The Davis-Stirling Common Interest Development Act governs the creation and management of common interest developments. The act requires a homeowners association to adopt rules that, among other things, specify the qualifications for candidates for the board of directors of the association and any other elected position, 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. The act requires the sealed ballots to be at all times in the custody of the inspector or inspectors of elections or at a designated location until after the tabulation of the vote.

This bill would, among other things, require an association to disqualify a member from nomination as a candidate for not being a member at the time of nomination and for being convicted of certain felonies, and would authorize an association to disqualify a person from being nominated or from serving on the board for specified reasons, including the failure to pay regular assessments. The bill would require the rules to ensure that the meeting at which ballots are counted is accessible to all members or their representatives who want to witness the tabulation and that it is held at a common area meeting space of association property or within a reasonable distance from the property. The bill would also require the rules to require a notice to be provided regarding the return and counting of ballots, nominations, and list of candidates names that will appear on the ballot. The bill would require the rules to mandate that the inspector of elections deliver to each member the ballots and a copy of the election operating rules at least 30 days before an election. The bill would require these rules to prohibit the denial of a ballot to a member and to a person with general power of attorney for an owner. This bill would require the sealed ballots, signed voter envelopes, voter list, proxies, and candidate registration list to be in the custody of the inspector of elections or at a designated location until after vote tabulation and would, with certain exceptions, require these association election materials to be considered association records, as defined, subject to inspection and copying.

Existing law requires an independent 3rd party to be selected by the association as the inspector of elections and prohibits a person, business entity, or subdivision of a business entity that is employed or under contract to the association for any compensable services from being an independent 3rd party unless otherwise expressly authorized by the rules of the association.

This bill would delete the exception made by rules of the association.

Existing law authorizes a member of an association to bring a civil action for declaratory or equitable relief for a violation of the above-described provisions by the association within one year from the date the cause of action accrues and authorizes a court to void the election results, as specified. Existing law also authorizes a cause of action for certain violations of the provisions governing common interest development association elections to be brought in small claims court.

This bill would, among other things, authorize the civil action to be brought in superior court or, if the amount of the demand does not exceed the jurisdictional amount of the small claims court, in small claims court, within one year from the date that the inspector of elections notifies the board and membership of the election results, whichever is later. The bill would also require the court to void the elections results, as specified, unless the association establishes that noncompliance by the association was unintentional and did not affect the results of the election. The bill would also prohibit an association from filing a civil action regarding a dispute in which the member has requested dispute resolution unless the association has complied with the internal dispute resolution procedures governing common interest developments, as specified.

Existing law defines association records to include membership lists, including name, property address, and mailing address, as specified.

This bill would include email addresses among the records that are defined as association records.

The Davis-Stirling Common Interest Development Act governs the creation and management of common interest developments. The act requires a homeowners association to adopt rules that, among other things, specify the qualifications for candidates for the board of directors of the association and any other elected position, 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. The act requires the sealed ballots to be at all times in the custody of the inspector or inspectors of elections or at a designated location until after the tabulation of the vote.

This bill would, among other things, delete the requirement that the rules specify the qualifications for candidates for the board and any other elected position and the qualifications for voting. The bill would prohibit require an association from disqualifying to disqualify a member from nomination, except nomination as a candidate for not being a member at the time of nomination and as specified with respect to for being convicted of certain felonies or felonies, and would authorize an association to disqualify a person from being nominated or from serving on the board for specified reasons, including the failure to pay regular assessments. The bill would require the rules to ensure that the meeting at which ballots are counted is accessible to all members or their representatives who want to witness the tabulation and that it is held on the at a common area meeting space of association property or within a reasonable distance from the property. The bill would also require the rules to require a notice to be provided regarding the return and counting of ballots, nominations, and list of candidates names that will appear on the ballot. The bill would require the rules to mandate that the inspector of elections deliver to each member the ballots and a copy of the election operating rules at least 30 days before an election. The bill would specify the grounds on which a nominee for the association board may be disqualified. The bill would require these rules to prohibit the denial of a ballot to a member and to a person with general power of attorney for an owner. This bill would require the sealed ballots, signed voter envelopes, voter list, proxies, and candidate registration list to be in the custody of the inspector of elections or at a designated location until after vote tabulation and would, with certain exceptions, require these items and the ballots association election materials to be considered association records, as defined, subject to inspection and copying.

Existing law requires an independent 3rd party to be selected by the association as the inspector of elections and prohibits a person, business entity, or subdivision of a business entity that is employed or under contract to the association for any compensable services from being an independent 3rd party unless otherwise expressly authorized by the rules of the association.

This bill would delete the exception made by rules of the association.

Existing law authorizes a member of an association to bring a civil action for declaratory or equitable relief for a violation of the above described above-described provisions by the association within one year from the date the cause of action accrues and authorizes a court to void the election results, as specified. Existing law also authorizes a cause of action for certain violations of the provisions governing common interest development association elections to be brought in small claims court.

