The Davis-Stirling Common Interest Development Act defines and regulates common interest developments that are not a commercial or industrial common interest development. The act requires a common interest development to be managed by an association, requires the association to select one or 3 independent 3rd parties as an inspector or inspectors of elections, and generally requires the associations elections regarding assessments legally requiring a vote, the election and removal of directors, amendments to the governing documents, or the grant of exclusive use of common area, to be conducted by the inspector or inspectors of elections in accordance with specified rules and procedures. The act excepts from these election requirements an election of directors if the governing documents of the association provide that one member from each separate interest is a director.

This bill would additionally except from those election requirements an election of directors if the election is uncontested, as defined, and would provide a procedure for an election to be declared as uncontested. The bill adds 2 additional election requirements that would ensure an announcement of an election and notification of nomination procedures is provided in a specific manner and would ensure a member in good standing who meets specified qualification requirements is not denied the right to vote or the right to be a candidate for director. The bill would authorize a cause of action alleging a violation of these and other specified election requirements to be brought in small claims court if the amount of the demand does not exceed the jurisdiction of that court.

The Davis-Stirling Common Interest Development Act defines and regulates common interest developments that are not a commercial or industrial common interest development. The act requires a common interest development to be managed by an association, requires the association to select one or 3 independent 3rd parties as an inspector or inspectors of elections, and generally requires the associations elections regarding assessments legally requiring a vote, the election and removal of directors, amendments to the governing documents, or the grant of exclusive use of common area, to be conducted by the inspector or inspectors of elections in accordance with specified rules and procedures. The act excepts from these election requirements an election of directors if the governing documents of the association provide that one member from each separate interest is a director.

This bill would additionally except from those election requirements an election of directors if the election is uncontested, as defined, and would provide a procedure for an election to be declared as uncontested. The bill adds 2 additional election requirements that would ensure an announcement of an election and notification of nomination procedures is provided in a specific manner and would ensure a member in good standing is not denied the right to vote or the right to be a candidate for director. The bill would authorize a cause of action alleging a violation of the these and other specified election requirements to be brought in small claims court if the amount of the demand does not exceed the jurisdiction of that court.

The Davis-Stirling Common Interest Development Act defines and regulates common interest developments. developments that are not a commercial or industrial common interest development. The act requires a common interest development to be managed by an association, requires the association to select one or 3 independent 3rd parties as an inspector or inspectors of elections, and generally requires the associations elections regarding assessments legally requiring a vote, the election and removal of directors, amendments to the governing documents, or the grant of exclusive use of common area, to be conducted by the inspector or inspectors of elections in accordance with specified rules and procedures. The act excepts from these election requirements an election of directors if the governing documents of the association provide that one member from each separate interest is a director.

This bill would additionally except from those election requirements an election of directors if the election is uncontested, as defined. defined, and would provide a procedure for an election to be declared as uncontested. The bill adds 2 additional election requirements that would ensure an announcement of an election and notification of nomination procedures is provided in a specific manner and would ensure a member in good standing is not denied the right to vote or the right to be a candidate for director. The bill would authorize a cause of action alleging a violation of the election requirements to be brought in small claims court if the amount of the demand does not exceed the jurisdiction of that court.

The Davis-Stirling Common Interest Development Act defines and regulates common interest developments. The act requires a common interest development to be managed by an association, requires the association to select one or 3 independent 3rd parties as an inspector or inspectors of elections, and generally requires the associations 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, to be conducted by the inspector or inspectors of elections in accordance with specified procedures. The act excepts from these election requirements an election of directors if the governing documents of the association provide that one member from each separate interest is a director.

This bill would additionally except from those election requirements an election of directors if the election is uncontested, as defined.

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2015-2016 Regular Session

Bill No: AB 1799 (Author:Mayes)

Version: June 6, 2016

Hearing Date: June 28, 2016

Fiscal: No

Urgency: No

Consultant: TH

SUBJECT

Common Interest Developments: Association Governance: Elections

DESCRIPTION

This bill authorizes a homeowner association in a residential common interest development to declare an election of directors “uncontested” when the number of candidates for election does not exceed the number of directors to be elected. This bill also authorizes an aggrieved party to bring a cause of action alleging a violation of specified election requirements in small claims court.

BACKGROUND

In California, common interest developments (CIDs) are governed by the Davis-Stirling Common Interest Development Act (“Davis-Stirling Act” or “Act”). Owners of separate property in CIDs have an undivided interest in the common property of the development and are subject to the CID’s covenants, conditions, and restrictions. CIDs are also governed by a homeowner association, which is run by volunteer directors that may or may not have prior experience managing an association. The Court of Appeal, Fourth Appellate District, previously observed that:

[t]he homeowners associations function almost “as a second municipal government, regulating many aspects of [the homeowners’] daily lives.” “[U]pon analysis of the association’s functions, one clearly sees the association as a quasi-government entity paralleling in almost every case the powers, duties, and responsibilities of a municipal government. As a ‘mini-government,’ the association provides to its members, in almost every case, utility services, road maintenance, street and common area lighting, and refuse removal. In many cases, it also provides security services and various forms of communication within the community. There is, moreover, a clear analogy to the municipal police and public safety functions. . . .” In short, homeowners associations, via their enforcement of the CC&R’s, provide many beneficial and desirable services that permit a common interest development to flourish. (Villa Milano Homeowners Ass’n v. Il Davorge (2000) 84 Cal.App.4th 819, 836 [citations omitted].)

