CC&R AMENDMENTS & RESTATEMENTS

Amend/Restate Defined. An amendment revises or replaces one or more paragraphs in a set of CC&Rs. A restatement revises and/or replaces, and reorganizes everything in the document. The operative language “amend and restate, in their entirety” or the equivalent phrase “amended and restated in its entirety” are industry standards used in CC&R restatements and are generally found on the first page of a restated document. Amendments are reasonable when you only need a few. At some point, amendments are problematic because members often overlook them, and they don't address underlying structural problems with your documents. A restatement is slightly more expensive but gives you a clean, up-to-date document. It completely replaces your existing CC&Rs and bylaws with an integrated set.

Board Approved Amendments

The standard process for amending an association's CC&Rs is for legal counsel to draft an amendment and the membership to approve it. Once the amendment is approved, it is submitted to the Office of the County Recorder for recordation. There are, however, specific instances when a board has authority to approve amendments. These are provided by statute. The Davis-Stirling Act authorizes changes in some instances and mandates it in others. Following are amendments Boards can adopt without a vote of the membership:

Cover Page. Without a vote of the membership, associations are required to place a cover page on the first page of their previously recorded CC&Rs stating, in at least 14-point boldface type, language from Government Code § 12956.1.

If this document contains any restriction based on age, race, color, religion, sex, gender, gender identity, gender expression, sexual orientation, familial status, marital status, disability, veteran or military status, genetic information, national origin, source of income as defined in subdivision (p) of Section 12955, or ancestry, that restriction violates state and federal fair housing laws and is void, and may be removed pursuant to Section 12956.2 of the Government Code by submitting a “Restrictive Covenant Modification” form, together with a copy of the attached document with the unlawful provision redacted to the county recorder’s office. The “Restrictive Covenant Modification” form can be obtained from the county recorder’s office and may be available on its internet website. The form may also be available from the party that provided you with this document. Lawful restrictions under state and federal law on the age of occupants in senior housing or housing for older persons shall not be construed as restrictions based on familial status.

Discriminatory Language. Government Code § 12955 prohibits discriminatory language in governing documents. This includes "race, color, religion, sex, gender, gender identity, gender expression, sexual orientation, marital status, national origin, ancestry, familial status, source of income, disability, veteran or military status, or genetic information of that person." Civil Code § 4225(b) requires boards to remove such language from their association's governing documents:

Notwithstanding any other provision of law or provision of the governing documents, the board, without approval of the members, shall amend any declaration or other governing document that includes a restrictive covenant prohibited by this section to delete the restrictive covenant, and shall restate the declaration or other governing document without the restrictive covenant but with no other change to the declaration or governing document.

Declarant Language. Declarant language can be very confusing to directors and members alike. Is the association a successor to the Declarant? Does the association have the powers of the Declarant? In short, the association is not a successor to the developer and does not have a declarant's powers. Fortunately, the Davis-Stirling Act allows boards to remove such provisions from an association's governing documents. Civil Code § 4230(a) provides:

Notwithstanding any provision of the governing documents to the contrary, the board may, after the developer has completed construction of the development, has terminated construction activities, and has terminated marketing activities for the sale, lease, or other disposition of separate interests within the development, adopt an amendment deleting from any of the governing documents any provision which is unequivocally designed and intended, or which by its nature can only have been designed or intended, to facilitate the developer in completing the construction or marketing of the development.

Before adopting the amendment, the board must deliver to all members a copy of the proposed amendment at least 30 days before the time, date, and place the board will consider adoption of the amendments. (Civ. Code § 4230(b).)

Outdated Code References. On January 1, 2014, the Davis-Stirling Act was completely reformatted and renumbered. Previously, all statutory sections were in the 1350 to 1378 range. On January 1, the Act moved into the 4000 to 6150 range. If governing documents include references to the old numbering scheme, boards can amend their documents to correct the statutory references. (Civ. Code § 4235.)

