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Association Cannot Change Voting Rights of Unit Owner Without the Unit Owner’s Consent
A recent case, Serota v. London-Towne Homeowners Association, dealt with an association trying to alter the voting rights of a unit owner. More broadly, the case gives some instruction on how to amend the governing documents of a community that was created before the passage of the Pennsylvania Uniform Planned Communities Act (the “UPCA”).
The facts of the case are straightforward. London-Towne Homeowners Association is a community with 70 townhouses. Serota owned 12 of these. The Declaration of Covenants, Conditions and Restrictions (the “CCR’s”) was recorded in 1979, before the UPCA was enacted. The CCR’s provided that each unit received one vote. This means Serota had 12 of the 70 votes of the Association. The CCR’s provided that they could be amended with the vote of 75% of all unit owners. The Executive Board of the Association amended the bylaws to provide that each unit owner receives only one vote, regardless of the number of units they own. The UPCA provides that no amendment can change the ownership percentages or the voting strength of any unit owner without that unit owner’s approval.
Even though the CCR’s were recorded before the UPCA, some of its sections apply retroactively to communities created before the Act. One of these sections deals with amendments to the declaration or CCR’s. Section 5102(d) of the UPCA provides that an amendment may be made either in accordance with the law at the time of the declaration, or be using procedures in the UPCA. This means that if the old CCR’s do not have any way to be amended, then the Association can use the process in the UPCA. However, all amendments to a need to comply with the procedures and requirements in the document being amended, as well as the procedures and requirements of the UPCA.
In this case, the Association claimed it did not need to follow the UPCA because the amendment was permitted by law in effect at the time the CCR’s were recorded — the Non-Profit Corporation Law. The Commonwealth Court found that the Non-Profit Corporation Law did not permit changing a substantial right like a unit owner’s voting rights. This means that the Association couldn’t make this change based on “old” law.
More importantly for this discussion, the Court determined that Section 5219(d)(1) of the UPCA applied. This part requires that no amendment can change the ownership percentages or the voting strength of any unit owner without that unit owner’s approval. Since the amendment was not authorized by the Non-Profit Corporation Law, the Court looked to see whether the UPCA allowed the amendment. Clearly, the UPCA does not permit an owner’s voting strength to be reduced without that owner’s consent. As a result, the amendment was ruled invalid.
I see a lot of CCR’s that were recorded before the 1996 enactment of the UPCA. A lot of these Declarations are very outdated and ineffectual. The retroactivity provisions of the UPCA allow many of these old Declarations to be amended to bring them up to modern standards. Because the Act permits Declarations to be amended with 67% approval of all unit owners, this often makes it possible to amend the Declaration, whereas the provisions in the original Declaration would have made it impossible. Unfortunately, there are still other limitations to consider. When trying to amend an old document, the Association needs to be careful that it is not tripped up by any of these other restrictions or procedures.