Post by Admin on Jan 13, 2014 14:57:23 GMT -5
covotethreshblog.docx (13.45 KB)
On the ballot:
15. These Covenants and Restrictions may be amended or released provided said amendment or release is approved by written ballot by the owners of not less than three-fourths (3/4) in number of the lots shown on the above-described plats.
Proposed Covenant:
15. These Covenants and Restrictions may be amended or released provided said amendment or release is approved by written ballot by the owners of not less than three-fourths (3/4) of ballots received, provided a quorum of 51% of members are represented.
Why Changed:
Lower number needed to approve Covenants from number of lots to 3/4% of ballots received, provided at least a quorum of 51% of members is represented. From past election results, the required number of votes to change a covenant would change from 592 to 450+/-, still a difficult number to reach!
Editors Note: These numbers simply are not accurate. If you only need 51% of the total parcels to have a voting quorum, then you only need 401 ballots received. The vote is passed if 75% of those 401 ballots vote YES. That is 301 YES votes to pass a covenant change. THIS IS WAY TOO LOW --LOWER THAN THE NUMBER NEEDED TO PASS A RULE!
I blogged elsewhere discussing this; here is a copy/paste:
This generated many questions and rightly so. There are many excellent reasons to keep the voting threshold to change covenants very high. The 75% of membership is generally recognized as unrealistically high and puts associations needing to make changes in a chokehold and unable to do anything.
First and foremost, covenants are the superior governing document specifying the property and contractual rights of owners. Our forefathers (ha the developers!) did not want them changed and made it difficult with a high voting threshold. Covenants give constructive notice to the public about the "bundle of rights" that attach to the real estate so they are just not about Saddlebaggers. You do not want to change them without intensive scrutiny and the language of change must be precise and meet a legal standard which must be careful not to tred on the original contract rights of owners. Amendments can "flesh out" the original covenants or expand rights--but they cannot take away those rights. Associations that inadvertantly abrogate rights get in trouble down the road when cH allenged and cost Associations gobs of legal fees.
Covenants are also now used by underwriters for lending institutions considering loans for property located within CID's (common interest developments). These types of loans carry special risks because of the powers of Associations to alter the value of the collateral real estate. Underwriters who read atypical or loosey-goosey language in Covenants will squirm and refuse to "pass" the property for a loan.
I believe that this change might be unfavorably regarded by loan underwriters and make it more difficult to acquire financing. The voting threshold reduction is a drastic one--FIFTY percent! It is not a typical threshold among CID's and this fact alone will raise a flag. Typically, CID's who are able to pass a voting threshold reduce it from 3/4 to 2/3; and a few to 50%. Those percentages relate to total parcels and are not qualified by a "quorum requirement" as this amendment proposes to do.
Here is how the #'s change under the various voting parameters:
Current (75% of 787 parcels): 592 to pass
Proposed (75% of ballots received with a 51% quorum: A 51% quorum reduces the 787 by half to 402 parcels and then the 75% affirmative vote is calculated): 302 to pass
Notice that the vote is for BALLOTS RECEIVED by 51% of parcels! Not TOTAL "voting parcels" or "entire membership". Very unusual and Very low. This is too aggressive. Too bad because SLohA needs to adjust the threshold but this is just a bad idea.
Other Associations: 2/3 of 787 parcels = 528 In my opinion, this is more appropriate and reflective of the superior status of the document.
As you can see, the lowering is 50%+ and is LESS THAN the voting threshold to pass a RULE which requires 50% of parcels: 394 to pass a rule versus 302 to pass a covenant. This is just nonsense.
(I am unable to understand the number in the example above ie 592 vs 450+ under any scenario.
On the ballot:
15. These Covenants and Restrictions may be amended or released provided said amendment or release is approved by written ballot by the owners of not less than three-fourths (3/4) in number of the lots shown on the above-described plats.
Proposed Covenant:
15. These Covenants and Restrictions may be amended or released provided said amendment or release is approved by written ballot by the owners of not less than three-fourths (3/4) of ballots received, provided a quorum of 51% of members are represented.
Why Changed:
Lower number needed to approve Covenants from number of lots to 3/4% of ballots received, provided at least a quorum of 51% of members is represented. From past election results, the required number of votes to change a covenant would change from 592 to 450+/-, still a difficult number to reach!
Editors Note: These numbers simply are not accurate. If you only need 51% of the total parcels to have a voting quorum, then you only need 401 ballots received. The vote is passed if 75% of those 401 ballots vote YES. That is 301 YES votes to pass a covenant change. THIS IS WAY TOO LOW --LOWER THAN THE NUMBER NEEDED TO PASS A RULE!
I blogged elsewhere discussing this; here is a copy/paste:
This generated many questions and rightly so. There are many excellent reasons to keep the voting threshold to change covenants very high. The 75% of membership is generally recognized as unrealistically high and puts associations needing to make changes in a chokehold and unable to do anything.
First and foremost, covenants are the superior governing document specifying the property and contractual rights of owners. Our forefathers (ha the developers!) did not want them changed and made it difficult with a high voting threshold. Covenants give constructive notice to the public about the "bundle of rights" that attach to the real estate so they are just not about Saddlebaggers. You do not want to change them without intensive scrutiny and the language of change must be precise and meet a legal standard which must be careful not to tred on the original contract rights of owners. Amendments can "flesh out" the original covenants or expand rights--but they cannot take away those rights. Associations that inadvertantly abrogate rights get in trouble down the road when cH allenged and cost Associations gobs of legal fees.
Covenants are also now used by underwriters for lending institutions considering loans for property located within CID's (common interest developments). These types of loans carry special risks because of the powers of Associations to alter the value of the collateral real estate. Underwriters who read atypical or loosey-goosey language in Covenants will squirm and refuse to "pass" the property for a loan.
I believe that this change might be unfavorably regarded by loan underwriters and make it more difficult to acquire financing. The voting threshold reduction is a drastic one--FIFTY percent! It is not a typical threshold among CID's and this fact alone will raise a flag. Typically, CID's who are able to pass a voting threshold reduce it from 3/4 to 2/3; and a few to 50%. Those percentages relate to total parcels and are not qualified by a "quorum requirement" as this amendment proposes to do.
Here is how the #'s change under the various voting parameters:
Current (75% of 787 parcels): 592 to pass
Proposed (75% of ballots received with a 51% quorum: A 51% quorum reduces the 787 by half to 402 parcels and then the 75% affirmative vote is calculated): 302 to pass
Notice that the vote is for BALLOTS RECEIVED by 51% of parcels! Not TOTAL "voting parcels" or "entire membership". Very unusual and Very low. This is too aggressive. Too bad because SLohA needs to adjust the threshold but this is just a bad idea.
Other Associations: 2/3 of 787 parcels = 528 In my opinion, this is more appropriate and reflective of the superior status of the document.
As you can see, the lowering is 50%+ and is LESS THAN the voting threshold to pass a RULE which requires 50% of parcels: 394 to pass a rule versus 302 to pass a covenant. This is just nonsense.
(I am unable to understand the number in the example above ie 592 vs 450+ under any scenario.