Rent Restrictions. Boards are required to amend their governing documents to remove unreasonable rental restrictions and bring them into conformity with statutory requirements.

Membership Approved Amendments

Reducing Exposure. Older CC&Rs do not require owners to carry insurance. Moreover, many owners mistakenly believe that the association's insurance automatically covers their interests because they live in an association. Associations should strongly consider amending their CC&Rs to require owners to purchase and maintain their own insurance. This benefits the membership if something from the owner's property damages common areas or other owners' properties. Associations should amend their CC&Rs to:

• Maintenance Obligations. Clearly define maintenance responsibilities for owners. Older documents are often ambiguous about maintenance responsibilities. Developers are known for using boilerplate documents that often mention components that do not even exist within the development. Failure to properly define duties leads to conflict, insurance disputes, and litigation. A maintenance chart should be included as an exhibit, which provides an easy reference for respective maintenance obligations.;
• Water Damage. Clearly defining liability for water damage where the association is not negligent;
• Reimbursement Assessments. Give the Board the authority to special assess individual owners for reimbursement of expenses incurred by the association for mitigating water damage;
• Insurance Provisions. Require owners to carry insurance for damage to their units and spell out the association's obligations. Add language regarding who pays the association's insurance deductible; and 

Other Reasons to Amend. Some reasons for restating your documents:

• Current Laws. In 1986, the “Davis-Stirling Act” went into effect. On January 1, 2014, a revised and restated Act replaced the original Act, putting governing documents throughout the state out of sync with the law in areas such as the Open Meeting Act, electric vehicle charging stations, pets, and rentals.
• Declarant Provisions. Remove all provisions related to the Declarant, the project's original developer.
• Plain English. Remove all legalese from the document and make all provisions in plain English so board members and homeowners can understand what they are reading.
• Pet Restrictions. Pet restrictions can be relaxed or strengthened depending on the association's needs. Condominium associations, in particular, may wish to restrict the number, weight, and breed of dogs.
• Rent Restrictions. Add rent restrictions that conform to the Davis-Stirling Act.
• Occupancy Restrictions. Add occupancy restrictions.
• Termination Date. Older sets of CC&Rs sometimes have a termination date. They may or may not have a mechanism for extending their term and may not have an amendment provision.

Distributing Ballots

Secret Ballot. Voting must be done by secret ballot (Civ. Code § 5100(a).) in accordance with written election rules. (Civ. Code § 5105(a).) Associations must follow owner approval requirements. Otherwise, any approval of the amendment or restatement is voidable. The Act of recording the amendment does not, by itself, make the amendment valid. (Taormina Theosophical Community v. Silver.)

Extended Balloting. Because the approval requirements in older documents can be unreasonably high and apathy among voters equally high, obtaining the necessary number of ballots in a 30-day balloting period is often impossible. The board may extend balloting one or more times to solicit ballots to maximize participation. The Inspector or Elections can also extend the balloting period. (Civ. Code § 5110(a).) An unpublished case, Bel Air Ridge HOA v. Rosenberg, supports the proposition that boards can extend the balloting period to ensure sufficient numbers of voters cast ballots related to special assessments and CC&R restatements.

Lender Provisions. As provided in the Davis-Stirling Act, lender provisions in CC&Rs cannot be amended by an association if the amendments would impair the security interest of a mortgagee of a mortgage or the beneficiary of a deed of trust without the approval of the percentage of the mortgagees and beneficiaries specified in the declaration, if the declaration requires the approval of a specified percentage of the mortgagees and beneficiaries. (Civ. Code § 4275(e)(3).) Obtaining mortgagee (lender) approval of CC&R amendments and restatements is difficult because banks rarely respond to ballot issues. The courts addressed this problem in Fourth La Costa Condominium Owners Assn. v. Seith (2008) 159 Cal.App.4th 563. The court ruled that if an association's CC&Rs require mortgagee approval in the form of "written consent," then the mortgagee's signature on a return receipt qualifies as a mortgagee's approval, provided the association includes a letter notifying the lender that failure to return the ballot will be deemed "consent" to the amendment.