Just as with municipal governments, homeowner associations use elections to choose members to serve on an association’s board of directors and to levy assessments for particular purposes. Under existing law, homeowner associations conduct elections through a paper and mail based balloting system that resembles California’s vote by mail process. While most CIDs in California have less than 25 units, the expense of conducting elections in larger associations –particularly those with several thousand units – can be significant.

This bill would permit the board of directors of an association to determine that an election for replacement directors is uncontested when the number of candidates standing for election, including write-in candidates, does not exceed the number of open seats on the board.

CHANGES TO EXISTING LAW

Existing law, the Davis-Stirling Common Interest Development Act, establishes the rules and regulations governing the operation of a residential common interest development (CID) and the respective rights and duties of a homeowners association and its members. (Civ. Code Sec. 4000 et seq.)

Existing law requires association 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 to be held by secret ballot in accordance with specified procedures. (Civ. Code Sec. 5100.)

Existing law authorizes associations to specify the qualifications for candidates for the board and any other elected position, and procedures for the nomination of candidates, consistent with the governing documents. (Civ. Code Sec. 5105(a).)

Existing law authorizes associations to specify the qualifications for voting, the voting power of each membership, the authenticity, validity, and effect of proxies, and the voting period for elections, including the times at which polls will open and close, consistent with the governing documents. (Civ. Code Sec. 5105(a).)

Existing law authorizes associations to specify a method of selecting one or three independent third parties as inspector or inspectors of elections. (Civ. Code Sec. 5105(a).)

Existing law requires associations to select an independent inspector or inspectors of elections to do the following:

• determine the number of memberships entitled to vote and the voting power of each;
• determine the authenticity, validity, and effect of proxies, if any;
• receive ballots;
• hear and determine all challenges and questions in any way arising out of or in connection with the right to vote;
• count and tabulate all votes;
• determine when the polls shall close, consistent with the governing documents;
• determine the tabulated results of the election; and
• perform any acts as may be proper to conduct the election with fairness to all members in accordance with all applicable laws and rules of the association regarding the conduct of the election. (Civ. Code Sec. 5110(c).)

Existing law specifies the voting procedure for an association election as follows:

• Ballots and two preaddressed envelopes with instructions on how to return ballots shall be mailed by first-class mail or delivered by the association to every member not less than 30 days prior to the deadline for voting. In order to preserve confidentiality, a voter may not be identified by name, address, lot, parcel, or unit number on the ballot. The association shall use as a model those procedures used by California counties for ensuring confidentiality of vote by mail ballots, including all of the following:
  • the ballot itself is not signed by the voter, but is inserted into an envelope that is sealed. This envelope is inserted into a second envelope that is sealed. In the upper left hand corner of the second envelope, the voter shall sign the voter’s name, indicate the voter’s name, and indicate the address or separate interest identifier that entitles the voter to vote; and
  • the second envelope is addressed to the inspector or inspectors of elections, who will be tallying the votes. The envelope may be mailed or delivered by hand to a location specified by the inspector or inspectors of elections. The member may request a receipt for delivery. (Civ. Code Sec. 5115(a).)

Existing law states that a quorum shall be required only if so stated in the governing documents or other provisions of law. If a quorum is required by the governing documents, each ballot received by the inspector of elections shall be treated as a member present at a meeting for purposes of establishing a quorum. (Civ. Code Sec. 5115(a).)

Existing law specifies that except for a meeting to count the votes, an election may be conducted entirely by mail unless otherwise specified in the governing documents. (Civ. Code Sec. 5115(b).)

Existing law provides that all votes shall be counted and tabulated by the inspector or inspectors of elections in public at a properly noticed open meeting of the board or members. Any candidate or other member of the association may witness the counting and tabulation of the votes. No person, including a member of the association or an employee of the management company, shall open or otherwise review any ballot prior to the time and place at which the ballots are counted and tabulated. The inspector of elections may verify the member’s information and signature on the outer envelope prior to the meeting at which the ballots are tabulated. Once a secret ballot is received by the inspector of elections, it shall be irrevocable. (Civ. Code Sec. 5120(a).)

Existing law provides that the tabulated results of the election shall be promptly reported to the board and shall be recorded in the minutes of the next meeting of the board and shall be available for review by members of the association. (Civ. Code Sec. 5120(b).)

Existing law provides that the sealed ballots at all times shall be in the custody of the inspector or inspectors of elections or at a location designated by the inspector or inspectors until after the tabulation of the vote, and until the time allowed for challenging the election has expired, at which time custody shall be transferred to the association. If there is a recount or other challenge to the election process, the inspector or inspectors of elections shall, upon written request, make the ballots available for inspection and review by an association member or the member’s authorized representative. Any recount shall be conducted in a manner that preserves the confidentiality of the vote. (Civ. Code Sec. 5125.)

