California HOA elections bill update (March 2019)

By Deborah Goonan, Independent American Communities

The Center for California Homeowner Association Law (CCHAL) is sponsoring an HOA Elections Bill, SB323, introduced by Senator Bob Wieckowski [D-Fremont]. The bill is based upon a similar HOA voter protection bill proposed last year.

Last year, SB1265 was approved by both chambers of California Legislature, only to be vetoed by Governor Jerry Brown.

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Read the text of SB323

SB323 has several key amendments

HOA election required every 4 years

Most importantly, SB323 would require that associations conduct board elections at least once every four years. According to CCHAL, the intent of requiring an election every 4 years is to prevent HOA boards from using various legal loopholes and election avoidance tactics.

When an HOA board blocks elections, it remains in power indefinitely, which may not be in the best interest of the association’s members.

SECTION 1.
Section 5100 of the Civil Code is amended to read:
5100.
(a) Notwithstanding any other law or provision of the governing documents, elections regarding assessments legally requiring a vote, election and removal of directors, amendments to the governing documents, or the grant of exclusive use of common area pursuant to Section 4600 shall be held at minimum every four years by secret ballot in accordance with the procedures set forth in this article.

Another important amendment would prevent the HOA from enacting a rule that would get around the requirements of existing state law, for an independent 3rd pary to serve as inspector of elections.

Independent third party is clearly defined in current law, but, as you can see, the proposed amendment strikes the clause “unless expressly authorized by rules of the association.”

This common sense amendment offers important protections for homeowners. After all, state regulatory laws do no good at all if the HOA board can simply enact a rule that says it’s OK to select an inspector of elections that is not independent.

5110. (a) The association shall select an independent third party or parties as an inspector of elections. The number of inspectors of elections shall be one or three.
(b) For the purposes of this section, an independent third party includes, but is not limited to, a volunteer poll worker with the county registrar of voters, a licensee of the California Board of Accountancy, or a notary public. An independent third party may be a member, but may not be a director or a candidate for director or be related to a director or to a candidate for director. An independent third party may not be a person, business entity, or subdivision of a business entity who is currently employed or under contract to the association for any compensable services unless expressly authorized by rules of the association adopted pursuant to paragraph (5) of subdivision (a) of Section 5105. other than serving as an inspector of elections.

Laptop computer internet communications
(Pixabay.com free image)

E-mail addresses, election materials would become “association records”

The bill also proposes that email addresses be added to the official definition of “association records,” unless, of course, a member opts out of authorizing communication by email.

Especially in large associations, email is often the easiest, most efficient way to communicate directly with HOA members.

“Association election materials” would also be deemed official records of the association, as defined below:

5200. For the purposes of this article, the following definitions shall apply:
(a) “Association records” means all of the following:

(9) Membership lists, including name, property address, and mailing address, and email address, but not including information for members who have opted out pursuant to Section 5220.

(14) Association election materials as defined in subdivision (c).

(c) “Association election materials” means returned ballots, signed voter envelopes, a list of parcel numbers and voters to whom ballots were to be sent, proxies, and the candidate registration list. Except for the purposes of this article, signed voter envelopes may be inspected but shall not be copied.

In the event of an election dispute or call for a recount, these proposed amendments would allow homeowners to review ballots, voter envelopes, parcel numbers, proxies, and candidate registration lists. Without all of these records, it would be nearly impossible to verify the results of a contested election.

Conditions for disqualifying nominations

Last year’s bill created controversy with regard to an HOA’s rules for disqualifying certain board candidates. SB323 addresses several concerns expressed by industry trade group Community Association’s Institute, in particular, the California Legislative Action Committee (CAI-CLAC).

The current bill would require that an HOA disqualify board nominees who are not members of the association, or who have been convicted of certain felonies, as described below:

(b) An association shall disqualify a person from a nomination as a candidate pursuant to either of the following:
(1) An association shall disqualify a nominee for not being a member of the association at the time of the nomination.
(2) An association shall disqualify a nominee if, within the past 20 years, the person has been convicted of a felony involving accepting, giving, or offering to give, a bribe, the embezzlement of money, the extortion or theft of money, perjury, or conspiracy to commit any of those crimes. For purposes of this paragraph, “conviction of a felony” includes a conviction of a felony in this state and a conviction under the laws of any other state, the United States, or any foreign government or country of a crime that, if committed in this state, would be a felony, and for which the person has not received a pardon from a person or entity authorized to grant the pardon.

In addition, several proposed amendments would allow an HOA to follow their current bylaws to disqualify board candidates under certain conditions:

  • A candidate is not current in payment of “regular assessments”
  • A candidate who is a joint owner of the same unit or parcel belonging to a current board member or approved candidate for the board.
  • A candidate who has not been a member of the association for at least one year.

(c) An association may disqualify a person from nomination as a candidate pursuant to any of the following:
(1) Through its bylaws only, and subject to paragraph (2) of subdivision (d), an association may require a nominee for a board seat, and an incumbent board director during their board tenure, to be current in the payment of regular assessments, which are consumer debts subject to validation. If an association requires a nominee to be current in the payment of regular assessments, it shall also require an incumbent board director to be current in the payment of regular assessments.
(2) Through its bylaws only, an association may prohibit more than one person with joint ownership interests in the same separate interest parcel from serving as board directors at the same time, subject to the following:
(A) The board may disqualify a person from nomination as a candidate pursuant to this paragraph only in cases where that person, if elected, could not serve on the board without violating the above prohibition.
(B) Notwithstanding subparagraph (A), the board may disqualify from nomination as a candidate a person who is a joint owner of a parcel if one of the other joint owners is already properly nominated for the current election, and none of the joint owners is an incumbent board director.
(3) Through its bylaws only, an association may disqualify a nominee if that person has been a member of the association for less than one year.

