Court Validation Of CC&R Amendments
(Not always a walk in the park)
by Stanley Feldsott, Esq.

Amendment of CC&Rs typically requires the approval of a "super majority" of the membership. Historically, seventy-five percent (75%) of the total membership had to approve any amendment to the CC&Rs. As of late, we are seeing some CC&Rs providing for a "super majority" of sixty-six and two-thirds percent (66 2/3%) of the total membership. Because of membership apathy or in some cases self interest, obtaining "super majority" approval has often times been difficult or impossible to achieve.

Civil Code §1356 was enacted as part of the Davis-Sterling Act and allows Associations or owners to petition the court for permission to amend the documents without obtaining the required percentage of owner votes. The bill sets limits, however, on when and how the court may be petitioned and leaves full discretion to the court to deny the petition. Civil Code §1356 provides in subdivision (a) that:

"If in order to amend a declaration, the declaration requires owners having more than 50 percent of the votes in the association...to vote in favor of the amendment, the association, or any owner of a separate interest, may petition the superior court...for an order reducing the percentage of the affirmative votes necessary for such an amendment. The petition shall describe the effort that has been made to solicit approval of the association members in the manner provided in the declaration, the number of affirmative and negative votes actually received, the number or percentage of affirmative votes required to effect the amendment in accordance with the existing declaration, and other matters the petitioner considers relevant to the court's determination...."

The section then goes on to detail the specific documents required to be filed and a showing that

1. Owners having more than 50 percent of the votes voted in favor of the amendment.

2. The amendment is reasonable.

Additionally, the court is prohibited from approving an amendment which would amend the CC&R amendment section and certain other matters.

All members of the Association are given at least fifteen days written notice of the court hearing. As a matter of practice, members opposed to validation of the amendment rarely appear at the hearing or retain counsel to oppose the Association's request for validation of the amendment. This is undoubtedly in part due to the fact that even if the objecting homeowners are successful in opposing the petition, the attorneys' fees they incur are not recoverable (See Blue Lagoon Community Assn. v. Mitchell (1997) 55 Cal.App.4th 472, 64 Cal.Rptr.2d 81). In general, the courts appear disposed to grant unopposed petitions to validate amendments.

The petition for court validation of a CC&R amendment is subject to attack on four different bases:

1. Procedural
   The petition and supporting documents are not in compliance with procedural mandates of Civil Code §1356. This typically is more of a delay tactic as the procedural defects generally can be corrected and the petition re-noticed e.g. failure to attach proposed amendment.

2. Jurisdictional
   Civil Code §1356 expressly prohibits the court from validating certain kinds of amendments e.g. an amendment amending the amendment section of the CC&Rs.

3. Showing of Reasonableness
   A precondition to validation by the court of a CC&R amendment is a finding by the court that the proposed amendment is reasonable.

4. Constitutionality
   Both the U.S. and California Constitutions prohibit the enactment of laws which impair existing contract rights. There have been a number of California cases that have dealt with the constitutionality of other statutes vis-a- vis the impairment of contact issue. If the impairment is significant, it must be justified by some over-riding public interest.

As can be seen from the discussion that follows in the matter of Twin Palms Homeowners Assn. v. Lawrence (Riverside Superior Court, Case No. INC 034862), "reasonableness" and "constitutionality" are the primary areas of attack when objections to the petition are filed. The Twin Palms Homeowners Association case clearly demonstrates that when appropriate objections are filed to a petition for validation, obtaining court approval is no "walk in the park".

FACTS:

Twin Palms is a thirty-nine (39) unit development. Approximate thirty-three (33) of the units are attached housing. Across the street are six (6) single family detached homes with private back yards and swimming pools, commonly referred to at Twin Palms as the "Big Six". The Association maintains the exterior surface, roofs and private back yards of the Big Six homes, the owners of which have limited use of the recreation facilities located across the street with the other thirty-three (33) units. As one might except, considerable friction existed throughout the years between the Big Six and the Association, for the most part relating to the level of maintenance performed by the Association on the private back yards of the Big Six. In order to resolve the ongoing disputes between the Big Six and the balance of the Association, a vote was taken to de-annex the Big Six from the development. A super majority of one hundred percent (100%) was required for this de-annexation. Thirty-seven (37) of the thirty-nine (39) units, including all of the Big Six, voted in favor of de-annexation, one individual did not vote, and one homeowner voted against de-annexation. The Association thereafter filed a petition under Civil Code §1356 for the court to validate the amendment feeling confident that with thirty-seven (37) of the thirty-nine (39) unit owners voting yes, with one abstention and only one "no" vote, the court would surely validate the amendment. The one homeowner who voted "no" objected to the petition on two grounds:

1. The amendment was unreasonable. If the parties can't agree on the level of maintenance to be performed in the private back yards, the appropriate remedy is an action for the court to determine the level of maintenance. To simply permit six (6) of the unit owners to withdraw from the Association relieving them of all use restrictions and financial obligations, absent the consent of one hundred percent (100%) of the membership, is unreasonable.

2. Civil Code §1356 is not unconstitutional on its face but as applied in this situation would be unconstitutional. In determining whether there is an unconstitutional impairment of existing contract rights, the case law tells us that the courts must go through the following analysis:
   
   

   a.	If the rights impaired are not significant, the analysis ends right there as the constitutional bar only relates to significant contract rights.
   b.	If there is a significant impairment of a contract right, then that impairment must be justified by some overriding public interest.

Prior cases have held that statues permitting certain commercial uses (daycare centers and homes for the elderly) did result in a significant impairment of contract rights (CC&R use restrictions). However, in each case the court found there was an overriding public interest.

In Twin Palms the homeowner argued that relieving the Big Six of all financial obligations and all use restrictions and other obligations under the CC&Rs was on its face significant, and there was no over-riding public interest. The CC&Rs were simply a contract between thirty-nine (39) unit owners and the Association. Notwithstanding the overwhelming vote in favor of de-annexation (37 out of 39), the single homeowner who voted "no" and challenged the petition was successful.

The court found that the amendment was not reasonable, and on that basis denied the Association's petition to validate the amendment. Having found that the amendment was unreasonable, the court did not reach the constitutional issue of prohibited impairment of existing contract rights. To date, there are no reported decisions dealing with the constitutionality of Civil Code §1356.

The Twin Palms case is illustrative of the fact that validation of a CC&R amendment by the court is not automatic. Indeed the statute court itself gives the trial court discretion. Admittedly, unopposed petitions for validation are fairly routinely granted by the court. Homeowners who are opposed to validation can object and the court will listen. It should be pointed out that this is one area of law where the need for competent counsel is crucial. If a petition to validate a CC&R amendment is to be defeated, the filing of appropriate legal briefs and declarations is essential. Given the fact that the notice requirement under Civil Code §1356 is only fifteen (15) days prior to the hearing, if meaningful objections are to be filed, it is important to retain legal counsel as soon as notice of the hearing is received.