By Steven Weil, Esq.
The CC&Rs and Bylaws of a "Common Interest Development" can be amended by membership vote. They can but should they? And, if they should, what techniques can be used to improve the chances that a proposed amendment will be adopted. This article explores these issues and the politics and psychology of amending the CC&Rs, Bylaws or House Rules ("Governing Documents" or "GDs").
I. Why Amend at All?
Here are some of the typical situations that prompt consideration of a GD amendment:
A. Conforming governing documents to the mandates of new legislation
Nowadays, this can be an illusory goal. The Davis-Stirling Common Interest Development Act, the main body of law affecting association operations, is constantly being amended. More and more legislation has been adopted that regulate virtually all aspects of how a CID is operated. Many of the new laws override or at least impact existing GD provisions. Unless the law requires amendments (and, sometimes it does), it is not practical to consider annual member-approved amendments every time the laws are amended.
B. Times change
As a project ages, CC&R amendments may become appropriate to respond to a project's changing demographics. Modifications more responsive to younger and growing families, more teens or an active aging population may be warranted (permitting, for example, on-street parking, second story additions, storage of recreational vehicles). Likewise, changes in products, materials or the delivery of services may make original CC&R prohibitions obsolete (such as those mandating or prohibiting certain types of windows, siding or roofs or those banning in-home business). Also, a more active "electorate" may find that voting and other project governance provisions are too general (no specific candidate rights) or antiquated (prohibiting notice via internet or email delivery).
C. Ambiguity isn't great for harmony
The shorter the Governing Documents, the more general their provisions; the more general the provisions, the greater the potential for ambiguities and challenges. Amendments which clarify the rights and responsibilities of the Association and its members foster "community," volunteerism and preservation of property values. On the other hand, clarifying amendments are sometimes objected to as being "too wordy."
D. Risk management
A decision of the California Supreme Court illustrates the use of CC&R amendments for strategic and risk management purposes. In Villa De Las Palmas Homeowners Assn. v. Terifaj (2004) 33 Cal.4th 73, an association sought a preliminary injunction to enforce a pet ban contained in unrecorded rules. The trial court denied the request. Instead of continuing to litigate the enforceability of the rules, the Association adopted and recorded CC&R amendments that prohibited pets. The Court concluded that this amendment was as enforceable as the original covenants and dismissed the owners' argument that the covenants should not apply to those whose ownership preceded the amendment. The Villa De Las Palmas principle of "retroactivity" has wide ranging implications for the ways in which CC&Rs can address risks facing Associations.
The Saga of University Lofts: A Study of Perseverance and Justice
The owners at University Lofts are a diverse and deserving bunch. Built in 1997as a mixed use project catering to persons with physical disabilities, the Berkeley, California project exhibited much promise. With a location near Downtown Berkeley and the University of California, it was attractive to people who wanted an urban environment with proximity to needed services and amenities. In addition, as a project built in partnership with the City of Berkeley, it was conceived as a way to provide affordable housing for moderate means individuals with physical disabilities. Each unit was designed to be fully accessible.
Unfortunately, the realization did not match the promise. A few years after construction, it became evident that there were substantial water intrusion issues needing attention. While the developer and general contractor attempted to make repairs, the respite was short-lived. By 2005, water was again creating serious difficulties. At this point the Association sought legal assistance from Berding & Weil. The firm assembled a team of experts to determine what was wrong and what it would take to fix the problems. It became clear that some of the problems were so severe that emergency repairs would be necessary to ensure a safe structure.
Despite compelling evidence that the problems were real, resolution of the case was anything but simple. Lack of insurance and recalcitrant carriers even where there was insurance complicated the case, and ultimately necessitated that the case be tried to a jury. Even with the concession that much was wrong, the last offer before trial was $725,000.00, a small fraction of what was needed to correct the defects. So the case started trial and only settled the day before closing arguments were to occur. The settlement: $2,750,000.00, an amount that truly reflects the needed repairs and costs incurred prior to trial.
In today's litigation environment, cases must sometimes be tried to maximize the recovery and expose the weaknesses of the myriad of defenses put up by insurers and others. Berding & Weil is always prepared to take any case to trial when needed to maximize recovery. We have the talent and resources to make our client's day in court a successful one.
IS RESERVE FUNDING MANDATORY?
Can an Association Legally defer the funding of Reserves Necessary for Repairs and Renovations?
By Tyler Berding
"What is a Condominium"
A condominium is not an architectural style but rather a form of legal ownership. This interest is often known as a "unit." With a condominium you own the air space within your walls, floors and ceiling with a common ownership interest in the remainder of the building--the common areas--which are shared by all owners, usually on a percentage basis.
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