Association Powers and Decision Making
- It must be within the scope of the association’s authority under the governing documents and the law;
- It must be based upon a reasonable investigation;
- It must be intended to serve the best interests of the association and the owners as a group;
- It must be made in good faith; and
- It must be reasonable considering the information available at the time the decision is made.
A homeowner association is typically not entitled to recover its attorney’s fees from an owner unless it prevails in a court proceeding or arbitration involving the enforcement of the governing documents. However, some association’s governing documents do allow for this so a review of your specific governing documents is needed.
Association Structure and Funds
In general, the distribution of power and authority within the HOA is determined by the governing documents. Where the governing documents simply give the association power to do or approve something without specifically requiring owner approval, the power can be exercised by the board of directors without owner approval. In practice, most governing documents require owner approval for a variety of major decisions including changing the items which the association is responsible to maintain, changing the owners’ assessment percentages, changing the unit or lot boundaries, and imposing leasing or resale restrictions.
The board of directors has complete control over all committees, officers, and managers. This means that the board decides who will serve in these capacities, and what authority they will have, subject only to restrictions in the governing documents. The board retains the power to override the decision of any committee, officer, and manager.
The first step in homeowner association decision making is determining whether the course of action under consideration would be reasonable and in the best interests of all owners. If this question can be answered affirmatively, the next step is to review the governing documents with the following questions in mind:
- Is a particular action or decision required under the governing documents and/or the law?
- Is a particular procedure for making the decision required under the governing documents and/or the law?
- Does the decision under consideration require an owner vote?
Questionable action should be reviewed by an attorney. If the action could have a significant impact on one or more owners, it is wise to get a written opinion of counsel before acting upon which the board can rely in the event of a legal challenge. A legal opinion may protect the board from liability for an erroneous decision by allowing it to assert reasonable reliance on the advice of counsel as a defense. But remember that the failure of an association to follow the advice of counsel or its own internal decision-making procedures will make inappropriate action vulnerable to a legal challenge.
Common Interest Development (aka Homeowner Associations)
The Declaration of CC&Rs is the most difficult of the governing documents to amend. In general, any amendment to the CC&Rs must be approved by a vote of the owners. An owner vote to amend the CC&Rs typically requires approval of a super-majority of the total voting power of the Association and may require approval from a government agency. There is usually a section of the CC&Rs that states the percentage of owner votes required to adopt a CC&R amendment, and sometimes the required percentage varies depending on which part of the CC&Rs is being amended. For example, the CC&Rs might state that at least 50% of the owners must approve an amendment in general, but that an amendment that would shift maintenance responsibility for some element of the property from the HOA to the individual owners requires a 75% vote. In another variation, the CC&Rs might state that to change the boundaries of someone’s lot, or to change the percentage of expenses someone pays, a 50% vote of the owners is required plus the approval of 100% of the owners who will be directly impacted by the amendment. Refer to your governing documents for specific percentages.
There are a few types of CC&R amendments that can be adopted by the board of directors without an owner vote. The board can amend the CC&Rs to delete provisions that illegally discriminate against or harass any person because of the race, color, religion, sex, gender, gender identity, gender expression, sexual orientation, marital status, national origin, ancestry, familial status, source of income, disability, or genetic information. The board can also delete references to sections of law that no longer exist or have been renumbered.
If an owners’ association is unable to get the votes needed to adopt a necessary amendment, it is possible to petition the court to amend the CC&Rs without the required number of owner votes; however, a court will not grant such a petition unless there is a good reason to ignore the voting requirement spelled out in the CC&Rs.
It is common for CC&Rs to provide that some or all amendments must be approved by eligible mortgage lenders who hold mortgages on the lots or units within the property, or by a local government agency. These provisions are intended to prevent the owners from adopting amendments that undermine the lenders’ or local government’s rights or powers. Before adopting an amendment, owners should review the CC&Rs to determine whether the approval of lenders and/or a local government agency might be required.
Once a CC&R amendment has been approved, it must be recorded in the records of the county where the property is located. A CC&R amendment that has not been recorded in the county records is not valid.
Enforcement and Disputes
It is generally the best practice for the association to act each time an owner violates the governing documents. When HOAs ignore minor owner violations, it signals that repeated minor violations, or more significant violations, will be tolerated. This generally leads to more problems in the end.
An owner is responsible for his/her tenant’s compliance with the governing documents and can be fined or penalized for the tenant’s violations. Any owner who rents his/her unit should have a written rental agreement incorporating all the governing document usage restrictions, and making the tenancy subject to any additional restrictions that are enacted by the association during the rental term.
