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Court Ordered Reduction in Supermajority required to amend Covenants

Started by GeorgerwilliamsW • 9 replies • 2129 views

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GeorgerwilliamsW (Indiana)
Posts: 975
Posted:
A question arose in the mark up session yesterday that I would like to answer. I would appreciate both your opinions and any factual information about and references to any unpublished cases in your state that you can provide.

Under the California Davis-Sterling Act, (section 1356) an association may ask a court to lower the supermajority requirement to amend covenant declarations.
    "Viewed objectively, the purpose of . . . section 1356 is to give a property owners' association the ability to amend its governing documents when, because of voter apathy or other reasons, important amendments cannot be approved by the normal procedures authorized by the declaration. In essence, it provides the association with a safety valve for those situations where the need for a supermajority vote would hamstring the association." (Blue Lagoon Community Assn. v. Mitchell (1997) 55 Cal.App.4th 472, 477.)

    The court may, but need not, grant the petition if it finds all of the following: Notice was properly given; the balloting was properly conducted (in accordance with all applicable provisions of the governing documents); reasonable efforts were made to permit eligible members to vote; owners having more than 50 percent of the votes, in a single class voting structure, voted in favor of the amendment; and the amendment is reasonable. (Peak Investments v. South Peak Homeowners Assn., Inc. (2006) 140 Cal.App.4th 1363, 1366-1367).


Are there instances in other states (published or unpublished court cases, in
particular) in which courts have allowed a lesser majority that required by the covenants to change covenants?

Is it a good idea to allow courts such discretion?
DonnaS (Tennessee)
Posts: 5,671
Posted:

George,
I am going to answer your second question now. "Is it a good idea to allow courts such discretion?"

IMHO, the answer is a definite NO!! IF and I say IF, the HOA has petitioned the court for receivership, then yes but involving the courts for basic governing issues is going beyond the courts jurisdiction. It is the responsibility of the members and any association can get the job of passing or denying votes if they put in the work. Where does anyone, and mostly these associations who don't seem to get issued settled because of owner apathy, where do they think it will be just handed to them. They need dedication and some members who are willing to get out and walk the developement. Is it right? No, but that's the way it goes in life.

George!! In your office, does everyone work equally? Are there slackers and are there some who seem to be leaders? Of course there are, just like HOA members. So let the HOAs alone until there are no other options available to them.
GeorgerwilliamsW (Indiana)
Posts: 975
Posted:

So, may I conclude that you do not approve of the "safety valve" concept written into the Davis-Sterling Act? That is a reasonable position.

Unfortunately, whether or not we think allowing courts to intervene in such instances is a good idea, an opinion about factual matters doesn't count:
    "...but involving the courts for basic governing issues is going beyond the courts jurisdiction."
The courts jurisdiction is determined by law, irrespective of what one's opinion of its jurisdiction is. It is a fact in California the courts have such jurisdiction by law, so it is not "going beyond the courts jurisdiction."
DonnaS (Tennessee)
Posts: 5,671
Posted:

George,
"The courts jurisdiction is determined by law, irrespective of what one's opinion of its jurisdiction is. It is a fact in California the courts have such jurisdiction by law, so it is not "going beyond the courts jurisdiction."

We could argue that sometimes the Courts jurisdiction is unwanted or unneeded. But I won't go that way.
Marajuana, Roe vs Wade comes to mind. Getting down to the HOA voting numbers is really getting pretty insignificant to me when it is the members who need a kick, not a law.

MaryA1 (Arizona)
Posts: 7,043
Posted:
George,

I don't know of any AZ court actions, however, the legislature has a bill b/4 them as we speak which would drastically lower the requirements to amend the CCRs. I am vehemently opposed to it. If this bill is enacted it would mean a mere 15% of the members of my assn (total membership = 1,702) could amend the CCRs. I don't believe anything lower than a majority vote of the members attending the meeting, NOT of the members voting, should be required. I do believe requiring more 75% or more is almost impossible. I wonder if anyone who thinks the CA law is fair has ever stopped to think about why the builders set the % so high. Could it be because the CCRs contain restrictions that run with the land and are agreed upon by the buyer when purchasing and really should only be changed if that buyer agrees to it? I have heard of some assn's that do require a 100% vote.
KirkW1 (Texas)
Posts: 1,665
Posted:
I don't know which chapter and section of law, but am sure that Texas law states that Covenants may be changed by approval of 2/3 of the membership (or a lessor level if stated in the covenants). I am quite certain that it is written to over ride any statement of a higher level. (It also spells out the manner in which one can change them.)

While I do believe that it is a good idea for the state to place a limit on just what percentage is required to change the covenants, I don't think allows discretion of the court is such a great idea. I think the big thing is that it would make things arbitrary. How exactly does one go about deciding when to lower the limit?
SusanW1 (Michigan)
Posts: 5,202
Posted:
The court is being petitioned - the board or whomever is left, MUST have some kind of system for resolving issues when they can't hold a meeting!

I would bet it involves lowering quorums or holding elections

KirkW1 (Texas)
Posts: 1,665
Posted:
I don't know of a nice way to resolve the main issue that I keep seeing. In my case, we have two totally different neighborhoods sharing a single set of documents. But others are perhaps in a worse place yet.

When you are talking more then 1000 homes then getting a 75% or a 66% majority of all ownership becomes nearly insurmountable. On the other hand, those that are an HOA of say 21, it seems quite reasonable indeed. If it is important then 2/3rds will approve of a change.

The best thing that I can think of would be to require a 60 day notice of the election. Then a 2/3rds vote of all who choose to vote. That and require that owners be allowed to register an absentee vote. This should probably be followed by a notification period during which a challenge can be made to the vote. Until any challenge is resolved the change is kept on hold. The challenge would have to be based on some combination of:
1) Failure to notify.
2) Improper handling of votes.
3) Evidence of intimidation.
Or something along these lines.
DonN (Michigan)
Posts: 357
Posted:
George

Most states have case law on the requirements for amendments. Michigan court opinions which are largely based on the reasoning and opinions from other states require the following:
(1) For the usual amendment (fix, correct, adjust, refine, etc.), the case law requires approval by a majority of owners and is then enforceable against all owners. Ardmore Park v. Simon.
(2) For any amendment that is not uniformly applied to all property units, unanimous approval is required. Maatta v. Dead River.
(3) Michigan has no cases on major amendment which could significantly change the character of the development or costs to the owners. This is addressed in an opinion by the North Carolina Supreme Court in Armstrong v. Ledges.

Louisiana statutory law requires unanimous approval for any amendment that increases the stringency of any provision.

Obviously, it may be impossible to obtain 2/3 or higher super-majority as written into some CC&Rs. Relief by the courts is appropriate for the amendments in (1) above. The requirements in Peak Investments v. South Peak Homeowners Assn., Inc. seem to be appropriate and are in agreement with (1) above.

There should be no relief from the courts for (2) and (3) which should require unanimous approval. The reasoning in (2) is that a majority could gang up on a specific property unit or units and impose provisions only on those property units. The reasoning in (3) is that a new contract is created which requires the approval of all parties.
DonN (Michigan)
Posts: 357
Posted:
George,

In my Feb 08 post, I forget to include a link to a proposed owner's/member's right concerning amendments of the CC&Rs. That link is Rights Concerning Amendment which is part of a proposed Statement of Rights.

The first link provides the statement or right concerning amendments with explanation and references including links to all of the cases cited. I will be adding the California case as a reference.

The second link is to the beginning of the proposed Statement of Rights.

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