The court interpreted the reduction in super-majority voting requirements narrowly
By Elias E. Guzman
A court recently held in Peak Investments v. South Peak Homeowners Association, Inc. (2006) 140 Cal.App.4th 1363, that a proposed amendment to CC&Rs which serves to reduce a super-majority voting requirement must be approved by at least 50 percent of all owners.
South Peak is a planned community of 63 custom lots in Laguna Niguel. The homeowners association was governed by recorded CC&Rs. The CC&Rs expressly limited the height and setback standards for all houses. One lot owner wanted to change the setback standards so the owner could build a larger home. The lot owner obtained a statement from the attorney who had represented the HOA in preparing amendments that a more restrictive setback requirement applicable to the lot in question was the result of a typographical error. The HOA’s Board refused to approve the amendment. The lot owner initiated a special meeting of all homeowners to vote on the proposed setback amendment. The CC&Rs established that a quorum required a minimum of at least 25% (16 of 63) of the membership. A CC&R amendment had to be approved by at least 2/3rds (42 of 63) of the members. The vote results showed that 17 members were present and 32 ballots were cast (21 in favor, 11 opposed). Because such a CC&R amendment required a super-majority vote, the HOA declared that the amendment failed.
The lot owners filed suit against the HOA under Civil Code section 1356 to reduce the CC&Rs requirement of a super-majority vote for the amendments because not enough members attended the meeting or mailed in ballots. As such, they sought a declaration that the amendment was properly approved by a majority of votes cast. The trial court granted the petition and HOA appealed.
Section 1356, subdivision (a), gives HOAs, or any member, a vehicle to amend the CC&Rs if they require approval by more than 50 percent of the votes by the association members. A court, is in its discretion, may grant a section 1356 petition if: proper notice was provided, balloting was properly calculated, reasonable efforts were made to permit eligible members to vote, and “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.” (Civ. Code, § 1356(c)(1)-(5).)
Appellant HOA argued that the trial court erred in finding that 50 percent of the owners voted in favor of the amendment, because the statute required the vote by 50 percent of all owners, whether or not they attended the meeting. The relevant question before the court was the meaning of “owners having more than 50 percent of the votes,” as stated in section 1356.
In interpreting the statute, the court held that other sections of the Davis-Stirling Act evidence the legislative intent that “a bare majority of all members would be a minimum required to amend the declaration.” The notes of Restatements of Property provide that the declaration, as a community’s constitution, should not be subject to change at impulse. Nonetheless, the rule of quorum and super-majority may be waived if needed to permit the adoption of amendments necessary for the proper functioning of the association and the amendment is reasonable. Another case relied on held that section 1356’s purpose 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 declaration.” It is a safety valve for instances when a “super-majority vote would hamstring the association.” Regardless, it is the legislative intent to require “at least” a simple majority of “all” members of an association. The trial court erred when it found that the votes of 21 out of 63 owners met the statutory prerequisite of having more than 50 percent of the vote voted in favor of the amendment. The court avoided addressing the issue of whether or not the amendment was reasonable or not, which was appropriate because the vote lacked a simple majority. The trial court’s order granting the petition was reversed.
This case is instructive on the point that if a member of a homeowners association seeks to utilize section 1356 to lower the super-majority voting requirements to amend CC&Rs, she must first establish that at least 50 percent of the members have voted in favor of the proposed amendment.
Elias E. Guzman is an associate with Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, environmental and planning issues contact Abbott & Kindermann at (916) 456-9595.
The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, nor the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.