No need to restate property rules
Question: I’m a board member. Our project was built around 1950. We’ve never amended or changed our covenants, conditions and restrictions, and no one has complained about them.
This last year our board meetings were overrun with speeches and seminars by vendors telling us to “restate” our CC&Rs.; They push do-it-yourself software and ready-made how-to manuals. These attorneys peddle a “one-price-fits-all” package, saying our “existing CC&Rs; are out of date and old and conflict with existing California law.” They say the only way to eliminate conflicts and race references and insert protections for the association is to update it and delete illegal clauses or be sued.
Their big sell is that our CC&Rs; are about to expire and that if they are not completely rewritten, we are violating the law. They said our association “would not be able to do business, thus exposing our directors to the possibility of going to jail.”
Among the additions these lawyers want to include are leasing restrictions, penalties, fines and attorney fees against homeowners who violate its provisions. They instructed us to tell homeowners we are merely “restating” or “amending” but not “rewriting.”
Our management company told us the CC&Rs; must be rewritten in laymen’s language, not legalese, to “keep up with the law” and “correct the existing typographical errors.”
The board appointed a committee to research this, and it reported that our old 15-page CC&Rs; will be replaced by a 65-plus-page document.
I’m cynical about what I’ve heard, so I did my own research. I believe these seminars are nothing more than marketing schemes aimed at getting a paycheck from our association. I’m very concerned about the ramifications of changing the covenants, conditions and restrictions, and my fear is that homeowners will merely go along with the pack without truly understanding how this will affect them.
Independent attorneys told me this was a waste of time and money and would have serious consequences for years to come. They said, “Don’t touch those CC&Rs.;” Should these recommendations be scrapped?
Answer: These needless recommendations will result in needless expenditures. The CC&Rs; recorded when your project was built are just as good today as any set of brand-new ones, typos and all. Don’t touch them and don’t let anyone convince you otherwise.
That CC&Rs; are out of date is a false premise lawyers and vendors use because it sounds dire. If that were true, the day after they were rewritten, they would be out of date.
When CC&Rs; are first drafted, they comply with laws and regulatory requirements in effect at that time, which might include, depending on the project’s age, the Davis-Stirling Act and federal, state and Department of Real Estate codes. CC&Rs; are written to last a lifetime.
Embarking on costly projects designed to beat the clock on expiring CC&Rs; is unnecessary. Civil Code section 1365 provides a mechanism for extending the expiration date with a simple majority vote at no cost to the association. Even if CC&Rs; expire, no one is thrown into jail. The development and association do not cease to exist and are not prevented from doing business.
There is no such thing as “keeping up with the law.” If this were the case, every time legislation passed, you would have to hire an attorney and rewrite the CC&Rs.; A good lawyer will advise an association that a change in the law negating a portion of the existing CC&Rs; automatically takes precedence and that the change does not have to be written in.
“Restated,” as referenced in the Davis-Stirling Act, means rerecording the CC&Rs; with whatever minor changes need to be made. “Rewritten” means a change in the document and its import. Unless homeowners understand each change and the reason why it is being made, any vote to approve the new documents is being obtained by fraud.
By agreeing to change the CC&Rs; at this time, the board in essence assumes an obligation, if not a duty, to rewrite the governing documents every time the law changes.
Warnings to delete alleged illegal clauses or add new ones or “risk being sued” are alarmist. The law defines standards for the development and takes into consideration that not all projects are alike. When courts review conflicts between private documents and the law, as a general rule, the law prevails.
Civil Code 1355.5 provides a cost-effective way for boards to remove portions of CC&Rs; made moot by the developer’s project completion. Associations do not have to remove developer language because it is inapplicable. If a board elects to remove developer language, the amendments must be discussed at an open meeting and be approved by a vote of all titleholders. That is a lot of work merely to remove provisions that have no force or effect. Removal of race-based terms that discriminate is accomplished by a simple amendment, not by rewriting governing documents. Rather than requiring the hiring of an attorney to make changes, the law provides that restating documents, eliminating race-based restrictions but making no other changes, is all that is required, and then only if requested. Other than “senior housing” exceptions, no clauses that discriminate are enforceable.
A board shouldn’t change the governing documents just because it can. We have heard reports about boards that rewrote their CC&Rs; only to discover that their homeowner insurance was canceled or they were unable to obtain insurance.
Reliance on prepackaged or do-it-yourself manuals or adopting CC&Rs; written for another association can create a major risk to homeowners. A board’s reliance on such products could constitute a breach of fiduciary duty.
The CC&Rs; are written in legalese because the law requires them to contain certain language. Unless management company personnel are licensed attorneys, they are practicing law without a license in advising that the CC&Rs; must be rewritten in “laymen’s language” to “correct typos” and “keep up with the law.”
Warning: These CC&Rs; are a restriction on your title. Any amendment, rewrite, addition or deletion of the document is a new restriction on your title. All must be disclosed to potential buyers and can affect the value of your asset.
Do not vote to alter your CC&Rs; without thoroughly understanding the legal and fiscal effect your vote will have on your asset. Once your vote is cast, it can’t be revoked.
Advice to boards from lawyers is just that, but it is only an attorney’s opinion of the law, not what the courts may ultimately decide. In this case it is probably better leaving your CC&Rs; well enough alone.
Please e-mail questions to: NoExit@mindspring.com.