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ADOPTING & AMENDING RULES

Operating Rules Defined. "Operating Rules" are broadly defined as any rule or regulation that applies to the management and operation of a common interest development or the conduct of its business and affairs. (Civ. Code § 4340.) As provided for in Civil Code § 4355(a), "Operating Rules" are specifically defined as a rule or regulation that applies to:

  1. Use of the common area or of an exclusive use common area.
  2. Use of a separate interest, including any aesthetic or architectural standards that govern the alteration of a separate interest.
  3. Member discipline, including any schedule of monetary penalties for violation of the governing documents and any procedure for the imposition of penalties.
  4. Delinquent assessment payment plans.
  5. Resolution of assessment disputes.
  6. Reviewing and approving or disapproving a proposed physical change to a member's separate interest or to the common area.
  7. Election rules

Exceptions. Per Civil Code § 4355(b), the following do not fall under the definition of an "Operating Rule" and are free of the requirements of Civil Code sections 4360 and 4365:

  1. A decision regarding maintenance of the common area.
  2. A decision on a specific matter that is not intended to apply generally.
  3. A decision setting the amount of a regular or special assessment.
  4. A rule change that is required by law, if the board has no discretion as to the substantive effect of the rule change.
  5. Issuance of a document that merely repeats existing law or the governing documents.

Rulemaking Authority. Before enacting rules and regulations, associations must have rulemaking authority either statutorily or through its governing documents. (Civ. Code § 4350(b).) Some older documents are silent on rulemaking authority. Fortunately, governing documents in newer developments all have rulemaking authority since the Department of Real Estate requires it. (Cal. Code Regs, tit. 10, § 2792.21(a)(7).)  The board can adopt rules after rulemaking authority has been established. Absent rulemaking authority in the governing documents, associations still have statutory authority to adopt rules for specific matters, such as election rules (Civ. Code § 5105), architectural rules (Civ. Code § 4765), IDR policies (Civ. Code § 5905) and collection policies (Civ. Code § 5730).

Notice of Proposed Change. Before adopting or amending an operating rule or changing the fine schedule, the board must provide notice of a proposed rule change at least 28 days before making the rule change. (Civ. Code § 4360(a).)

  • Text of Change. The notice must include the text of the proposed rule change and a description of its purpose and effect.
     
  • Emergency. Notice is not required if the board determines that an immediate rule change is necessary to address an imminent threat to public health or safety or an imminent risk of substantial economic loss to the association.

Comments by Members. A decision on a proposed rule change must be made at a board meeting, after consideration of any comments made by association members. (Civ. Code § 4360(b).) The board must consider comments by members but is not required to adopt them.

Notice of Adoption. Within 15 days of adopting or changing a rule, the board must deliver notice to the membership. (Civ. Code § 4360(c).)  Rules become effective upon written notice to the membership.

Not Recorded. Only CC&Rs are recorded, not rules.

Not Presumed Reasonable. Rules and regulations are not given the same presumption of reasonableness as are CC&Rs. (Dolan-King v. Rancho Santa Fe.) Whether a rule is reasonable is to be determined not by reference to facts that are specific to the objecting homeowner but by reference to the common interest development as a whole. The same test of reasonableness used for CC&Rs is used for rules, i.e., rules should be enforced unless they are wholly arbitrary, violate a fundamental public policy, or impose a burden on the use of affected land that far outweighs any benefit. (Sui v. Price.) To be enforceable, operating rules must meet the following criteria (Civ. Code § 4350):

  1. The rule is in writing.
  2. The rule is within the authority of the board conferred by law or by the declaration, articles of incorporation or association, or bylaws of the association.
  3. The rule is not in conflict with governing law and the declarationarticles of incorporation or association, or bylaws of the association. (Ekstrom v. Marquesa.) 
  4. The rule is adopted, amended, or repealed in good faith and in substantial compliance with the requirements of this article.
  5. The rule is reasonable.

Membership Veto. The membership has a limited right to veto rule changes. Members owning 5% or more of the separate interests may call a special meeting of the members to reverse a rule change. (Civ. Code § 4365.) The written request may not be delivered more than 30 days after the members of the association are notified of the rule change. (Civ. Code § 4365(b).) The rule change may be reversed by the affirmative vote of a majority of the votes represented and voting at a duly held meeting at which a quorum is present. (Civ. Code § 4365(d).) The board must give notice of a special meeting and send out ballots. The results of the membership vote must be provided to the membership within 15 days of the vote. (Civ. Code § 4365(g).) If an operating rule is reversed, it cannot be re-adopted by the board for at least one year. However, the board may vote on other operating rules covering the same subject. (Civ. Code § 4365(f).)

Emergency Rule Change. If the board determines an immediate rule change is required to address an imminent threat to public health or safety, or an imminent risk of substantial economic loss to the association, it can make an emergency rule change without a 28-day waiting period. Once adopted emergency rules take effect upon notice to the membership. An emergency rule change is effective for up to 120 days. (Civ. Code § 4360(d).)

Nonsubstantive Changes. If the board is doing nothing more than correcting grammar or renumbering provisions, the 28-day notice period is not triggered since the rules are not being changed. Even so, the board must distribute a copy of the clean set along with an explanation of what was done and that no changes were made to the rules.

No Annual Notice. Once Rules and Regulations have been adopted and distributed to the membership they do not need to be distributed annually. New members to the association must receive a copy of the rules and fine policy and normally do so through escrow. Rule changes need only be distributed once--when they are adopted. Disciplinary policies, however, must be distributed annually.

ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.

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