Amending CC&Rs: Vote Failed, Now What, and Notifying Lenders

By Kelly G. Richardson, Esq. CCAL, HOA Homefront Column 

Kelly, a few years ago we were updating our by-laws and CC&R’s. We needed 51% of the members to vote for the bylaws changes but 66% to change the CC&R’s. The board refused to give us a red lined document but instead just sent us the final version, so we had to go through it piece by piece and spent hours looking for the changes.

As the vote was first counted, the vote for the bylaw changes needed a few more votes. A board member moved to postpone the vote in order to reach out to people that had not voted.  When the bylaw vote came up again it passed by one vote. The CC&R’s needed way more votes to pass so they didn't address that.

I recently discovered that the only way you are allowed to extend a vote is if you could not get a quorum which in this case we did have. Can we reverse that vote, getting now more people to vote to reverse it or do we have to go to court? J.N., Irvine.

Dear J.N.: I am sorry to that your board proposed a major governing document revision without sending a “red-line” draft to the members. This violated Civil Code Section 5115(g), which requires that the text of the proposed amendment be sent to members along with the ballot (unless the election is electronic, in which case the proposed amendment can be sent electronically). If the HOA sent a non-redlined “final” version document then the amendments were essentially hidden. Not only did that violate the statute, but it made it much harder for the membership to approve the amendment(s).

Postponing the opening of ballots to provide homeowners further time to vote is common, but Civil Code 5120 prohibits opening ballots before the announced time for the vote counting.

It might be time for the HOA to start over, but this time pursuing the process correctly. Best, Kelly

Hi Kelly,

The builder of our HOA put in the CC&Rs that to amend it, there has to be an approval vote of the membership and the mortgage lenders of 51%.   With over 100 residences, obtaining any response from the mortgage lenders would be a monumental task.  Is there anyway around this regulation?  We would like to update the CC&Rs. J.P., Lake Forest.

Dear J.P.: Fortunately, the appellate court ruled in 2008 that HOAs need not actually receive votes from each mortgage lender when lender consent is required by the governing document to approve certain amendments. In Fourth La Costa v. Seith, the court held that because the HOA mailed notice to the lenders by certified mail, return receipt requested, and gave them a reasonable time (30 days) to respond, the lenders’ failure to respond could be deemed “consent” to the amendment. Ascertaining the lenders takes some research but recorded mortgages are public documents. In my career of over 36 years serving HOAs, I think I have received 3 responses from lenders – and they were simply questions regarding whether the lender must do something with the notice. Your HOA’s lawyers, assuming they are experienced HOA attorneys, are familiar with the Fourth La Costa case and should be able to help your HOA on this.

Sincerely, Kelly