This bill provides that directors shall not be required to be elected if the election is uncontested, and states that an election of directors is uncontested if both the number of candidates for election, including write-in candidates, does not exceed the number of directors to be elected at that election, and the association has declared the election is uncontested.

This bill states that an association may declare an election of directors to be uncontested only if all of the following procedures have been satisfied:

• the association’s adopted election rules have been complied with;
• all declared candidates were nominated before the deadline for nominations and in accordance with the association’s governing documents;
• the inspector of elections has informed the board that the number of candidates does not exceed the number of directors to be elected at that election;
• the board votes in open session to declare the election uncontested after a hearing during an open board meeting where members are able to make objections to the board making that declaration; and
• at least 20 days before the board meeting for the vote to declare an election uncontested, the association provides a specified notice to all members.

This bill states that the notice described above must set forth the following:

• the intention of the board to vote at a regular board meeting to declare the election of directors is uncontested, and giving date, time, and place of that board meeting;
• a disclosure to members of the names of all candidates, however nominated, including self-nomination, who will be declared elected if the board declares the election is uncontested; and
• the right of any member to appear at the board meeting and make an objection to the board declaring the election is uncontested before the board votes on the matter.

This bill states that if the association’s governing documents provide for write-in votes on the ballot, the association shall allow 15 days after the board meeting described above for a write-in candidate to submit his or her name to the inspector of elections. In the event additional write-in candidates result in the total number of candidates exceeding the number of directors to be elected, an election shall be held. If after the 15-day period the total number of candidates, including the number of write-in candidates, does not exceed the number of directors to be elected, the uncontested election results shall be sealed and become effective immediately, with any write-in candidates added as members.

This bill states that if an association’s governing documents do not provide for write-in votes on the ballot, then the association must provide at least 15 days’ general notice of a self-nomination process.

This bill requires an association’s election rules to do the following:

• ensure that an announcement of an election and notification of nomination procedures, including self-nomination, shall be provided to all members at least 60 days before any election for directors;
• ensure a member who satisfies the lawful qualifications adopted by the association is not denied the right to be a candidate for director; and
• ensure a member who satisfies the lawful qualifications adopted by the association is not denied the right to vote.

This bill authorizes a cause of action alleging a violation of these and other specified election requirements to be brought in small claims court.

COMMENT

1. Stated need for the bill

The author writes:

Often, homeowner association [HOA] board elections are uncontested. The number of candidates does not exceed the number of vacant seats. Current law requires such uncontested elections to follow the same election procedures as contested elections, including minimum vote thresholds and costly third-party verification of results. For instance, an election for [an] HOA with 12,000 units could cost as much as $20,000. This unnecessarily burdens lower-income communities, diverting resources from better uses.

AB 1799 exempts homeowner associations from the costly election procedure requirements in current law, when the number of candidates does not exceed the number of open seats. It includes a structured process, notice requirements, and other safeguards. Specifically, the bill:

• Provides that an HOA board may declare an election uncontested if the number of candidates does not exceed the number of seats up for election.
• Requires that an HOA board may only declare an election uncontested in an open meeting, and only if it has complied with all election rules.
• Requires that notice be provided to homeowners before an election is declared uncontested, which shall include their right to object to that declaration.
• For communities that allow write-in candidacies, allows a fifteen day period after the election has been declared uncontested for additional candidates to file. For communities that do not, the bill requires that they allow a period for self-nominations.
• Ensures that members who satisfy the lawful qualifications for voting or to serve as director are not denied that right.

1. Potential cost savings for homeowner associations

The California Association of Community Managers (CACM) and the Community Associations Institute (CAI), writing in support, argue that this bill will potentially allow homeowner associations to avoid the cost of conducting vote-by-mail elections when the number of candidates standing for election does not outnumber the number of open board seats. CACM states:

Elections of board members are an important part of how common interest developments (CID) come together to build and maintain healthy communities. In certain instances, the election of directors may be uncontested, even after strict adherence to the CID’s Bylaws and Voting and Elections Rules that involve numerous attempts to solicit nominees. In these instances, AB 1799 allows CIDs the opportunity to save the costs of a protracted and costly election process and seat a new board of directors in a timely manner thereby making for a more productive CID.

CAI similarly states:

AB 1799 allows these nonprofit HOAs to avoid the unnecessary expense and effort of conducting elections when there are more open seats for the board than candidates willing to fill them. The bill also allows ample time for owners to self-nominate or become write-in candidates. On average, each [ballot] packet costs more than $1.00. In very large communities that costs tens of thousands of dollars annually. AB 1799 will provide efficiency by avoiding spending funds unnecessarily which can otherwise be redirected to neighborhood maintenance and operational needs.

As noted in the Background above, though most CIDs in California are made up of 25 units or less, and therefore do not incur large costs when conducting elections, this bill could help defray costs for large associations. However, it is unclear whether, or how often, these larger associations would be in a position to take advantage of this bill’s cost savings potential, given the larger candidate pool from which members interested in standing for election are likely to emerge.

