In the construction of a statute the intention of the Legislature, and in the construction of the instrument the intention of the parties, is to be pursued, if possible; and when a general and particular provision are inconsistent, the latter is paramount to the former. So a particular intent will control a general one that is inconsistent with it.
All posts by Steve Tinnelly
Rules of Interpretation
Rules of interpretation are important to address issues arising from vague language within an association’s governing documents, or from language within the governing documents that conflicts with the Davis-Stirling Act (“Act”) or the California Corporations Code.
Statutory Language Defers
If any statute uses language to the effect of “unless otherwise provided in the declaration or bylaws…” (i.e., Civ. Code § 4365(e).), the statute is meant to defer to the language in those governing documents of an association.
Statutory Language Controls
If any statute uses language to the effect of “notwithstanding any provision of the governing documents to the contrary…” (i.e., Civ. Code § 4230(a).) or “no governing documents shall prohibit….” (i.e., Civ. Code § 4705(a).), the language within the statute is controlling and overrides any contradictory language in an association’s governing documents.
Statutory Language is Silent
Provisions of the Act may be silent on whether they are intended to control or to defer to the language in an association’s governing documents. Those provisions may nevertheless control where they use the term “shall,” as that term is a word of command and “must be given a compulsory meaning.” (People v. O’Rourke (1932) 124 Cal.App. 752, 759.) For example, Civil Code Section 4910(a) states that “the board shall not take action on any item of business outside of a board meeting.” This language is controlling and would override any contradictory language in an association’s governing documents.
Conflicts Between Governing Documents
There may be conflicting language between an association’s governing documents (i.e., conflicts between the language in the declaration and the language in the bylaws). Those conflicts may be resolved through the application of the hierarchy of governing documents. (See “Hierarchy of Governing Documents” and Civ. Code § 4205.)
Interpretation of Declaration (“CC&Rs”)
California courts have established the following principles with respect to interpreting CC&Rs:
“The same rules that apply to interpretation of contracts apply to the interpretation of [CC&Rs].” (Chee v. Amanda Golt (2006) 143 Cal.App.4th 1360, 1377).
CC&Rs which are “enacted for the mutual benefit of [the] homeowners, are to be interpreted so as to give effect to the main purpose of the contract… and where a contract is susceptible of two interpretations, the courts shall give it such a construction as will make it lawful, operative, definite, reasonable and capable of being carried into effect… [and] avoid an interpretation which will make [the CC&Rs] extraordinary, harsh, unjust, inequitable or which would result in absurdity.” (Battram v. Emerald Bay (1984) 157 Cal.App.3d 1184, 1189.)
“Where two provisions appear to cover the same matter, and are inconsistent, the more specific provision controls over the general provision.” (Starlight Ridge South Homeowners Assn. v. Hunter-Bloor (2009) 177 Cal.App.4th 440, 447; Code Civ. Proc. § 1859.)
“We consider the [CC&Rs] as a whole and construe the language in context, rather than interpret a provision in isolation.” (Starlight Ridge South Homeowners Assn. v. Hunter-Bloor (2009) 177 Cal.App.4th 440, 447.)
Tract Map
The Tract Map (or “Subdivision Map”) is filed by the “Declarant” (typically the CID’s developer) prior to the construction of a Planned Unit Development (“PUD”) (typically, single family home projects). The Tract Map illustrates the dimensions, boundaries and locations of the separate interests (the “lots,” “parcels” or “spaces”) and the common areas.
Condominium Plan
The Condominium Plan is filed by the “Declarant” (typically the CID’s developer) prior to the construction of a condominium project. The Condominium Plan shows the engineering specifications of the CID and contains descriptions and diagrams identifying the boundaries of the separate interests (the condominium “units”), the common areas, and exclusive use common areas (i.e., parking spaces and balconies). (Civ. Code § 4120, Civ. Code § 4285.) By contrast, Planned Unit Developments (“PUDs”) use a “Tract Map” to illustrate the boundaries of the various lots and common areas.
Addressing Maintenance Questions
The boundaries illustrated in the Condominium Plan may help clarify the members’ respective maintenance responsibilities versus those of the association where the maintenance responsibilities under the CC&Rs may be ambiguous.
