LHC Newsletter, Vol 8, No. 2

THE PROPOSED CC&R AMENDMENT DID NOT PASS, WHAT DO YOU DO NOW?

By:      Robert D. Hillshafer

David A. Loewenthal

Michael D. Attar

So you have attempted to amend the Association’s Declaration of Covenants, Conditions and Restrictions (CC&R’s) without success.  What do you do now after having already spent considerable Association resources and much effort getting to this point? It is well known that many Associations suffer from voter apathy and/or indecision when it comes to amendment of governing documents, even after much publicity and several attempts to obtain a membership vote.  Given that amendments of most governing documents require a supermajority, often as high as 75% of the total membership, the will of a substantial majority of the voting membership may be thwarted because of the apathy of a small number of non-voting members.  This result is both frustrating and potentially detrimental to the Association and its membership.  Fortunately, there is a Court procedure built into the Davis-Stirling Act which is designed specifically to mitigate apathy and allow Associations the ability to adopt amendments to the CC&R’s when attempts at obtaining approval by a supermajority requirement have failed.

 

Civil Code 4275 provides an Association with a safety valve, through a Court Petition process, for those situations where the need for a supermajority vote would prevent the Association from implementing reasonable and necessary amendments.  In order to amend a Declaration (CC&R’s), the statute requires that at least 50 percent of the membership in the Association voted in favor of the amendment.  The higher the percentage of affirmative votes cast further supports the request to the Court to approve the amendment.

 

To successfully utilize this procedure, balloting on the proposed amendment must be conducted in accordance with the governing documents and the Davis-Stirling Act.  The Association must comply with the secret ballot method by using the two (2) envelope system as set forth in Civil Code 5115 and provide for mailing in the ballots.  The Association must establish that a reasonably diligent effort was made to permit all eligible members the opportunity to vote on the proposed amendment which means strict adherence to all the voting requirements of the Act.  By statute, at least thirty (30) days must be provided to the members to vote on an amendment.  During this “voting period”  the members should be reminded and encouraged to return their ballots (whether for or against), by posting notices, email blasts, and other means of providing notice to the membership to exercise their right to vote.  This particular issue of “getting out the vote” can be important in this procedure as some courts have interpreted the term “permitting” members to vote to equate with “encouraging” members to vote.  One effective tool that can be used to reinforce this is to “extend” the voting period in order to solicit more members to cast votes either for or against.  In a recent unpublished opinion, the appellate courts have recognized that the extension of voting is an appropriate method to encourage voting as long as the encouragement is neutral.

 

Assuming the foregoing election criteria is met and the amendment is reasonable and not sought for an improper purpose, the Association may file a Petition in the Superior Court of the county in which the Association is located for an order reducing the percentage of the affirmative votes necessary for such an amendment.   Although the statute does not require the petition to be supported by a Declaration, it is our experience and recommendation that a declaration by a board member which authenticates the supporting documentation should be filed with the Petition.

 

The procedural requirements for the petition include describing the efforts that have been made to solicit approval of the Association members in the manner provided in the Declaration of CC&R’s, identifying the number of affirmative and negative votes actually received; identifying the number or percentage of affirmative votes required to effect the amendment in accordance with the existing Declaration; and other matters the Association considers relevant to the Court’s determination.  The petition must contain, as exhibits to the Petition, copies of all of the following:  (1) The governing documents. (2) A complete text of the amendment. (3) Copies of any notice and solicitation materials utilized in the solicitation of member approvals.  (4) A short explanation of the reason for the amendment. (5) Any other documentation relevant to the court’s determination.  These matters are also addressed in the Declaration accompanying the Petition.

 

Ultimately, the Court has discretion to approve the Petition if it complies with the statutory requirements.  The statute provides that “The court may, but shall not be required to, grant the petition…”   Consequently, it is helpful to have Association legal counsel guide the Association through the procedures and process, which involves at least two (2) court hearings, including an ex parte application to set the hearing, and the actual Petition hearing itself.  The Association must provide at least fifteen (15) days written notice of the Court hearing to all members of the association.  This can be a costly mailing to the members particularly with the Petition and the exhibits typically being a hundred or more pages.  However, if properly presented, most  judges at the ex parte hearing will approve an alternative notice procedure to minimize the cost through several more cost efficient means of providing notice to the membership.  These measures include providing the membership notice of the applicable court dates by making the Petition available for review at the managing agent’s office.

 

Although infrequent, the Petition may be opposed by member(s) that do not want the court to grant the Petition.  Opposing members (with or without counsel) may submit written opposition, Declarations and other evidence relating to issues of improper voting/balloting, reasonable diligence in permitting eligible voters an opportunity to vote, and the reasonableness of the amendment.  Often these submissions do not comply with the formal rules of Court but are nonetheless given consideration by the court in a somewhat relaxed process.  These oppositions often focus on irrelevant matter or alleged wrong doing by the Board which then has to be controverted by further pleadings submitted by the Association.  After consideration of the Petition, supporting declarations and documents as well as any opposition, the Court will ultimately decide whether to grant the Petition.

 

Even if the Court grants the Petition, the amendment is not effective until the Court order and a Certificate of Amendment duly notarized by a board member is recorded in the County Recorder’s Office.  The amendment carries the same force and effect as if the amendment were adopted in compliance with every requirement imposed by the governing documents.  Within a reasonable time after recording, the Association shall deliver a copy of the amendment by first class mail or personal delivery, together with a statement that the amendment was recorded to the members.

 

Although members may file opposition to the Petition, attorney fees are not available to a successful Petitioner Association nor to a successful opposing member/owner of the Association.   By definition, the Petition process is not an enforcement action pursuant to Civil Code Section 5975 relating to the enforcement or to restrain the violation of the Declaration or for the enforcement or to restrain the violation of any revisions to the Declaration.  In Blue Lagoon Community Association v. Mitchell (1997) 55 Cal.App.4th 472, the appellate court addressed the exact issue of the availability of attorney fees for a successful respondent in a petition under former Civil Code section 1356, and ruled that there was no statutory basis for an award of attorney fees in any event.

 

The Petition process is a necessary tool for Association’s to use in what might otherwise be an impossible task of amending the CC&R’s and could result in a significant waste of resources when a supermajority requirement exists.  It is wise to keep in mind when attempting to amend that keeping good records of all the communications is critical and that advising the membership of the petition process up front is not a bad idea.

 

©2016 by Loewenthal, Hillshafer & Carter, LLP.  All rights reserved.  Permission is granted to reproduce to transmit in any form any part of this newsletter as long as proper attribution to Loewenthal, Hillshafer & Carter, LLP is given.  Due to the rapidly changing nature of the law, information contained in this publication may become outdated.  As a result, lawyers and all others using this material must research original sources of authority.