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Amend Our Docs! ?

Here’s an example of how this might arise. “In the situation we dealt with, the proposed amendment was to remove a view restriction,” explains Robert M. DeNichilo, an attorney at DeNichilo & Lindsley LLP in Irvine, Calif., who specializes in representing community associations. “It was in an older community in which only certain homes were limited as to the heights they could go, and the rule was meant to preserve owners’ views. Over time, many of the single-story homes had been remodeled into two-story homes. But the small section of homes prohibited by the governing documents couldn’t expand to become two-story. The owners subject to the restriction came together and sought an amendment to the CC&Rs.”

Often, the issues involved are more divisive. “I’ve seen this, unfortunately,” says James R. McCormick Jr., a partner at Peters & Freedman LLP in Encinitas, Calif., who represents associations. “In fact, I’ve had to deal with this recently in several associations. The issues were hot-button issues, and a small group thought the board was taking the wrong or an inappropriate stance. They were very caustic, community-dividing issues, and a very small, vocal minority group wanted to change things.”

There’s No Easy Answer

“In California, unfortunately there’s no case law,” says McCormick. “On the one hand, you have the board, which has the authority to manage the corporation. On the other hand, you have the members, who have the final authority to approve amendments. Does that mean owners can begin the process? Or does the board control the introduction of amendments because they have the authority to manage the corporation?”

Your state law may provide better guidance than California’s. Or the answer may be in your governing documents. “Which group wins out?” asks McCormick. “It’s a tough one that can only be resolved if there’s something specific in the association’s state law or governing documents. I’ve seen governing documents say that if 25 percent of the members come up with an amendment, it’s got to be sent to the members for a vote.

“But if there’s nothing in the documents, it’s ripe for argument because it’s not clear the board has to pay attention to the proposed amendment,” adds McCormick. “In some cases, boards have said they weren’t going to put the issue to a vote because that wasn’t something owners could force them to do. They’ve said, ‘That’s not an authority you owners have.’ Then the owners have said they were going to sue. I got a lot of heat for it at a couple of different meetings. The issues blew over for the most part, and they’re nonissues now.”
DeNichilo agrees it’s a judgment call. “If only one board member receives the amendment, that board member doesn’t have authority to act on it,” he explains. “They act as a board. But if somebody’s gone to the time and effort to offer an amendment, the board can put it on its agenda and make it something for the board to discuss as a whole. If they think it would benefit the association, they could support it and move forward. If they don’t support it, the members could push it on their own.”

In DeNichilo’s case, the board agreed to send the matter to members. “The owners came to the board meetings, sought the support of the board, and then tried to get the support of other homeowners who weren’t subject to the restriction. The board ended up not taking a position either way.”

A Compromise Solution

It’s risky to ignore owners’ proposed amendments, says Debra A. Warren, principal of Cinnabar Consulting in San Rafael, Calif., which provides training and employee development services to community association management firms and training and strategic planning sessions for association board members. “This situation is similar to a board presenting a special assessment and there being a group that says, ‘We don’t agree with the board’s logic and think this is the way to go.’

“When the board is presented with a reasonable alternative or an amendment,” advises Warren, “they should look at the issues in the amendment and find a way to conduct a poll of all the members to find out whether it’s worth spending association money to fine-tune the language and administer a voting process. If it is, continue on that path and take it to the association’s attorney to clean up the language and vote on it.”

Warren views owners’ proposed amendments in a favorable light. “In some ways,” she says, “it’s a healthy way for change to occur if a board just keeps going along and doing the same thing even though it no longer fits the way people need the association to run today.”

If, however, the board ignores the proposed amendment, tensions can boil over. “That’s what can make this situation a boondoggle,” says Warren. “It just incites the group proposing the amendment, and you can spend a lot of money answering letters that get sent. If the board doesn’t put the issue in front of members, the small group will take on that role. They’ll start disseminating information, and the board gets in a defensive position. The board may have to clear up factual information, and the members get angry. That board isn’t going to be there for very long.

“That’s why it’s smart to acknowledge to everyone that you received a request,” Warren says. “You can say, ‘Before we spend association funds on a full-blown election, we’d like to get your input as well.’ Then do a survey to see how people feel about the issue.”

Be Prepared for Battle

If you choose not to present the issue for a vote, be prepared for blowback. “It can get really ugly,” says Warren. “It’s really hard for those things to happen in a vacuum–people always take them personally. And board members often spend a lot of time trying to come up with good solutions, but sometimes members don’t appreciate all the solutions because they don’t have all the information in front of them or don’t understand the legal ramifications.”

McCormick hopes his state courts provide some guidance in the future. “At some point,” he says, “I hope there’s some interpretive law because I can see both the board’s and the owner’s arguments on how to deal with this issue.”