument that this would be a breach of their fiduciary duty (ie. lowering the barrier could let the investor "invaders" in).

I agree that this is worth fighting over.

Mortgage companies don't like it when they can't veto a change in the docs. That makes sense, because some changes could adversely affect a mortgagee's interest. So, if you eliminate Mortgagees' assent, I would expect it to be challenging for any prospective buyer to get a mortgage, which in turn could make the individual properties more difficult to sell and therefore less valuable.

My HOA changed the amendatory threshold for all three of the main governing documents to a simple majority (50% plus 1) back in 2011. It hasn't been a problem. Only one amendment in 2013 has been enacted since.

Note that the "simple majority" is a majority of those members present at a members meeting where there's a quorum, NOT a majority of all the homeowners.

Personally I believe 51% of all owners (note I say all owners) is enough to change a Bylaws and 2/3rds to 76% of all owners (notice I say all owners) to change a Covenant. I believe those numbers are high enough to stop an association from doing something stupid.

The problems I have seen are the % not being of all owners and a BOD try to pass R&R's that countermand Covenants and/or Bylaws.