Getting Around a Supermajority Requirement

 Court properly granted HOA’s petition to amend its CC&R’s, without satisfaction of supermajority provision, even absent proof of voter apathy.   Orchard Estate Homes, Inc. v Orchard Homeowner Alliance (2019) 32 CA5th 471

 

Orchard Estate Homes, Inc., a planned residential development governed by covenants, conditions, and restrictions (CC&Rs) supplemented by rules and regulations, prohibited short-term rentals of units for durations of less than 30 days. When the homeowners association (HOA) attempted to enforce this rule against an owner who used a unit for such purpose, a lower court held the rule unenforceable because it was not contained in the CC&Rs. HOA asked residents to vote to amend the CC&Rs appropriately. After balloting was completed, approximately 62 percent of the owner-members voted to prohibit short-term rentals, but the percentage was less than the supermajority (67 percent) required to approve the amendment. HOA then filed a petition under CC §4275 seeking authorization to reduce the percentage of affirmative votes to adopt the amendment, which was opposed by the Orchard Homeowner Alliance (Alliance), an unincorporated association of owner-members who had purchased units for short-term rental purposes. The trial court granted the petition and Alliance appealed, arguing that the trial court erred in ruling that HOA need not show voter apathy under CC §4275. Finding no abuse of discretion in granting HOA’s petition, the court of appeal affirmed.

Before a court approves an HOA’s petition under CC §4275(c), the HOA must show

·       Reasonable notice of the court hearing;

·       Balloting conducted appropriately under the bylaws and other applicable law;

·       Eligible voters diligently pursued;

·       A majority of voters approved the amendment;

·       The amendment was reasonable; and

·       The petition was not otherwise improper.

Alliance did not argue these factors were lacking, but instead argued that HOA had to show that voter apathy led to the reduced approval percentage before the court could approve its petition to amend the CC&Rs. But Alliance offered no actual legal authority requiring HOA to prove voter apathy as a prerequisite to relief from the CC&R supermajority provision. Voter apathy is not specifically listed as a factor to consider under CC §4275(c). The trial court properly approved HOA’s petition.

THE EDITOR’S TAKE: Getting Around a Supermajority Requirement. It is difficult to be truly confident in giving advice when the environment of rules confronting an attorney is so contradictory. In this case, the contradiction comes not from the internal language of the statute itself—CC §1475—but rather from the way courts are interpreting it—in other words, not because it is a self-contradictory rule, but rather from the way the courts treat it.

The statute contains five requirements in order for a homeowners association to amend its CC&Rs without getting the supermajority approval that is required by those CC&Rs:

Proper notice;

Proper voting;

Getting out the votes;

Majority approval; and

Reasonableness.

But the courts seem to prefer a requirement of six components rather than five, adding lack of voter apathy as an additional requirement.

This decision says trial judges should follow the statute even when the judicial understanding seems to require satisfying all six requirements, not just the five enumerated. However, if I were representing a group of dissenters who wanted to stop a proposed amendment—particularly one that brought in Airbnb renters as opposed to permanent residents—I might opine that they had a chance of success in blocking the amendment based on the district in which the project is located—especially if it is not the Fourth District (which decided Orchard Estate Homes)—in the hope that the courts there will follow the “case logic” of the statute rather than its literal language. —Roger Bernhardt

Reprinted from 42 Real Property Law Reporter 65 (Cal CEB May 2019), copyright 2019 by the Regents of the University of California. Reproduced with the permission of Continuing Education of the Bar - California (CEB). No other republication or external use is allowed without permission of CEB. All rights reserved.  (For information about CEB publications, telephone toll free 1-800-CEB-3444 or visit our website - CEB.com)