1. Potential for candidate disenfranchisement

The Center for California Homeowner Association Law (CCHAL), joined by other groups in opposition, argues that this bill could have the effect of insulating incumbent board members from electoral pressure. They argue that because the incumbent members of a homeowner association board are in a position to set voter and candidate qualifications under existing law, they can use this power to disqualify opposing candidates and then cancel elections for lack of sufficient candidates. As stated by CCHAL:

AB 1799 gives boards a lethal combination of powers: it lets incumbent boards cancel elections after they decide there are enough candidates who meet the “qualification” rules created by the board. Homeowners also have to meet the board’s “qualifications” for voting. This combination of powers dis-enfranchises voters and violates homeowners’ right to self-governance, that is: to vote and to choose their own leaders.

CCHAL argues that a lack of specificity in existing law pertaining to establishing qualifications for voting and for candidacy in association elections has “led to extraordinary abuses of power by boards in the ten years since the statutes governing association elections were enacted.” They state:

Boards have routinely established “qualifications” that have nothing to do with a candidate’s ability to perform as a board director but whose real purpose is to prevent homeowners who question board policies or decisions from running for a board seat. . . . A Los Angeles County lawsuit brought by homeowners illustrates the point vividly: Griffing v. Village Palos Verdes Homeowners Association. In this case, the board amended its bylaws to state that any homeowner who had sued the board, its property manager, or another homeowner in the last six years was not “qualified” to run for the board in the upcoming election. This “qualification” targeted a group of homeowners, who sought association records detailing the board’s spending plan for a multi-million dollar special assessment of $75,000 per unit. The board ignored their repeated written requests for the financial records. [When] the homeowners sued in small claims court to obtain the board’s spending [plan, the] board, in turn, amended its bylaws to state that “any plaintiff…whether they prevail of not in their suit may not, for a period of six years, declare themselves a candidate for the board.” [The] 25 homeowners, who had been seeking the records, sought an injunction in Los Angeles Superior Court to stop the upcoming board election, because the ballot did not contain the names of the homeowners, who had sued in small claims court and who now wanted to run for a board seat. The court issued the injunction. It also ordered new elections with revised ballots that that included the names of the dissenting homeowners.

CCHAL and other stakeholders opposed to this bill cite many other examples of what they consider to be abusive homeowner association actions to limit voter and candidate qualifications in order to disenfranchise opponents. Given the apparent lack of clear standards prohibiting homeowner associations from enacting election rules for the purpose of disenfranchising others, the additional tool of being able to cancel supposedly uncontested elections could further insulate incumbent board members from electoral pressure. As such, the policy question presented by this bill is whether the Legislature ought to empower homeowner associations to cancel elections in order to reduce costs without simultaneously enacting appropriate safeguards to ensure that qualification rules are not used to inappropriately bar others from voting or running for elected office.

Support: California Association of Community Managers; Community Associations Institute

Opposition: California Alliance for Retired Americans; California Commission on Aging; Center for California Homeowner Association Law; Rutgers School of Law Constitutional Rights Clinic; Five Individuals

HISTORY

Source: Author

Related Pending Legislation: None Known

Prior Legislation: AB 1360 (Torres, 2014) would have amended the Davis-Stirling Common Interest Development Act to authorize associations to conduct elections using electronic voting systems, provided participating voters opt into using the electronic voting system and other required conditions are met. This bill failed passage in the Senate Judiciary Committee.

Prior Vote:

Senate Transportation and Housing Committee (Ayes 6, Noes 2)

Assembly Floor (Ayes 71, Noes 4)

Assembly Housing and Community Development Committee (Ayes 7, Noes 0)

**************

SENATE COMMITTEE ON TRANSPORTATION AND HOUSING

Senator Jim Beall, Chair

2015 - 2016 Regular

Bill No: AB 1799 Hearing Date: 6/14/2016

SUBJECT: Common interest developments: association governance: elections

DIGEST: This bill exempts homeowner associations (HOA) in a common interest development (CID) from election procedure requirements in uncontested elections.

ANALYSIS:

Existing law:

1) Requires the election and removal of directors, amendments to governing documents, or the grant of exclusive use of common areas to be held by secret ballot.

2) Provides that directors shall not be required to be elected if the governing documents provide that one member from each separate interest is a director.

3) Requires the HOA to adopt election rules that do the following:

1. Ensure that if any candidate or member advocating a point of view is provided access to association media, newsletters, or web site during a campaign, and that equal access shall be provided to all candidates and members, for purposes reasonably related to the election
2. Ensure access to common- area meeting space at no cost to all candidates
3. Specify the qualifications for candidates for the board and any other elected position, and procedures for the nomination of candidates, consistent with the governing documents. A nomination shall not be deemed reasonable if it disallows any member from nominating himself or herself for election to the board
4. Specify the qualifications for voting, the voting power of each membership, the authenticity, validity, effect of proxies, and the voting period for elections. This would include the times at which polls will open and close, consistent with the governing documents
5. Specify a method for selecting one or three independent third parties as elections inspector or inspectors of elections. Inspectors may appoint or oversee additional independent third-party persons to verify signatures and to count and tabulate votes as the inspector or inspectors deem appropriate

4) Requires the inspector of elections to be one or three individuals who have the following duties:

a) Determine the number of memberships entitled to vote and the voting power of each

b) Determine the authenticity, validity, and the effect of proxies;

c) Receive votes and ballots and hear and determine all challenges and questions

d) Count and tabulate all votes

e) Determine when polls close

f) Determine the results of the election

5) Permits the nomination of candidates from the floor of membership meetings or nomination by any other manner.

