HOA Homefront Reader Questions: Rules

RULES

By Kelly G. Richardson, Esq. CCAL

The Rules … On Rule Changes Does Your HOA Have All Five of the Required Rule Sets?

Good community rules and regulations (“operating rules,” per Civil Code 4340) help set standards and encourage neighborly conduct.However, good rules also must be enforceable andassociationsmust follow a prescribed rule amendment process. Because rules are amended only by the board, the law requires special procedures to alert members in advance when boardsconsidera rule change.

Civil Code Section 4360establishes the following two-step meeting process: 1. In the first open meeting theboard decides to announce a proposed change,the board mustgive members at least 28 days advance written notice of an upcoming meeting to consider a change, a copy of theverbatim proposed change, and a statement as to the purpose and effect of the change. 2. At the secondboard meeting, the board must allow member comments before voting on the proposed rule change. 3. If the rule change is adopted, a notice must be announced to members within 15 days after the meeting. 4. If the change is controversial, 5% or more of the membership may, within 30 days of notification of a rule change, demand a membership meeting to vote upon its reversal. If a majority of a quorum votes to overturn the rule change, the board cannot reinstate the overturned rulechange for one year.

The law allows for emergency rules, if immediate action is necessary to avoid imminent threat to health, safety or to substantial economic loss. Boards may pass emergency rules for up to 120 days but they cannot be renewed.

Before changing association rules, consider these process tips: 1.Discuss the rule. If the rule change is too complicated to draft during the board meeting, then delegate someone (the HOA’s attorney?) to draft language for consideration at the next meeting to consider publication of the proposed change. Don’t rush - good rules adopted slowly are better than poor rules quickly approved. 2. Once the motion to adopt the rule change is made in the second board meeting, suspend deliberations and reopen members’ open forum on the rule change. Commentswill be minimal unless the rule change is controversial. 3. Listen to the members.The process’ open forum aspect is important. Listen. If significant opposition to the rule arises, more consideration should be given. Can the proposed change perhaps be improved? Is the board unexpectedly upsetting homeowners so that an overturn vote is all but certain? Such rule changesmight not be in the best interests of neighborhood relations, even though it may have originally seemed like a good idea. 4. Don’t rush past member objections. Perhaps after further study/discussion/ modification, the proposed change can be republished to members again later. 5. If the change is adopted, announce it promptly. Don’t wait to send it with the draftmeeting minutes - the secretary has 30 days for the draft minutes, while thisannouncement must be made within 15 days. 6. Have legal counsel review the draft rule change to prevent legal problems.

Perfection is not required. Per Civil 4350(d), if the board acts in good faith and in substantial compliance with the procedures, the rule should be valid.

The law, while potentially frustrating, adds transparency and deliberation to the rule-making process. The hoped-for results are better andless divisive rules - and more harmonious communities.

Operating rules are often called “house rules” or “rules and regulations” by associations in California. Rules are modified by HOA Boards under Civil Code Section 4340, and under Civil Code Section 4350(a) must be written. In adopting rule changes, boards must follow the procedure prescribed by Civil Code Section 4360.

Most rules are tailored to the needs and desires of a given community, addressing parking, pool use,or other topics. However, there are five rules topics required by statute.

Election rules: Civil Code Section 5105 requires associations to have election rules. The statute lists the basic requirements of election rules, including board eligibility standards. These rules apply not only to board elections, but also to any matter on which a topic on which a membership vote is required using the 30day notice and other voting procedures required by Civil Code Section 5100(a). These rules must conform to statute and the bylawsand are now likely out of date, with 2022’s new election by acclamation option under Civil Code 5103.

Internal Dispute Resolution (“IDR”) Policies: Civil Code Section 5905 requires associations to adopt a fair and reasonable policy to establish an IDR procedure, in which a homeowner may meet with another homeowner or the board to try to work things out short of litigation. If an association fails to create such a policy, Civil Code 5915 contains the default procedure.

Architectural Modification Request Procedures: Boards frequently receive requests from homeowners who wish to modify their residence or adjacent common area. Civil Code Section 4765 requires associations to have a written procedure for the application process. Without such procedures, homeowners and board alike have no guidance as to how applications are to be processed.

Assessment Delinquency Enforcement Policies: Civil Code Section 5730 recites detailed disclosures regarding association handling of delinquent assessments, and under Civil Code 5310(6) is part of the Annual Policy Statement to be published to members. Civil Code 5310(7) also requires that the association policies in enforcing lien rights be specified and annually given to members. Associations might adopt the contents of Civil Code 5730 as rules and then add any lien enforcement policies to satisfy Section 5310(7).

Schedule of Fines: A common disciplinary measure is to impose fines, after a hearing, to discourage members from violating association rules and covenants. However, many are unaware that the only the fines disclosed in the HOA’s rulescan be imposed, because Civil Code 5850(c) restricts fines to those as stated in the written fine schedule in effect at the time of the violation. Without a fine schedule, there aren’t fines.

All California all common interest developments, regardless of size, must have each of these five rule sets. The IDR, delinquency, architectural application procedures, and fine schedule must be disclosed annuallyin the Annual Policy Statementrequired by Civil Code 5310. Election rules must be sent to all members at least 30 days before an election, per Civil Code 5105(g).

Each of these rules must be adopted following the process in Civil Code Section 4360, which requires the exact text of the proposed rule change to be announced at least 28 days before the board vote on the proposed changes.

Complete your HOA rulesand provide the required guidance to board and members.

Kelly G. Richardson, Esq. is a Fellow of the College of Community Association Lawyers andPartnerof Richardson Ober DeNichilo LLP, a law firm known for community association advice. Submit questions to Kelly@rodllp.com. Past columns at www.HOAHomefront.com. All rights reserved® .

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