Bill collection notice

Nonpayment of assessments and IDR

SB323 gets very specific about disqualification of a board candidate due to nonpayment of assessments.

A “disqualifying debt” is defined as regular assessments, plus interest. If enacted as currently drafted, SB323 would not allow an HOA to disqualify a candidate for nonpayment of “fines, fines renamed as assessments, collection charges, late charges, or other costs levied by a third party.”

These amendments would prevent the HOA from disqualifying a candidate by suddenly discovering they are in violation of HOA covenants, rules, or restrictions — violations which may be petty or completely made up.

The bill would also prevent disqualification of a candidate for nonpayment of non-court approved collection costs and attorney fees. This amendment is necessary, because the HOA collections industry has become notorious for running up fees which far exceed the actual HOA assessment delinquency.

SB323 makes no specific mention, one way or the other, of disqualifying a candidate for nonpayment of a special assessment. However, if a member is current on a payment plan (the most common method of paying a costly special assessment), SB323 would not allow that member’s candidacy to be disqualified.

In the event of a payment dispute with member, the HOA would be required to engage in Internal Dispute Resolution (IDR), and prove that payment is not current, before they could disqualify a board nominee.

In short, SB323 puts a reasonable burden on the incumbent HOA board to prove they have a valid reason for disqualifying a competing candidate for an upcoming election.

(d) Before disqualifying a nominee for alleged nonpayment of regular assessments, the association shall provide the nominee the opportunity to engage in the internal dispute resolution process set forth in Article 2 (commencing with Section 5900) of Chapter 10.
(1) A disqualifying debt includes regular assessments and interest owed the association. Fines, fines renamed as assessments, collection charges, late charges, or other costs levied by a third party are not disqualifying debts.
(2) The nominee shall not be disqualified for failure to be current in payment of regular assessments if any of the following circumstances are true:
(A) The nominee has paid the regular assessment under protest pursuant to Section 5658.
(B) The nominee has entered into a payment plan pursuant to Section 5665.
(C) Upon request by the nominee to engage in the internal dispute resolution process, the association fails to convene a timely session of the process, or the nominee and the association are engaged in the process at the time of the deadline for nominations.
(D) It is determined, at the conclusion of the internal dispute resolution process, that the nominee does not owe a disqualifying debt.

Adding teeth to HOA elections and voting law

Current state law says that a court “may” throw out the result of an improperly conducted election, but SB323 changes “may” to “shall.” This small but significant change would require a court to void a contested election, unless the HOA could prove that any election errors were “unintentional” and had no effect on the results of the vote.

Upon a finding that the election procedures of this article, or the adoption of and the adherence to rules provided by Article 5 (commencing with Section 4340) of Chapter 3, were not followed, a court may shall void any results of the election. election, unless the association establishes, by a preponderance of the evidence, that its noncompliance with this article or the election operating rules was unintentional and did not affect the results of the election. The findings of the court shall be stated in writing as part of the record.

Property rights quote

CAI-CLAC opposition to SB323

CAI attorneys of Adams/Stirling recently distributing an email opposing CCHAL’s HOA election bill. In his usual abrasive tone, Attorney Adrian Adams slams SB323 with sensationalized claims.

Among those claims:

  • That the bill, if enacted, would only allow HOAs to disqualify some types of convicted felons,  and not others
  • That the bill would not allow HOAs to disqualify a member who is suing the association

 

It appears that some of the claims are either erroneous or untrue.  (see excerpts above) For example, the attorney writes that:

  • The bill allows owners to copy other’s signatures from voting ballot envelopes (SB323 states that signatures may be inspected but not copied)
  • Owners will be “forced” to include their emails on membership lists (but SB323 allows for members to opt out of email notification)

Reference: THEY’RE BAA-AACK! FELONS AND PRIVACY ISSUES

Some suggestions for improvement

With regard to the first claim, SB323 does specifically mention prior conviction of certain financial crime felonies as a disqualifying factor for board candidates. And the bill does not call out other felony offenses.

However, the bill could easily be amended to allow disqualification of nominees convicted of other serious offenses.

With regard to a member suing the association, it may be unfair or inappropriate to disqualify a board candidate, depending on the nature of the lawsuit.

To correct this problem, the bill could require a candidate’s disclosure of an ongoing lawsuit against the HOA, with a brief statement of complaints against the HOA. The candidate could also be required to disclose if the HOA sued first, resulting in a countersuit against the HOA.

Armed with those facts, let voting members decide whether to elect the nominee.

 

CAI-CLAC recently published its official statement in opposition to SB323.

Ironically, the trade group that claims to represent “all homeowners” in HOA-governed communities is against requiring HOA elections at least every 4 years, and against promoting transparency in the election process.

Based upon exaggerations and erroneous assumptions, the group incites fears over loss of privacy as a means to their end of killing SB323.

Hopefully, California Legislators won’t fall for these scare tactics.

See: SB 323 Threatening Privacy in Homeowner Association Elections (CAICLAC)