Most governing documents do not require earthquake insurance, and it is not required by law. Since earthquake insurance is expensive and typically involves a large deductible, its benefits are debatable, and a board should not face liability for choosing not to obtain it if the decision was based on competent advice from an insurance professional.
Maintenance, Alterations, and Defects
Condominium governing documents usually require association approval for improvements and alterations which:
- Change the appearance of any exterior area;
- Change any interior common area (except entirely separated exclusive use common areas such as storage closets);
- Impair structural integrity;
- May interfere with another owner’s use or enjoyment of their unit (such as installation of hardwood floors above a neighbor’s ceiling); or
- Interfere with plumbing, electrical, heating, or air conditioning service to other units or the common area.
Planned development governing documents usually require association approval for improvements and alterations which:
- Change any common area;
- Involve the construction of new structures or additions, including fences, walls, pools, spas, balconies, patios, patio enclosures, screens, tents, awnings, window air conditioners, exterior shutters, exterior antennas, or exterior wiring;
- Change the appearance of the exterior elements of existing structures including paint, siding, and roofing;
- Change the appearance of existing landscaping visible from the common area or other lots;
- Obstruct the view from another lot or from the common area; or
- Interfere with the water supply, sewage or drainage systems.
Most governing documents contain detailed procedures for the submittal, consideration, and approval of proposed alterations and improvements. Where the governing documents do not contain these procedures, or where the procedures are incomplete, the board should develop new or supplemental procedures and express them in a written resolution or Rule. If formal approval procedures are not established, or if they are not strictly followed, the association may be prohibited from enforcing its architectural guidelines. Alteration approval is a responsibility of the board, but it may delegate this responsibility to an officer, committee, or professional manager provided it retains final authority.
Meetings and Decisions
The level of owner voting power required for approval is determined by the governing documents and tends to vary depending on the type of decision. Most governing documents list a group of decisions requiring greater than majority approval, specify the level of approval required for each, and state that all other owner decisions are made by a majority. In instances where the governing documents are not specific, a majority approval requirement is presumed.
When interpreting voting requirements in governing documents or in the law, it is important to pay close attention to the wording. When a matter requires the approval of a specified percentage, or the majority, “of all owners” or “of the total voting power of the association,” it means that the voting power cast for approval must be measured against the total voting power of all owners including those who did not cast votes. When a matter requires the approval of a specified percentage, or a majority, “of the owners” (i.e., without using the word “all”), or “of the votes cast,” it means that the voting power cast for approval is only measured against the total voting power cast.
A matter that could be decided at an owner meeting may also be decided by casting a written mail-in ballot. Most governing documents contain provisions allowing for business to be conducted by written ballot with some exceptions. The provisions differ greatly, and a careful review of the association’s governing documents is necessary to determine whether this is authorized.
Most governing documents require that the association prepare and maintain minutes of all owner meetings and that these minutes be made available to owners for inspection on written demand at any reasonable time for any reasonable purpose. There may be a requirement that the secretary is responsible to prepare the minutes within a prescribed number of days following the meeting. All minutes remain in draft form until they are approved at the next association or board meeting.
Most lenders will refuse to make mortgage loans on homes within condominium projects and planned developments unless there are special provisions in the governing documents to protect them. These provisions are designed to ensure that the basic rights and responsibilities associated with the home at the time the loan is made cannot be easily changed. The lender is particularly concerned about changes that might devalue the home such as an increase in the home’s assessment allocation, the removal of a parking or storage space, or an uninsured or underinsured loss. Most lenders review the mortgage protection provisions of the governing documents before they approve a mortgage within a condominium project or planned development.
Some governing documents require professional management or state that an owner vote (or even the approval of mortgage lenders) is required to discontinue professional management. Absent these provisions, professional management is not required, but it is generally advisable, particularly for larger associations.
The governing documents always specify how assessments are allocated among the owners, and usually require a high percentage of the owners and the mortgage lenders to approve any change in the allocation. The allocation is established by the developer at the time the governing documents are prepared and is reviewed by a governmental agency. There are no legal grounds for an owner to challenge the assessment allocation based upon fairness or equity.
A homeowners’ association may charge fees for the use of recreational facilities and refuse access without payment, provided the charge applies equally to all owners and is not specifically prohibited by the governing documents. Such fees can be initiated and adjusted by the board unless the governing documents specifically require an owner vote.
The association may also temporarily suspend an owner’s recreational facilities usage privileges as discipline for a violation of the governing documents. This type of discipline is permitted only if: (i) the governing documents do not specifically prohibit it, (ii) the board has adopted the discipline policy in advance, (iii) notice of the policy has been provided to all the owners in advance, and (iv) the violating owner is given notice of the violation and the opportunity to request a board hearing before the recreational facilities usage privileges are removed.