As the [trial] court noted, the CC&Rs required an affirmative vote of owners, but only written consent by lenders. The court explained [t]his would tend to indicate that the CC&Rs, as originally drafted, contemplated a distinction between the forms of approval required from each group, with the approval from the latter group being more relaxed in form. The CC[&]Rs did not specify the method by which the consent may be obtained. [The Owners Association's] method of assuring receipt of the proposed changes by the lenders and thereafter providing them with 30 days within which to reject the changes is as good as any." We agree with the court's assessment. (Fourth La Costa v. Seith)

Approval Requirement

Older CC&Rs sometimes fail to include an amendment provision. If so, the Davis-Stirling Act allows for amending and restating CC&Rs. (Civ. Code § 4260.) If the declaration does not specify the percentage of members who must approve an amendment to the declaration, an amendment may be approved by a majority of all members under Section 4065. (Civ. Code § 4270.)

Davis-Stirling CIDs. The Legislature recognized that CC&Rs protect associations and provide a mechanism for financial support for the upkeep of common areas. Accordingly, when an association meets the definition of a CID and its CC&Rs do not provide a means for owners to extend the term of the CC&Rs, a majority of members may extend the term. A declaration that specifies a termination date but that contains no provision for extension of the termination date may be extended before its termination date by the approval of members pursuant to Section 4270. (Civ. Code § 4265(b).)

Non-Davis-Stirling CIDs. If a development does not qualify as a common interest development, the CC&Rs may be extended only by the unanimous vote of 100 percent of the property owners or by a vote of a lesser number of owners as provided in the declaration of restrictions. (8 Miller & Starr, Cal. Real Estate (3d ed. 2011) § 24:41, pp. 24-137 to 24-138 & fn. 9.)

Advocacy by the Board for Approval

Ballot Information. Boards can include factual information about ballot proposals but not their recommendations. To maintain fairness in the election process, the ballot and accompanying materials must remain neutral. How much the board is allowed to tell the membership about a special assessment or CC&R amendment without it being "advocacy" can be found in Wittenburg v. Beachwalk. In this case, the association held an election to amend its CC&Rs. The board sent information to the membership explaining the purpose of the amendment and the consequences if the amendment failed. The board then urged members to vote for the amendment. Opponents filed suit alleging a violation of the Davis-Stirling Act that prohibits “Expressly advocating the election or defeat of any candidate that is on the association election ballot.” (Civ. Code § 5135.) Although the statute references candidates, the more conservative position is to apply the principle to all elections.

Advocacy Defined. The court adopted the following definition for advocacy: "Black's Law Dictionary defines "advocacy" as "[t]he act of pleading for or actively supporting a cause or proposal." (Black's Law Dict. (7th ed. 1999) p. 55, col. 2.) And the verb "advocate" is commonly defined to mean "to plead in favor of." (Merriam-Webster's Collegiate Dict. (10th ed. 2001) p. 18, col. 1.)" It then identified the following as advocacy by the board in the election: “Both the association Web site and newsletter contained the statement, ‘Members are encouraged to vote yes for the 8th Amendment…’ This amounts to advocacy.”

Explanatory Information Allowed. The court did not criticize the information sent to the association. Explaining the purpose of a special assessment or CC&R amendment does not qualify as advocacy. Common sense dictates that boards explain why they are putting something to a vote. The State of California does the same when it presents ballot initiatives to a vote. What boards cannot do is tell members how to vote.

Proper Advocacy. Board members are allowed, however, to individually advocate for or against a matter if they do so at their own expense. As long as they don't use association resources, board members can speak to members, write letters, send emails, and distribute flyers advocating their position without fear of violating the statute. 

