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March 10, 2008
What Controls in HOAs - the Documents or the Law?
Below is a question I received from a reader in the State of Washington. While I cannot answer anything that might be perceived as giving legal advice in another state, I can give a practical answer to the question:
"Which controls, the governing documents or state law?"
My answer is a common "lawyerly" answer. It depends ... on how the law and the governing documents are written. In California, if you see the word "notwithstanding" preceding a provision in the law, that generally means the law controls over the governing documents.
An example of this would be a law that says, "Notwithstanding anything in the Declaration, the Association shall maintain the .... and the Owners shall maintain the .... ." On the other hand, if the law says: "Unless the Declaration otherwise provides, the Association shall maintain the ... and the Owners shall maintain the ...." and there is a clause in the Declaration on the subject, then the Declaration would control.
You have to be careful though. Civil Code Section 1366 is a prime example of a difficult law that is hard to interpret. It says:
" Notwithstanding more restrictive limitations placed on the board by the governing documents, the board of directors may not impose a regular assessment that is more than 20 percent greater than the regular assessment for the association's preceding fiscal year or impose special assessments which in the aggregate exceed 5 percent of the budgeted gross expenses of the association for that fiscal year without the approval of owners, constituting a quorum, casting a majority of the votes at a meeting or election of the association conducted in accordance with Chapter 5 (commencing with Section 7510) of Part 3 of Division 2 of Title 1 of the Corporations Code and Section 7613 of the Corporations Code. For the purposes of this section, quorum means more than 50 percent of the owners of an association. This section does not limit assessment increases necessary for emergency situations."
This kind of language even gives lawyers fits. What it means is that Boards can raise assessments up to 20 percent each year, and can impose special assessments that do not exceed 5% of the budgeted gross expenses, without a vote of the membership. If a vote is required, the approval requirement is a majority of a quorum and for this purpose, the law controls as to quorum, and not the governing documents.
Would you have interpreted the statute that way? Wouldn't it be nice is the answers were as simple as black and white?
Posted by Beth Grimm at March 10, 2008 8:46 PM