Reader Questions - Are Our CC&Rs Enforceable?, Election Rules

Kelly Richardson,

Our HOA was formed about 1960. We have filed SI-100 with the state as required. We have never filed any state or federal tax forms.

The HOA is a voluntary group of individual homes. It owns no property. Our annual income from dues is about $2000 and our major expense $1500 to insure the board of directors. Are the CC&R’s enforceable and if so, how do we do it?

Do we need insurance?

R.S., Rancho Palos Verdes

Dear R.S.,

I checked your association’s corporate status with the Secretary of State, and your HOA is “active”. [Readers: Check it at http://kepler.sos.ca.gov/ and make sure your association is “active”. If you can’t find your HOA, you might not be using the legal name of the corporation, or it might not be a corporation – check your bylaws to see if it is an “unincorporated association”. Also make sure your agent for service is active – sometimes it lists a former manager or former director.]

If your group of homeowners is voluntary, then that would imply there are no covenants, conditions and restrictions binding you all. If membership is mandatory, then the money paid each month or quarter is not “dues” but “assessments”. If there is no “CC&R’s” or membership is voluntary, then your group is not a “common interest development” under the Davis-Stirling Common Interest Development Act. CC&Rs are enforceable as to the owners of the property on which they are recorded. If your group wishes to become a common interest development, you would need all of the owners to agree (and probably also any mortgage holders).

As to insurance, yes it is a good idea. You are volunteers, and should be protected as much as possible from liability (in addition to the protections of the “Business Judgment Rule”).

Thanks for your question,
Kelly

Dear Kelly,

I have a question regarding Election Rules for HOAs. Beginning July 1, 2006, all associations were required to adopt election rules that comply with California Civil Code 1363.03.

Do the HOA “Election Rules” need to be signed and dated by a member of the Board of Directors? Must the motion that accepted the document be noted in the minutes?

Can an HOA’s management company qualify as an independent third party and act as their “Inspector of Elections”?

Sincerely,

D.O., Altadena

Dear D.O.,

If your HOA does not have written election rules, it should adopt some. Rules are adopted by a procedure dictated in Civil Code 1357.100-150. The proposed rule change must be given verbatim to all members at least 30 days before the board meeting at which they will be adopted. Nothing in that law says the rule change must be signed by a director, but the rule’s adoption must be noted in the minutes. Also, the rule change must be announced in writing no later than fifteen days after it is adopted. Any owner should be able to request a copy.

Your management company does NOT qualify as an “independent third party” under 1363.03(c)(2), but it can serve as the inspector IF your election rules specifically allow that.

There are also companies providing inspector of election services, or the board can appoint HOA volunteer members to serve.

Thanks,
Kelly

Written by Kelly G. Richardson

Kelly G. Richardson Esq., CCAL, is a Fellow of the College of Community Association Lawyers and a Partner of Richardson | Ober | DeNichilo LLP, a California law firm known for community association advice. Submit questions to [email protected]. Past columns at www.hoahomefront.com. All rights reserved®.