6) Permits a member of an association to bring a cause of action in small claims court against the HOA if the association restricts access to association resources by a candidate or member advocating a point of view; the receipt of a ballot by a member, or the counting, tabulation, or reporting of, access to, ballots for inspection and review after the tabulation.

This bill:

1) Provides that directors shall not be required to be elected if the election is uncontested. An election of directors is uncontested if the number of candidates for election, including write-in candidates if applicable, does not exceed the number of directors to be elected at that election and the HOA has declared the election uncontested.

2) Permits an HOA to declare an election to be uncontested only if all of the following procedures have been satisfied:

a) Required election rules have been adopted and complied with for the election.

b) All declared candidates were nominated before the deadline for nominations and in accordance with all lawful provisions of the HOA’s governing documents.

c) The inspector of elections has informed the board that the number of candidates does not exceed the number of directors to be elected at the election.

d) The board votes in open session to declare the election is uncontested after a hearing during an open board meeting where members are able to make objections to the board making that declaration.

e) At least 20 days before the board meeting for the vote to declare the election is uncontested, the HOA provides general notice to all members as set forth by the following:

i. The intention of the board to vote at a regular board meeting to declare the election of directors is uncontested, and giving the date, time, and place of that board meeting

ii. A disclosure to members of the names of all candidates, however nominated, including self-nomination, who will be declared if the board declares the election is uncontested

iii. The right of any member to appear at the board meeting and make an objection to the board, declaring the election is uncontested before the board votes on the matter

f) The names of all candidates, however nominated, the general notice required, any objection to the board making the declaration that the election of directors is uncontested, and the board vote declaring the election of the directors is uncontested shall be recorded in the meeting minutes

3) If the HOA governing documents provide for write-in votes on the ballot, the HOA shall allow 15 days after the board meeting declaring an uncontested election for a write-in candidate to submit his or her name to the inspector of elections.

a) In the event one or more write-in candidates are timely submitted and additional candidates result in the total number of candidates exceeding the number of directors to be elected at that election, an election shall be held pursuant to general election rules. If after the 15-day period the total number of candidates, including the number of write-in candidates, does not exceed the number of directors to be elected at that election, the uncontested election results shall be sealed and become effective immediately, with any write-in candidates added as members. The new board shall take place immediately following the seal of the election.

b) If an HOA’s governing documents do not provide for write-in votes on the ballot, the HOA must provide at least 15 days’ general notice of a self-nomination process following the board determination of an uncontested election.

4) Requires the HOA to adopt rules that:

a) Ensure that an announcement of an election and notification of nomination procedures, including self-nomination, shall be provided to all members by general notice at least 60 days before an election for directors.

b) Ensure a member who satisfies the lawful qualifications specified by the association’s rules specifying the qualifications for candidates for the board and any other elected position, and the association’s governing documents, shall not be denied the right to be a candidate for director.

c) Ensure a member who satisfies all lawful qualifications specified by rules adopted by the association, which specify the qualifications for voting, and the association’s governing documents, shall not be denied the right to vote.

5) Provides that a member may bring a cause of action in small claims court for a violation of this act.

COMMENTS:

1) Purpose of this bill. According to the author, CID board elections are often uncontested, with the number of candidates not exceeding the number of vacant seats. Current law requires such uncontested elections to follow the same election procedures as contested elections, including minimum-vote thresholds and costly third-party verification of results. In one example from the Laguna Woods HOA, a board election cost as much as $20,000, including ballot printing, mailing, and inspector of election services. In uncontested elections, this expense is wholly unnecessary and unnecessarily burdens CID budgets. This bill exempts HOAs from the costly election procedure requirements in current law when the number of candidates does not exceed the number of open seats. It includes a structured process, notice requirements, and other safeguards.

2) CIDs background. A CID is a form of real estate in which each homeowner has an exclusive interest in a unit or lot and a shared or undivided interest in common-area property. Condominiums, planned unit developments, stock cooperatives, community apartments, and many resident-owned mobilehome parks all fall under the umbrella of common interest developments. There are over 50,220 CIDs in California that comprise over 4.8 million housing units, or approximately one-quarter of the state’s housing stock. CIDs are governed by an HOA. The Davis-Stirling Common Interest Development Act provides the legal framework under which CIDs are established and operate. In addition to the requirements of the act, each CID is governed according to the recorded declarations, bylaws, and operating rules of the association, collectively referred to as the governing documents.

3) Current CID elections procedures. Under current law, CID elections must be held by secret ballot and, among other things, an association must adopt rules around campaigning, specifying the qualifications for candidates for the board, specifying the qualifications for voting, and specifying the method for selecting independent third-party inspectors. Ballots and two preaddressed envelopes with instructions for returning the ballot are mailed to every member not less than 30 days prior to the deadline for voting. The ballot is inserted into an envelope, which is placed in a second envelope and mailed to the inspectors. The votes are tabulated by the inspectors in public at a properly noticed open meeting of the board or members. The tabulated results shall be promptly reported to the board and shall be recorded in the minutes of the next meeting. Additionally, within 15 days of the election, the board shall give general notice to all members of the results of the election.