Suspended Corporation
Most associations are incorporated as Nonprofit Mutual Benefit Corporations under the California Corporations Code. Though corporate status is not required, associations incorporate to avail themselves of certain legal protections afforded to corporations under California law. An association may have its corporate status suspended for a variety of reasons, including:
- Failure to file a “Statement by Domestic Nonprofit Corporation” with the Secretary of State. (Corp. Code § 2205.)
- Failure to file a “Statement by Common Interest Association” with the Secretary of State. (Corp. Code § 2205.)
- Failure to file tax returns. (Rev. & Tax. Code § 23301.)
- Failure to pay taxes. (Rev. & Tax. Code § 23301.5, § 23775.)
Verification of Corporate Status
An association may verify its corporate status online via the Secretary of State’s website. If corporate status has been suspended, the association should contact the Franchise Tax Board as well as the Secretary of State’s office.
Impacts of Suspension
“…[E]xcept for filing an application for tax exempt status or amending the articles of incorporation to change the corporate name, a suspended corporation is disqualified from exercising any right, power or privilege.” (Timberline, Inc. v. Jaisinghani (1997) 54 Cal.App.4th 1361, 1365.) A suspension of corporate status may have significant impacts on the association, including, among others:
- Association Litigation. A suspended association is unable to initiate lawsuits or to defend itself in lawsuits that are filed against it. Attorneys who engage in litigation for an association with knowledge that its corporate status has been suspended are subject to sanctions. (Palm Valley Homeowners Association v. Design MTC (2001) 85 Cal.App.4th 553.)
- Association Contracts. A contract that is executed by a suspended association is voidable at the election of the other contracting party. (Rev. & Tax Code § 23304.5.) A suspended association may therefore lose it’s ability to enforce its contracts with vendors and other third-parties.
A suspension of an association’s corporate status will not operate to relieve the association of its ongoing obligations (i.e., satisfying its maintenance requirements under the governing documents).
Reviving Corporate Status
A suspended association may revive its corporate status through various measures depending upon the reasons underlying the initial suspension. Suspensions based on tax issues may be resolved through paying delinquent tax balances and filing the requisite tax returns. Suspensions based upon failure to file the required statements of information with the Secretary of State may be resolved by filing those statements and paying any resulting fines and penalties.
Corporations Code Section 2205. Suspension of Corporate Status.
(a) A corporation that (1) fails to file a statement pursuant to Section 1502 for an applicable filing period, (2) has not filed a statement pursuant to Section 1502 during the preceding 24 months, and (3) was certified for penalty pursuant to Section 2204 for the same filing period, is subject to suspension pursuant to this section rather than to penalty pursuant to Section 2204.
(b) When subdivision (a) is applicable, the Secretary of State shall provide a notice to the corporation informing the corporation that its corporate powers, rights, and privileges will be suspended after 60 days if it fails to file a statement pursuant to Section 1502.
(c) After the expiration of the 60-day period without any statement filed pursuant to Section 1502, the Secretary of State shall notify the Franchise Tax Board of the suspension and provide a notice of the suspension to the corporation, and thereupon, the corporate powers, rights, and privileges of the corporation are suspended, except for the purpose of filing an application for exempt status or amending the articles of incorporation as necessary either to perfect that application or to set forth a new name.
(d) A statement pursuant to Section 1502 may be filed notwithstanding suspension of the corporate powers, rights, and privileges pursuant to this section or Section 23301, 23301.5, or 23775 of the Revenue and Taxation Code. Upon the filing of a statement pursuant to Section 1502 by a corporation that has suffered suspension pursuant to this section, the Secretary of State shall certify that fact to the Franchise Tax Board and the corporation may thereupon be relieved from suspension unless the corporation is held in suspension by the Franchise Tax Board by reason of Section 23301, 23301.5, or 23775 of the Revenue and Taxation Code.
Governing Documents
An association’s “governing documents” are defined as “the declaration and any other documents, such as bylaws, operating rules, articles of incorporation, or articles of association, which govern the operation of the common interest development or association.” (Civ. Code § 4150.)
In addition to state, local and federal laws, a common interest development (“CID”) is governed by its governing documents. The governing documents may have been initially drafted by the CID’s developer, but are subject to amendment by the association and its membership over time. (See “Amendments to Declaration,” “Amendments to Bylaws,” and “Adopting & Amending Operating Rules.”)
