By Deborah Goonan, Independent American Communities

Debgoonan@icloud.com

Updated Sept. 24, 2019

 

It’s been 5 months since IAC posted an update on two hotly-debated common interest community HOA election bills.

After months of vigorous attempts by trade group lobbyists to defeat it, SB 323 has passed both chambers of the California Legislature.

However, the HOA-industry’s favored election bill, SB 754, also awaits Governor Newsom’s signature by Oct. 13, 2019.

Here’s a summary of both bills.

 

SB 323 (2019)

SB 323 reforms the election and voting process for all members of California homeowners, condominium, and cooperative associations. Its provisions apply to both incorporated and unincorporated associations.

These amendments will not apply to votes cast by delegates or elected representatives (commonly used in large-scale communities with more than 1,000 members).

The bill was introduced by Senator Bob Wieckowski [D-Fremont], and supported by Center for California Homeowner Association Law (CCHAL), California Alliance for Retired Americans (CARA), American Civil Liberties Union, Greater Sacramento Urban League and the Nonprofit Housing Association of Northern California.

HOA election reform

Unless the Governor vetoes SB 323, the following key changes will apply to the election process in all California HOA-governed common interest communities: 

Requires HOA-governed communities to hold elections when board member terms expire, and at least once every four years. This will help prevent a common problem in many communities — the same small group of board members controls the HOA for many years, simply by avoiding annual elections.

Overrides election rules and procedures in governing documents. No longer can the HOA board rely on Bylaws that effectively rig the outcome of most elections.

In addition to HOA board member elections, secret ballot voting will be required for voting on other important HOA matters, including “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.”

Requires associations and the inspector of elections to retain accurate candidate and voter registration lists. 

Requires associations to use a double-envelope mail ballot system, as used by California counties, to ensure secret ballots. 

Allows for election by acclamation, subject to all of the following conditions. 

• The association consists of at least 6,000 units.
• The association provides at least 30 days advance notice of a call for board nominations. Written notices must be sent to each individual HOA member.
• The association cannot disqualify candidates, in violation of exceptions allowed by the provisions of SB 323.

SB 323 set limited standards for disqualification of board candidates. Generally, as long as the candidate is a member of the association, that candidate cannot be denied the right to run for election to the board. (Exception: a developer retains the right to appoint any non-member candidate to the board.)

Election operating rules must allow for self-nomination.

However, through its bylaws or election operating rules only, a board candidate can be disqualified under the following narrow circumstances:

• The candidate discloses, or the HOA becomes aware of a candidate’s criminal history, and that history would prevent the HOA from obtaining fidelity bond insurance.

 

• Failure of the candidate to remain current on payment of regular or special assessments, subject to validation of consumer debts. Notably, a nominee cannot be disqualified for “nonpayment of fines, fines renamed as assessments, collection charges, late charges, or costs levied by a third party.” Likewise, if a candidate pays under protest, or pays assessments according to a mutually-agreeable payment plan, the HOA must allow the person to run for election. Finally, if the association failed to offer Internal Dispute Resolution with the member, it must allow the candidate to run for election to the board.

 

• A nominee who jointly owns a parcel owned by an incumbent board member or previously-approved nominee can be disqualified.

 

• An association can rule out a nominee that has been a member of the association for less than one year.

To be valid, a community’s election operating rules must be amended and adopted at least 90 days prior to an election. No last-minute changes to the rules, which could confuse and complicate the voting process.

 

Enforcement of election and voting statutes

Within a year after an HOA election, any member of an association can file a lawsuit in civil court, challenging the election.

This year, SB 323 adds that a member must prove, by a preponderance of evidence, that the association failed to follow the law when conducting its election.

However, an HOA can still sidestep accountability for breaking state law, if it can prove, by a preponderance of evidence, that its errors (intentional or unintentional) did not affect the outcome of the election.

In other words, the outcome of a lawsuit over an HOA election or vote comes down to which party provides more convincing evidence to prove their case.

SB 323 Voting tallies:

Assembly: 41 to 28

Senate: 29 to 11

Read CA SB 323 (2019)

 

CA SB 754 (2019)

SB 754 is the “election by acclamation” bill sponsored and supported by trade group Community Associations Institute. CAI’s California Legislative Action Committee (CAI-CLAC) launched an aggressive lobbying campaign to oppose SB 323, while supporting SB 754.

It must be noted that CAI-CLAC made numerous attempts to convince CAI members and legislators that SB 323 would harm HOAs and increase costs for homeowners. The trade group vehemently opposes limitations on an HOA’s ability to hand-pick nominees for the board.

In fact, IAC witnessed several email campaigns circulated by CAI-CLAC attorney firms, spreading inaccurate and misleading information about SB 323, in its attempt to kill the bill.

At the same time, CAI, the trade group that claims to represent the interests of all homeowners in community associations, has been eager to give HOAs broad discretion to call off HOA elections.

The goal: give the incumbent HOA board full control the nomination process, to help ensure that their chosen candidates can run unopposed. That’s why “election by acclamation” is so important to CAI.

Needless to say, the battle lines were drawn between CAI and several housing advocacy groups in the state of California.

During the legislative process, the “election by acclamation” provisions of SB 754 were incorporated into SB 323, but with conditions supported by homeowner and housing advocates.

Likewise, much to the disappointment of CAI-CLAC, many of the provisions of SB 323 were incorporated into SB 754.

Thus, SB 754 mirrors SB 323 provisions pertaining to limitations on disqualification of board candidates.

 

However, SB 754 includes Section 3, as follows:

SEC. 3.
Section 1.1 of this bill incorporates amendments to Section 5100 of the Civil Code proposed by both this bill and Senate Bill 323. That section shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2020, (2) each bill amends Section 5100 of the Civil Code, and (3) this bill is enacted after Senate Bill 323, in which case Section 1 of this bill shall not become operative.

CAI-CLAC is now urging its supporters to contact Governor Newsome, and ask him to veto SB 323. If the Governor vetoes SB 323, the only portion of SB 754 that will survive is the portion that allows election by acclamation, without limitations.

That would be a worst case scenario for members of California HOA-governed communities.

SB 754 Voting tallies:

Assembly: 77 to 1

Senate: 36 to 0

Read CA SB 754 (2019)

 

Call to action for supporters of SB 323

IAC readers might recall that, last year, former Governor Jerry Brown vetoed two bills similar to SB 323 and SB 754.

This year, housing advocates have a second chance to bring HOA election reforms over the finish line.

California property owners in HOA-governed communities are advised to contact Governor Gavin Newsom and urge him to sign SB 323 into law. ♦

Correction: a previous version of this post noted Governor Newsom’s deadline to consider both HOA bills as September 30, 2019. The correct date is October 13, 2019.