4) Uncontested elections. This bill would allow the board of directors of an HOA to declare an election uncontested if the number of candidates running for election does not exceed the number of directors to be elected at the election. In other words, the HOA would not have to send out paper ballots pursuant to comment 3 above. In order to qualify, the election would have to comply with all property adopted election rules, all candidates must be nominated before the deadline and be in compliance with the governing documents, and the inspector of elections would have to declare that the number of candidates does not exceed the number of directors to be elected. Twenty days before declaring the election uncontested, the HOA would be required to notify the members that the board is planning to vote on an uncontested election and the right of the members to object to the board declaring the election uncontested.

Following an HOA’s declaration of an uncontested election at a board meeting, this bill would permit members 15 days to write-in a candidate for election. If one or more write in candidate are received and the number of candidates exceeds the number of directors to be elected, this bill requires an election to be held. If after 15 days the number of write-in candidates and the number of candidates does not exceed the number of open positions on the board, the election results will be sealed and the write-in members will be added as members. It is possible that there will not be enough members running for the open positions on the board; if additional candidates’ write-in their names, this bill would add them to the board automatically. If an HOA does not provide a write-in process, this bill would require an HOA to provide a process for self-nomination 15 days after declaring an uncontested election.

4) Opposition. According to the Center for California Homeowner Association Law, which represents the rights of homeowners living in California, AB 1799 would void the essential voting rights of association owners. The homeowner’s right to vote is conferred by ownership in association property, just as the right to vote in public elections is conferred by citizenship. This bill would return legal and political control of elections to incumbent boards by giving them new powers to decide who is qualified to vote and run for a board seat. They also challenge the alleged costs of HOA board elections, stating that current law permits “volunteer poll workers” to serve as independent inspectors. Given that more than 50% of HOAs have fewer than 25 units, it’s unclear why some HOAs have elected to hire and pay for independent inspectors. According to the Educational Community for Homeowners, the current version of the bill contains lengthy and complicated procedures to designate an election as “uncontested,” turning the proposed cure into a real problem.

5) Double-referral. This bill has been double-referred to this committee and Senate Judiciary Committee.

Assembly Votes:

Floor: 71-4

H&CD: 7-0

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

POSITIONS: (Communicated to the committee before noon on Wednesday,

June 8, 2016.)

SUPPORT:

California Association of Community Managers

Community Association Institute

OPPOSITION:

California Alliance for Retired Americans

Center for California Homeowner Association Law

Educational Community for Homeowners

Rutgers Law School, Constitutional Rights Clinic

3 individuals

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:

Author:(Mayes)

As Amended Ver:May 3, 2016

Majority vote

SUMMARY: Exempts homeowners associations (HOA) in a common interest development (CID) from election procedure requirements in uncontested elections. Specifically, this bill:

1. Exempts an election from the election requirements of the Davis-Stirling Common Interest Development Act (Act) if the election of directors is uncontested.
2. Provides that an election of directors is uncontested if:
3. The number of candidates for election, including write-in candidates, if applicable, does not exceed the number of directors to be elected at that election; and
4. The association has declared the election is uncontested.
5. Provides that an HOA may declare an election of directors is uncontested only if all of the following procedures have been satisfied:
6. The election rules required by Section 5105 have been adopted and complied with for the election.
7. All declared candidates were nominated before the deadline for nominations and in accordance with all lawful provisions of the HOA's governing documents.
8. The inspector of elections has informed the board that the number of candidates does not exceed the number of directors to be elected at that election.
9. The board votes in open session to declare the election is uncontested after a hearing during an open board meeting where members are able to make objections to the board making that declaration.
10. At least 20 days before the board meeting for the vote to declare the election is uncontested, the HOA provides general notice to all members as set forth in Section 4045 of all of the following:
    1. The intention of the board to vote at a regular board meeting to declare the election of directors is uncontested, and giving date, time, and place of that board meeting.
    2. A disclosure to members of the names of all candidates, however nominated, including self-nomination, who will be declared elected if the board declares the election is uncontested.
    3. The right of any member to appear at the board meeting and make an objection to the board declaring the election is uncontested before the board votes on the matter.
11. The names of all candidates, however nominated, the general notice required by subparagraph (e), any objection to the board making the declaration that the election of directors is uncontested, and the board vote declaring the election of directors is uncontested shall be recorded in the meeting minutes.
12. Requires, in cases where the HOA's governing documents provide for write-in votes on the ballot, the association to allow a write-in candidate to submit his or her name to the inspector of elections up to 15 days after the board meeting described in subparagraph (d) of paragraph (1).
13. Provides that in cases where the HOA's governing documents do not provide for write-in votes, the association must provide for a self-nomination process 15 days after declaring the election uncontested.
14. Requires a HOA to adopt a rule as part of the election procedure that do both of the following:
15. Ensure that an announcement of an election and notification of nomination procedures, including self-nomination, will be provided to all members by general notice at least 60 days before any election of the directors; and
16. Ensure a member in good standing, who satisfies any lawful requirements specified by the HOA's governing documents will not be denied the right to vote or the right to be a candidate for director.
17. Provides that a member may bring a cause of action in small claims court for a violation of this Act.