This bill would, among other things, authorize the civil action to be brought in Superior Court superior court or, if the amount of the demand does not exceed the jurisdictional amount of the small claims court, in small claims court, within one year from the date that the inspector of elections notifies the board and membership of the election results, whichever is later. The bill would also require the court to void the elections results, as specified, unless the association establishes that noncompliance by the association was unintentional and did not affect the results of the election. The bill would also prohibit an association from filing a civil action regarding a dispute in which the member has requested dispute resolution unless the association has complied with the internal dispute resolution procedures governing common interest developments, as specified.

Existing law defines association records to include membership lists, including name, property address, and mailing address, as specified.

This bill would include email addresses among the records that are defined as association records.

The Davis-Stirling Common Interest Development Act governs the creation and management of common interest developments. The act requires a homeowners association to adopt rules that, among other things, specify the qualifications for candidates for the board of directors of the association and any other elected position, 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. The act requires the sealed ballots to be at all times in the custody of the inspector or inspectors of elections or at a designated location until after the tabulation of the vote.

This bill would would, among other things, delete the requirement that the rules specify the qualifications for candidates for the board and any other elected position and the qualifications for voting. The bill would prohibit an association from disqualifying a member from nomination, except for not being a member at the time of nomination and as specified with respect to certain felonies or the failure to pay regular assessments. The bill would require the rules to ensure that the meeting at which ballots are counted is accessible to all members or their representatives who want to witness the tabulation and that it is held on the common area of association property or within a reasonable distance from the property. The bill would also require the rules to require a notice to be provided regarding the return and counting of ballots, nominations, and list of candidates names that will appear on the ballot. The bill would require the rules to mandate that the inspector of elections deliver to each member the ballots and a copy of the election operating rules at least 30 days before an election. The bill would specify the grounds on which a nominee for the association board may be disqualified. The bill would require these rules to prohibit the denial of a ballot to a member and to a person with general power of attorney for an owner. This bill would require the signed voter envelopes, voter list, and candidate registration list to be in the custody of the inspector of elections or at a designated location until after vote tabulation and would would, with certain exceptions, require these items and the ballots to be considered association records records, as defined, subject to inspection and copying.

Existing law requires an independent 3rd party to be selected by the association as the inspector of elections and prohibits a person, business entity, or subdivision of a business entity that is employed or under contract to the association for any compensable services from being an independent 3rd party unless otherwise expressly authorized by the rules of the association.

This bill would delete the exception made by rules of the association.

Existing law authorizes a member of an association to bring a civil action for declaratory or equitable relief for a violation of the above described provisions by the association within one year from the date the cause of action accrues and authorizes a court to void the election results, as specified. Existing law also authorizes a cause of action for certain violations of the provisions governing common interest development association elections to be brought in small claims court.

This bill would, among other things, authorize the civil action to be brought in Superior Court or, if the amount of the demand does not exceed the jurisdictional amount of the small claims court, in small claims court, within one year from the date that the inspector of elections notifies the board and membership of the election results, whichever is later. The bill would also require the court to void the elections results, as specified, unless the association establishes that the failure of noncompliance by the association to follow this article or the election operating rules was unintentional and did not affect the results of the election. The bill would also prohibit an association from filing a civil action regarding a dispute in which the member has requested dispute resolution unless the association has complied with the internal dispute resolution procedures governing common interest developments, as specified.

Existing law defines association records to include membership lists, including name, property address, and mailing address, as specified.

This bill would include email addresses among the records that are defined as association records.

The Davis-Stirling Common Interest Development Act governs the creation and management of common interest developments. The act requires a homeowners association to adopt rules that, among other things, specify the qualifications for candidates for the board of directors of the association and any other elected position, 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. The act requires the sealed ballots to be at all times in the custody of the inspector or inspectors of elections or at a designated location until after the tabulation of the vote.

This bill would delete the requirement that the rules specify the qualifications for candidates for the board and any other elected position and the qualifications for voting. The bill would prohibit an association from disqualifying a member from nomination, except for not being a member at the time of nomination and as specified with respect to certain felonies or the failure to pay regular assessments. The bill would require the rules to ensure that the meeting at which ballots are counted is accessible to all members or their representatives who want to witness the tabulation. The bill would also require the rules to require a notice to be provided regarding the return and counting of ballots, nominations, and list of candidates names that will appear on the ballot. The bill would require the rules to mandate that the inspector of elections deliver to each member the ballots and a copy of the election operating rules at least 30 days before an election. The bill would require these rules to prohibit the denial of a ballot to a member and to a person with general power of attorney for an owner. This bill would require the signed voter envelopes, voter list, and candidate registration list to be in the custody of the inspector of elections or at a designated location until after vote tabulation and would require these items and the ballots to be considered association records subject to inspection and copying.

Existing law requires an independent 3rd party to be selected by the association as the inspector of elections and prohibits a person, business entity, or subdivision of a business entity that is employed or under contract to the association for any compensable services from being an independent 3rd party unless otherwise expressly authorized by the rules of the association.

