HOA Rules: Creating, Changing, and Repealing

The Davis-Stirling Act contains a number of sections regarding the Operating Rules of common interest development associations. These sections, contained mainly in Article 5 of the Civil Code and regulate the adoption of rules, the application of rules, and provide a procedure for members to reverse rules. All board members and managers should be diligent in following these provisions. This article provides a review of the provisions contained in these sections of the Civil Code.

What Are "Operating Rules" and "Rule Changes"?

Operating rules are distinct from the Covenants, Conditions, and Restrictions (CC&Rs) of an HOA. If the board has the authority to adopt rules - authority typically found in the CC&Rs - it can create new rules as needed. Civil Code §4340 defines "operating rules" and "rule changes":

Operating Rule: a regulation adopted by the board that applies generally to the management and operation of the common interest development or the conduct of the business and affairs of the association.

Rule Change: the adoption, amendment, or repeal of an operating rule by the board.

The authority to create rules is not limitless. California law (in Civil Code §4350) also defines what makes a rule "valid and enforceable." Generally, the rule must be in writing, it can't contradict the governing documents or the law, it must be adopted legally, and it must be reasonable. For more information on exactly what makes a rule valid and enforceable, read Components of an Enforceable Rule.

Rule Change Procedures

The two main rule "procedures" are found in Civil Code Sections 4360 and 4365. Civil Code §4360 provides specific procedures for the board of directors to follow when proposing and adopting rule changes. Civil Code §4365 provides a process where members of the association may call a special meeting to reverse a rule change made by the board of directors of the association.

When Rule Change Procedures are Required (or Not)

The provisions of Civil Code §4360 and §4365 only apply to an operating rule that relates to one or more of the following subjects:

  1. Use of the common area or of an exclusive use common area.
  2. Use of a separate interest, including any aesthetic or architectural standards that govern alteration of a separate interest.
  3. Member discipline, including any schedule of monetary penalties for violation of the governing documents and any procedure for the imposition of penalties.
  4. Any standards for delinquent assessment payment plans.
  5. Any procedures adopted by the association for resolution of disputes.
  6. Any procedures for reviewing and approving or disapproving a proposed physical change to a member's separate interest or to the common area.
  7. Procedures for elections.

Not every decision of the board, even when it applies to the entire community, requires a rule. Because of this, some decisions of the board cannot be reversed by members. The provisions of Civil Code §4360 and §4365 do not apply to the following actions by the board of directors:

  1. A decision regarding maintenance of the common area.
  2. A decision on a specific matter that is not intended to apply generally.
  3. A decision setting the amount of a regular or special assessment.
  4. A rule change that is required by law, if the board has no discretion as to the substantive effect of the rule change.
  5. Issuance of a document that merely repeats existing law or the governing documents.

The Process for Changing Rules

The process for making rule changes, as set forth in Civil Code §4360, are as follows:

  1. The board shall provide general notice pursuant to Section 4045 of a proposed rule change at least 28 days before making the rule change. The notice shall include the text of the proposed rule change and a description of the purpose and effect of the proposed rule change. Notice is not required under this subdivision if the board determines that an immediate rule change is necessary to address an imminent threat to public health or safety or imminent risk of substantial economic loss to the association.
  2. A decision on a proposed rule change shall be made at a board meeting, after consideration of any comments made by association members.
  3. As soon as possible after making a rule change, but not more than 15 days after making the rule change, the board shall deliver general notice pursuant to Section 4045 of the rule change. If the rule change was an emergency rule change made under subdivision (d), the notice shall include the text of the rule change, a description of the purpose and effect of the rule change, and the date that the rule change expires.
  4. If the board determines that an immediate rule change is required to address an imminent threat to public health or safety, or an imminent risk of substantial economic loss to the association, it may make an emergency rule change, and no notice is required, as specified in subdivision (a). An emergency rule change is effective for 120 days, unless the rule change provides for a shorter effective period. A rule change made under this subdivision may not be readopted under this subdivision.

Reversing or Repealing a Rule

Because members do not "vote" on rule changes, there is no mechanism to stop a rule change before it takes effect. However, the law allows members to reverse a recent rule change. As long as members act promptly - within 30 days of the association's delivery of the new rule for review - members may use a process for calling a special meeting to reverse a rule change. If the members are successul, the board cannot introduce the rule again for one year. The reversal process is set forth in Civil Code §4365:

  1. Members of an association owning 5 percent or more of the separate interests may call a special vote of the members to reverse a rule change.
  2. A special vote of the members may be called by delivering a written request to the association. Not less than 35 days nor more than 90 days after receipt of a proper request, the association shall hold a vote of the members on whether to reverse the rule change, pursuant to Article 4 (commencing with Section 5100) of Chapter 6. The written request may not be delivered more than 30 days after the association gives general notice of the rule change, pursuant to Section 4045.
  3. For the purposes of Section 5225 of this code and Section 8330 of the Corporations Code, collection of signatures to call a special vote under this section is a purpose reasonably related to the interests of the members of the association. A member request to copy or inspect the membership list solely for that purpose may not be denied on the grounds that the purpose is not reasonably related to the member's interests as a member.
  4. The rule change may be reversed by the affirmative vote of a majority of a quorum of the members, pursuant to Section 4070, or if the declaration or bylaws require a greater percentage, by the affirmative vote of the percentage required.
  5. Unless otherwise provided in the declaration or bylaws, for the purposes of this section, a member may cast one vote per separate interest owned.
  6. A rule change reversed under this section may not be readopted for one year after the date of the vote reversing the rule change. Nothing in this section precludes the board from adopting a different rule on the same subject as the rule change that has been reversed.
  7. As soon as possible after the close of voting, but not more than 15 days after the close of voting, the board shall provide general notice pursuant to Section 4045 of the results of the member vote.
  8. This section does not apply to an emergency rule change made under subdivision (d) of Section 4360.

The original version of these laws took effect in 2004. Rules adopted (or the process commenced) prior to 2004 are still valid (see Civil Code §4370). And while it should be obvious, associations must give their members access to the operating rules of the association (Civil Code §5850(b)). Secret rules are a terrible idea. 

When associations pay attention to the needs of the community and take care to adopt good, reasonable rules, they are unlikely to run into much opposition. But not every association gets it right, and both boards and members should know the process and their rights.

John Paul Hanna and David Van Atta are the principals in the law firm of Hanna and Van Atta in Palo Alto, CA. The firm is an ECHO member. These attorneys have authored a number of publications relating to real property law and Hanna is a member of the ECHO Legal Resource Panel.

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