What percentage of homeowners must approve changes to our covenants?

Q: Our community is attempting to amend our declaration of covenants, conditions and restrictions (CCRs). Our HOA’s community manager told us that under North Carolina General Statutes Chapter 55A (the North Carolina Nonprofit Corporation Act), if an HOA’s board of directors calls a meeting for members to vote on a proposed amendment and not enough owners appear at the meeting to approve the amendment, the board can postpone the meeting so that at the second meeting only half the number of votes will be required to approve the amendment. However, our CCRs state that amendments to the CCRs require the affirmative vote of 67 percent of the members. Can Chapter 55A reduce the required percentage of votes for a proposed amendment to our CCRs?

A: There is an important distinction between the number of members required to conduct business at a members’ meeting (known as a “quorum”) and the number of “yes” votes required to approve an amendment to your CCRs.

Let’s start with the quorum requirement. Before any action or votes can be taken at a meeting, there must be a minimum percentage of the members present. The North Carolina Planned Community Act (the “PCA”) puts the minimum quorum requirement at 10 percent of the members, although your HOA’s bylaws might require a higher percentage (many do). The PCA also states that if the HOA cannot meet the quorum requirement for a meeting, the board can postpone the meeting to a later date, at which later meeting the quorum requirement percentage will be reduced by half. This process can be repeated—with the quorum percentage being reduced by half each time—until a quorum is met.

This “shrinking quorum” rule, however, does not apply to the amendment of CCRs. In order to amend a declaration of restrictive covenants, the PCA requires a vote of at least 67 percent of all members of the HOA—not simply 67 percent of those present at a meeting once the quorum requirement has been met. Many communities’ CCRs actually require even a higher percentage vote to amend. Seventy-five percent is common, and I’ve seen as high as 90 percent.

So while your community manager is correct that the “shrinking quorum” rule applies for members’ meetings and votes on most matters, it does not apply to CCR amendments, and it cannot be used to reduce the number or percentage of votes required to approve an amendment to the CCRs. Unless the requisite percentage of votes is cast in favor of the amendment, it is immaterial whether or not the quorum has been met.

This column was originally published in the Charlotte Observer on July 9, 2016. © All rights reserved.

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