The types of governing documents for any particular CID or association will vary slightly based upon the nature of the CID itself:
| Governing Document | PUDs | Condo Projects | Stock Cooperatives |
| Declaration (CC&Rs) | √ | √ | |
| Bylaws | √ | √ | √ |
| Articles of Incorporation | √ | √ | √ |
| Operating Rules | √ | √ | √ |
| Election Rules | √ | √ | √ |
| Architectural Guidelines | √ | √ | √ |
| Tract Map | √ | ||
| Condominium Plan | √ | ||
| Proprietary Lease | √ |
Extending Term of Declaration (CC&Rs)
Some sets of CC&Rs contain provisions that provide for their expiration after a specific period of time or a specified date (sometimes called the “termination date”). Such CC&Rs often also contain a provision allowing for an automatic renewal/extension of the termination date. Where the CC&Rs are silent in this respect, the termination date may be extended by approval from a majority of the members, or any greater percentage required under the amendment procedures contained in the CC&Rs themselves. (Civ. Code § 4265(b); Civ. Code § 4270.) The public policy behind allowing for CC&R extensions with approval of the members is as follows:
“…The Legislature further finds that covenants and restrictions contained in the [CC&Rs], are an appropriate method for protecting the common plan of developments and to provide for a mechanism for financial support for the upkeep of common area including, but not limited to, roofs, roads, heating systems, and recreational facilities. If [CC&Rs] terminate prematurely, common interest developments may deteriorate and the housing supply of affordable units could be impacted adversely. The Legislature further finds and declares that it is in the public interest to provide a vehicle for extending the term of the [CC&Rs] if the extension is approved by a majority of all members, pursuant to Section 4065.” (Civ. Code § 4265(a).)
The approved extension becomes effective after complying with the procedural requirements for amending CC&Rs found under Civil Code Section 4270(a). (See “Amendments to Declaration (CC&Rs).”)
Length of Allowable Extension(s)
No extension that is made pursuant to Civil Code Section 4265 is valid if it exceeds the length of the initial term of the CC&Rs, or twenty (20) years, whichever is less. (Civ. Code § 4265(d).) However, this does not limit the number of extensions that may occur. (Id.)
Amendments to Bylaws
Bylaws may be amended according to the procedures and voting requirements contained within the bylaws. When the bylaws do not contain provisions for their amendment, they may be amended by approval of a majority of the members at a meeting where quorum is present. (Corp. Code § 5034; See Corp. Code § 7150(b); See also Corp. Code § 7512(a) (subject to limitation, “[o]ne-third of the voting power, represented in person or by proxy, shall constitute a quorum at a meeting of members”).)
Amendment by Board
Certain provisions of the bylaws may be amended by the board without membership approval. (Corp. Code § 7150(a).) Such amendments are valid unless they would:
“(1) Materially and adversely affect the rights of members as to voting, dissolution, redemption, or transfer;
(2) Increase or decrease the number of members authorized in total or for any class;
(3) Effect an exchange, reclassification or cancellation of all or part of the memberships; or
(4) Authorize a new class of membership.” (Corp. Code § 7150(a).)
Additionally, the bylaws may restrict or eliminate the board’s ability to adopt, amend, or repeal any or all portions of the bylaws. (Corp. Code § 7150(c).)
Amendment by Membership
Where a proposed bylaw amendment will require approval from the association’s membership, voting to approve the proposed amendment must be conducted by secret ballot. (Civ. Code § 5100(a); See also “Balloting Requirements & Procedures.”)
No Recording Requirement; Effective Upon Notice
Unlike amendments to the declaration, bylaw amendments are not required to be recorded and are effective upon notice to the membership.
Bylaws
The provisions of an association’s bylaws contain the policies, powers, and procedures relating to the corporate governance of the association. The bylaws set forth how the association will function as a corporation, including such information as the number, qualifications, and terms of directors, as well as election and quorum requirements.
No Recording Requirement
Unlike the declaration (“CC&Rs”), the bylaws are not required to be recorded or filed, but some law firms and developers record them as exhibits to the declaration.
Valid Even if Unsigned
Bylaws are supposed to be signed by the person or persons establishing the association (i.e., the association’s developer). The lack of a signature does not necessarily invalidate the bylaws but it can have implications for the association in the context of loan certifications. The board may therefore choose to ratify the existing bylaws and sign them.
Amendments to Bylaws
Bylaws may be amended pursuant to their own amendment provisions as well as those found in the California Corporations Code. (See “Amendments to Bylaws.”)