FISCAL EFFECT: None

COMMENTS:

Background: There are over 50,220 CIDs in the state that comprise over 4.8 million housing units, or approximately one quarter of the state's housing stock. CIDs include condominiums, community apartment projects, housing cooperatives, and planned unit developments. They are characterized by a separate ownership of dwelling space coupled with an undivided interest in a common property, restricted by covenants and conditions that limit the use of common area and the separate ownership interests, and the management of common property and enforcement of restrictions by a HOA. CIDs are governed by the Act as well as the governing documents of the HOA, including bylaws, declaration, and operating rules. The Act requires elections to conform to an extensive process including double stuffed ballots and the HOA to select one or three independent third parties as an inspector or inspectors of elections. AB 569 (Chau), Chapter 661, Statutes of 2014 exempted HOAs from these procedures in cases where their bylaws require all of the members to serve on the board of directors.

This bill would allow the board of directors of a HOA to declare an election uncontested if the number of candidates running for election does not exceed the number of directors to be elected at the election. In order to qualify, the election would have to comply with all properly adopted election rules, all candidates must be nominated before the deadline and in compliance with the governing documents, and the inspector of elections would have to declare that the number of candidates does not exceed the number of directors to be elected. Twenty days prior to declaring the election uncontested, the HOA would be required to notify the members that the board is planning to vote that the election is uncontested and the right of the members to object to the board declaring the election uncontested.

Write-in candidates: In some cases, the governing documents of a HOA allow for members to write-in candidates for an election. After the HOA declares that an election is uncontested at a board meeting, this bill would allow members 15 days to write-in a candidate for election. If one or more write-in candidates are received and the number of candidates exceeds the number of directors to be elected then this bill requires an election to be held. If after 15 days the number of write-in candidates and the number of candidates does not exceed the number of open positions on the board then the election results will be sealed and the any write-in members will be added as members. It's possible that there may not be enough members running for the open positions on the board and if additional candidates write in their names this bill would add them to the board automatically. If an HOA does not provide a write-in process then this bill would require an HOA to provide a process for self-nominations 15 days after declaring an uncontested election.

Purpose of this bill: According to the author, "CID board elections are often uncontested, with the number of candidates does not exceeding the number of vacant seats. Current law requires such uncontested elections to follow the same election procedures as contested elections, including minimum vote thresholds and costly third-party verification of results. These costs are a burden on the budgets of CIDs, particularly lower-income communities. AB 1799 exempts homeowner associations from the costly election procedure requirements in current law, but only in instances where the requirements are unnecessary because the number of candidates does not exceed the number of open seats. AB 1799 will return these resources to the budgets of homeowner associations, allowing for additional improvements to shared community features."

Analysis Prepared by: Lisa Engel / H. & C.D. / (916) 319-2085 FN: 0002870

Date of Hearing: April 27, 2016

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

David Chiu, Chair

ABPCA Bill Id:AB 1799 (

Author:Mayes) – As Amended Ver:April 4, 2016

SUBJECT: Common interest developments: association governance: elections

SUMMARY: Exempts homeowners associations (HOA) in a common interest development (CID) from election procedure requirements in uncontested elections. Specifically, this bill:

1. Exempts an election from the election requirements of the Davis-Stirling Common Interest Development Act if the election of directors is uncontested.
2. Provides that an election of directors is uncontested if:
3. The number of candidates for election, including write-in candidates, if applicable, does not exceed the number of directors to be elected at that election; and
4. The association has declared the election is uncontested.
5. Provides that an association may declare an election of directors is uncontested only if all of the following procedures have been satisfied:
6. The election rules required by Section 5105 have been adopted and complied with for the election.
7. All declared candidates were nominated before the deadline for nominations and in accordance with all lawful provisions of the association’s governing documents.
8. The inspector of elections has informed the board that the number of candidates does not exceed the number of directors to be elected at that election.
9. The board votes in open session to declare the election is uncontested after a hearing during an open board meeting where members are able to make objections to the board making that declaration.
10. At least 20 days before the board meeting for the vote to declare the election is uncontested, the association provides general notice to all members as set forth in Section 4045 of all of the following:
    1. The intention of the board to vote at a regular board meeting to declare the election of directors is uncontested, and giving date, time, and place of that board meeting.
    2. A disclosure to members of the names of all candidates, however nominated, including self-nomination, who will be declared elected if the board declares the election is uncontested.
    3. The right of any member to appear at the board meeting and make an objection to the board declaring the election is uncontested before the board votes on the matter.
11. The names of all candidates, however nominated, the general notice required by subparagraph (E), any objection to the board making the declaration that the election of directors is uncontested, and the board vote declaring the election of directors is uncontested shall be recorded in the meeting minutes.
12. Requires, in cases where the association's governing documents provide for write-in votes on the ballot, the association to allow a write-in candidate to submit his or her name to the inspector of elections up to 15 days after the board meeting described in subparagraph (D) of paragraph (1).
13. Requires a HOA to adopt a rule as part of the election procedure that do both of the following:
14. Ensure that an announcement of an election and notification of nomination procedures, including self-nomination, will be provided to all members by general notice at least 60 days before any election of the directors; and
15. Ensure a member in good standing, who satisfies any lawful requirements specified by the HOAs governing documents will not be denied the right to vote or the right to be a candidate for director.
16. Provides that a member may bring a cause of action in small claims court for a violation of this Act.

