Are You Resisting Amending Documents Because of Mortgagee (Lender) Approval Provisions?

Amendment Provisions Requiring Lender Approval

Ugh. Some HOA documents require lender as well as owner approval to amend. This creates a considerable hurdle because

(1)    Lenders are difficult if not impossible to locate without great energy and expense and sometimes loans have been bought and sold so many times the borrower doesn’t even have a good address.

(2)    Lenders are generally unresponsive – part of the problem is that they probably don’t want to read the whole bundle of CC&Rs (I mean, who does anyway?) and the other is that finding the right person to do the task is nearly impossible.

So, the lender protection clauses in the CC&Rs present just one more potential hurdle. In fact, amendments that require mortgagee (lender) voting and approval are often the subject of discussion among attorneys, because the process adds an onerous aspect to trying reasonably to amend the governing documents. Lots of managers simply advise HOAs it is too difficult to amend so the board doesn’t even try.

My January newsletter will offer tips on amending documents but for now, consider this to get over the highest hurdle.

Unless you have to go to court and seek court approval of the documents, foregoing lender approval may not be the end of the world. Why?

In many documents, there is legalease type language that precludes needing the approval if no lenders have sent written notice to the HOA asking for notice of any proposed amendments. A layperson may miss or misinterpret this language so it is good to get a legal opinion on this.

A board may want to consider a “fall back” provision in CC&Rs that allows it to take specific steps to reinstate provisions that were included in the documents you are amending if a challenge is raised by anyone.

I have not seen a challenge brought to any set of CC&Rs that has been approved in the last 30 years of my law practice. I offer the board the option of the fall back provision as a stop gap to possible serious legal action. I cannot make guarantees that there won’t be a challenge. But I can provide measures to minimize the impact if there is.

My belief is that if a board sticks to updating and restating the governing documents in a way that does not add controversial changes (such as a new lease limitation provision) when presenting the documents to the members for approval, the chances of a challenge are slim to none. If a challenge is made by a member based on failure to get lender approval, then it seems one argument/defense that can be made is that the member does not have standing to object, only the lenders do.

And if a member challenges the recording of a set of CC&Rs that received member approval, and there is a rollback (fallback) provision in the new documents that allows a board to make adjustments I have described, the problem may be curable without protracted arguments. Also, it may be possible to reason with any challenger that the updated documents are far superior to the original or prior documents and likely to stave off legal battles that will cost the entire HOA, including the owner who has the beef.

Do not take this as legal advice, only one attorney’s way of getting over the hurdle of documents that actually do require approval of mortgagees (remember not all do even though it may look so at first glance). And I do not suggest using this method if you are not willing to do whatever it takes to get the percentage of owner approval even when high. If a Board relies on the petition process to seek court approval for updated CC&Rs that received majority approval of members, but not the super-majority required by the prior documents, then I would say avoiding going to lenders for approval could mean death to the petition.

I will more fully vet this and other ideas on the January E-newsletter so sign up now at and also check out the E-news Archives as there might be something there that is pertinent to a problem you are facing.

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Beth A. Grimm is an attorney who serves homeowner associations and homeowners alike. She is a frequent contributor to the Echo Journal and other similar publications in the State of California and on a national level. She provides several publications written in plain English to help people who need information about California law as it relates to homeowner and condominium associations.

Things to keep in mind about this site: Practical Nuts and Bolts Problems and Solutions are Discussed. Beth A. Grimm practices law in California ONLY! There is nothing in these blogs that is intended to constitute legal advice. You must consult with an attorney if you want legal advice!