Court Petition to Approve CC&Rs

Older CC&Rs often have very high approval requirements, making it almost impossible to amend or restate the CC&Rs. The Legislature recognized the difficulty and enacted Civil Code § 4275 (formerly section 1356) to help alleviate the problem. The purpose of section 4275 is to provide homeowners associations with the ability to amend their governing documents when, because of voter apathy or other reasons, important amendments cannot be approved by the procedures authorized by the declaration. In essence, it provides an association with a safety valve for those situations where the need for a supermajority vote would hamstring the association. (Mission Shores v. Pheil.)

Good Faith Effort. If an association makes a good-faith effort to obtain membership approval and the votes fall short of the supermajority, the association may petition the court to reduce the required percentage. (Blue Lagoon v. Mitchell.) The petition must contain the following:

• The reasons for the amendment.
• The number of votes needed to amend.
• The number of affirmative and negative votes received.
• The association's effort to solicit membership approval.
• A copy of the governing documents, the text of the amendment, and the notice and solicitation materials used.

Court's Decision. When making its findings, the court does not need to recite each factor it considers nor detail the evidence supporting each factor. Instead, the record needs only to reflect that the court weighed the relevant factors. The requirements for granting a Section 4275 petition can be detailed in the association's moving papers, and the trial court's final order can reference Civil Code § 4275 and deem that all necessary requirements have been met. (Quail Lakes v. Kozina.)

Time Frame. The courts give the petition priority. The process generally takes 30 to 90 days to prepare and file the petition and hear the matter in court.

Court Approval. The court may, but is not required to, grant the petition if it finds all of the following:

• The membership was given at least 15 days' written notice of the court hearing.
• Balloting on the proposed amendment was conducted per the governing documents.
• A reasonably diligent effort was made to permit all eligible members to vote on the proposed amendment.
• More than 50% of the membership voted in favor of the amendment. (Peak Investments v. South Peak HOA)
• The amendment is reasonable.
• Granting the petition is not improper for any reason stated in subdivision (e) of the statute.

Retroactive Application

Once a CC&R amendment or restatement is recorded, it applies to all members regardless of the date they purchased their unit/lot. The courts addressed this clearly in the Terifaj case:

The questions we confront in this case are whether use restrictions added to a declaration through an amendment and recorded after a homeowner has purchased an individual unit bind such an owner and whether the rule of Nahrstedt—that restrictions in a development's declaration are presumed to *79 be reasonable and are enforceable unless they are arbitrary, impose an undue burden on the property or violate fundamental public policy (Nahrstedt, supra, 8 Cal.4th 361, 386)—applies to subsequently enacted restrictions. We are also called upon to decide whether the trial court abused its discretion in awarding attorney fees to the homeowners association.

We conclude that under the plain and unambiguous language of sections 1354, subdivision (a) [New: Civ. Code § 5975], and 1355, subdivision (b) [old Civ. Code § 1355], use restrictions in amended declarations recorded subsequent to a challenging homeowner's purchase of a condominium unit are binding on that homeowner, are enforceable via injunctive relief under section 1354, subdivision (a), and are entitled to the same judicial deference given use restrictions recorded prior to the homeowner's purchase. (Villa De Las Palmas Homeowners Ass'n v. Terifaj (2004) 33 Cal.4th 73, 78–79.)

Grandfathering Existing Conditions

When CC&Rs are amended or restated to impose new restrictions, such as the number of dogs an owner may have, boards may want to grandfather existing conditions. In other instances, such as "No Smoking" anywhere in the building, there would be no exceptions. 

Challenging an Amendment

The statute of limitations for challenging CC&R amendments (and restatements) is four years from the date the amendment was recorded. (Schuman v. Ignatin (2011) 191 Cal.App.4th 255; Costa Serena Owners Coalition v. Costa Serena Architectural Committee (2009) 175 Cal.App.4th 1175.)

Bylaw Amendments. See "Bylaw Amendments."

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