EXISTING LAW:

1. Require elections for assessments, amendments to the governing documents, members of the board of directors, or the granting of exclusive use of common area must be conducted by secret ballot.
2. Require the inspector of election may be one or three individuals who have the following duties:
3. Determine the number of memberships entitled to vote and voting power;
4. Establish the authenticity, validity and effect of proxies;
5. Receive votes and ballots, hear and determine all challenges and questions;
6. Count and tabulate all votes;
7. Determine when polls close; and
8. Determine the results of the election.
9. Requires a home owners association to select one or 3 independent 3rd parties as an inspector or inspectors of elections.
10. Requires the association’s elections to be conducted by the inspector or inspectors of elections in accordance with specified procedures.

FISCAL EFFECT: None

COMMENTS:

Background: There are over 50,220 CIDs in the state that comprise over 4.8 million housing units, or approximately one quarter of the state's housing stock. CIDs include condominiums, community apartment projects, housing cooperatives, and planned unit developments. They are characterized by a separate ownership of dwelling space coupled with an undivided interest in a common property, restricted by covenants and conditions that limit the use of common area and the separate ownership interests, and the management of common property and enforcement of restrictions by a HOA. CIDs are governed by the Davis Stirling Act (the Act) as well as the governing documents of the HOA, including bylaws, declaration, and operating rules. The Act requires elections to conform to an extensive process including double stuffed ballots and the HOA to select one or three independent third parties as an inspector or inspectors of elections. AB 569, Chau, Chapter 661, Statutes of 2014 exempted HOAs from these procedures in cases where their bylaws require all of the members to serve on the board of directors.

This bill would allow the board of directors of a HOA to declare an election uncontested if the number of candidates running for election does not exceed the number of directors to be elected at the election. In order to qualify, the election would have to comply with all properly adopted election rules, all candidates must be nominated before the deadline and in compliance with the governing documents, and the inspector of elections would have to declare that the number of candidates does not exceed the number of directors to be elected. Twenty days prior to declaring the election uncontested, the HOA would be required to notify the members that the board is planning to vote that the election is uncontested and the right of the members to object to the board declaring the election uncontested.

Write-in candidates: In some cases, the governing documents of a HOA allow for members to write-in candidates for an election. After the HOA declares that an election is uncontested at a board meeting, members would have 15 days to write-in a candidate for election. If one or more write-in candidates are received and the number of candidates exceeds the number of directors to be elected than AB 1799 requires an election to be held. If after 15 days the number of write-in candidates and the number of candidates does not exceed the number of open positions on the board then the election results will be sealed and the any write-in members will be added as members. It's possible that there may not be enough members running for the open positions on the board and if additional candidates write in their names this bill would add them to the board automatically.

Purpose of this bill: According to the author, "CID board elections are often uncontested, with the number of candidates does not exceeding the number of vacant seats. Current law requires such uncontested elections to follow the same election procedures as contested elections, including minimum vote thresholds and costly third-party verification of results. These costs are a burden on the budgets of CIDs, particularly lower-income communities. AB 1799 exempts homeowner associations from the costly election procedure requirements in current law, but only in instances where the requirements are unnecessary because the number of candidates does not exceed the number of open seats. AB 1799 will return these resources to the budgets of homeowner associations, allowing for additional improvements to shared community features."

Arguments in support: According to California Association of Community Managers, elections of board members are an important part of how CIDs come together to build and maintain healthy communities. In certain instances, the election of directs may be uncontested, even after strict adherence to the CID bylaws and voting election rules that involve numerous attempts to solicit nominees. In these instances, AB 1799 allows CIDs the opportunity to save the costs of a protracted and costly election process and seat a new board of directors in a timely manner thereby making for a more production CID."

Arguments in opposition: According to the Center for California Homeowner Association Law, "Homeowners who buy a home in an association have no voice in its creation by local government and no choice in whether or not to join it: membership is mandatory and so are assessments. The only instrument for an owner to express choice is his individual vote: the homeowner's vote to choose the leadership for the association's governing board and the homeowner's decision to become a candidate for seat on the governing board…AB 1799 undermines the basic right and restores control of elections to incumbents."

Staff comments:

This bill would allow for write-in candidates if the governing documents provide a process for them. The committee may wish to allow for a process for write-in candidates regardless of whether the governing documents specifically allow for them.

REGISTERED SUPPORT / OPPOSITION:

Support

California Association of Community Managers

Community Associations Institute

Individuals (4)

Opposition

California Alliance for Retired Americans

Center for California Homeowner Association Law

Rutgers School of Law Constitutional Rights Clinic

Individuals (1)

Analysis Prepared by: Ken Spence / H. & C.D. / (916) 319-2085