by Deborah Goonan
A few weeks ago, in Pudlit 2 Joint Venture v. Westwood Gardens HOA, the 4th District Court of Appeals ruled that an Association’s governing documents overrule state law, unless the Covenants, Conditions & Restrictions (CC&Rs) incorporate specific language stating compliance with statutes “as amended from time to time.”
(I previously blogged about it here, and Jan Bergemann of CCFJ summarizes the key issue in his June 12th blog.)
Simply stated, if an Association wants new statutes to apply, their CC&Rs “contract” must contain what is known as “Kaufman language” specifically stating that new statutes will automatically amend the governing documents. Otherwise, new statutes that might benefit members in Associations will have no effect in overruling troublesome or offensive provisions in the CC&Rs.
Sounds simple, but it’s not.
Well, here’s the complicating factor. There are often reasons that an Association might not want to add “as amended from time to time” (Kaufman) language. There is often fine print in the Declarations that the HOA does NOT want statute to override, to the benefit of the Developer or HOA Board, and to the disadvantage of the owner/member. For example, a Developer may want to avoid complying with state law that would limit his right to require mandatory arbitration in the event of construction defect claims.
There is a huge fundamental flaw in the industry of Association-Governed Communities.
Florida developers have been building HOAs for nearly 50 years. Several homeowner friendly statutes that have been enacted in the past decade or so do not apply to the vast majority of Associations, simply because the Declarations were filed long before the new statutes took effect. The standard HOA industry argument is that government cannot impair a contract, although it’s debatable whether the CC&Rs are a valid contract or the HOA’s constitution. I’ve seen attorneys refer to either terminology, depending on the context.
Another favorite trick to water down a statute is to insert the phrase “unless otherwise specified in the governing documents,” thereby making everything that follows NOT applicable to any Association that has a “contract” written to the contrary.
Of course, Florida state legislators are famous for this practice that removes all teeth from any sort of homeowner friendly reform. A perfect example is the statute 720 provision pertaining to election procedures in the Homeowners’ Association Act. (my emphasis added in BOLD)
720.306 Meetings of members; voting and election procedures; amendments.—(1) QUORUM; AMENDMENTS.—(a) Unless a lower number is provided in the bylaws, the percentage of voting interests required to constitute a quorum at a meeting of the members shall be 30 percent of the total voting interests. Unless otherwise provided in this chapter or in the articles of incorporation or bylaws, decisions that require a vote of the members must be made by the concurrence of at least a majority of the voting interests present, in person or by proxy, at a meeting at which a quorum has been attained.…(b) Unless otherwise provided in the governing documents or required by law, and other than those matters set forth in paragraph (c), any governing document of an association may be amended by the affirmative vote of two-thirds of the voting interests of the association.…
(8) PROXY VOTING.—The members have the right, unless otherwise provided in this subsection or in the governing documents, to vote in person or by proxy
9) ELECTIONS AND BOARD VACANCIES.—
(a) Elections of directors must be conducted in accordance with the procedures set forth in the governing documents of the association.
In essence, FL statute 720 defers to the governing documents of the HOA. So if the governing documents allow valid amendments with 51% affirmative vote instead of two-thirds of the voting interests of the Association, then so be it, as far as the FL State government is concerned.
If the governing documents of an Association allow for ONLY in person voting, or conversely, ONLY general proxy voting for elections or amendments, that’s A-OK in Florida’s HOAs.
Check the statutes in your own state. You may find similar language that allows your Association to get around homeowner friendly laws, if they were to be enacted.
And where the Declarations are silent or ambiguous on these issues, HOAs are usually pushed by attorneys to amend the documents to get around Statutes with which they’d rather not comply — or to be certain to reap advantages of other Statute provisions (written by industry lobbyists) that throw the “contract shall not be impaired” argument under the bus. Double standards apply!
What’s the solution?
It seems that any homeowner-friendly statute needs to be written with teeth, clearly stating that its intent is to override governing documents on a particular issue — in other words, add language that says, “notwithstanding provisions in the governing documents…”
After all, there are many laws on the books that override or invalidate unreasonable, discriminatory, or harmful provisions of contracts. Some of them, such as Fair Housing Laws prohibiting racial discrimination, are actually enforced!
Enforcement would be a novel concept in HOA-Land.