This bill would delete the exception made by rules of the association.

Existing law authorizes a member of an association to bring a civil action for declaratory or equitable relief for a violation of the above described provisions by the association within one year from the date the cause of action accrues and authorizes a court to void the election results, as specified. Existing law also authorizes a cause of action for certain violations of the provisions governing common interest development association elections to be brought in small claims court.

This bill would, among other things, authorize the civil action to be brought in Superior Court or, if the amount of the demand does not exceed the jurisdictional amount of the small claims court, in small claims court, within one year from the date that the inspector of elections notifies the board and membership of the election results, whichever is later. The bill would also require the court to void the elections results, as specified, unless the association establishes that the failure of the association to follow this article or the election operating rules was unintentional and did not affect the results of the election. The bill would also prohibit an association from filing a civil action regarding a dispute in which the member has requested dispute resolution unless the association has complied with the internal dispute resolution procedures governing common interest developments, as specified.

Existing law defines association records to include membership lists, including name, property address, and mailing address, as specified.

This bill would include email addresses among the records that are defined as association records.

The Davis-Stirling Common Interest Development Act governs the creation and management of common interest developments. The act requires a homeowners association to adopt rules that, among other things, specify the qualifications for candidates for the board of directors of the association and any other elected position, 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. The act requires the sealed ballots to be at all times in the custody of the inspector or inspectors of elections or at a designated location until after the tabulation of the vote.

This bill would delete the requirement that the rules specify the qualifications for candidates for the board and any other elected position and the qualifications for voting. The bill would prohibit a rule that specifies procedures for the nomination of candidates from being deemed reasonable if it disallows a member from being nominated for any reason other than not being a member at the time of the nomination, but would authorize an associations bylaws to disqualify members who have been convicted of certain felonies. an association from disqualifying a member from nomination, except for not being a member at the time of nomination and as specified with respect to certain felonies or the failure to pay regular assessments. The bill would require the rules to ensure that the meeting at which ballots are counted is accessible to all members or their representatives who want to witness the tabulation. The bill would also require the rules to require a notice to be provided regarding the return and counting of ballots, nominations, and list of candidates names that will appear on the ballot. The bill would require the rules to mandate that the inspector of elections deliver to each member the ballots and a copy of the election operating rules at least 30 days before an election. The bill would require these rules to prohibit the denial of a ballot to a member and to a person with general power of attorney for an owner. This bill would require the signed voter envelopes, voter list, and candidate registration list to be in the custody of the inspector of elections or at a designated location until after vote tabulation and would require these items and the ballots to be considered association records subject to inspection and copying.

Existing law requires an independent 3rd party to be selected by the association as the inspector of elections and prohibits a person, business entity, or subdivision of a business entity that is employed or under contract to the association for any compensable services from being an independent 3rd party unless otherwise expressly authorized by the rules of the association.

This bill would delete the exception made by rules of the association.

Existing law authorizes a member of an association to bring a civil action for declaratory or equitable relief for a violation of the above described provisions by the association within one year from the date the cause of action accrues and authorizes a court to void the election results, as specified. Existing law also authorizes a cause of action for certain violations of the provisions governing common interest development association elections to be brought in small claims court.

This bill would, among other things, authorize the civil action to be brought in Superior Court or, if the amount of the demand does not exceed the jurisdictional amount of the small claims court, in small claims court, within one year from the date that the inspector of elections notifies the board and membership of the election results, whichever is later. The bill would also require the court to void the elections results, as specified, unless the association establishes that the failure of the association to follow this article or the election operating rules was unintentional and did not affect the results of the election. The bill would also prohibit an association from filing a civil action regarding a dispute in which the member has requested dispute resolution unless the association has complied with the internal dispute resolution procedures governing common interest developments, as specified.

The Davis-Stirling Common Interest Development Act governs the creation and management of common interest developments. The act requires a homeowners association to adopt rules that, among other things, specify the qualifications for candidates for the board of directors of the association and any other elected position, 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. The act requires the sealed ballots to be at all times in the custody of the inspector or inspectors of elections or at a designated location until after the tabulation of the vote.

This bill would delete the requirement that the rules specify the qualifications for candidates for the board and any other elected position and the qualifications for voting. The bill would prohibit a rule that specifies procedures for the nomination of candidates from being deemed reasonable if it disallows a member from being nominated for any reason other than not being a member at the time of the nomination. nomination, but would authorize an associations bylaws to disqualify members who have been convicted of certain felonies. The bill would require the rules to ensure that the meeting at which ballots are counted is accessible to seniors and persons with disabilities. all members or their representatives who want to witness the tabulation. The bill would also require the rules to require a notice to be provided regarding the return and counting of ballots, nominations, and list of candidates names that will appear on the ballot. The bill would require the rules to mandate that the inspector of elections deliver to each member the ballots and a copy of the election operating rules at least 30 days before an election. The bill would require these rules to prohibit the denial of a ballot to a member and to a person with general power of attorney for an owner. This bill would require the signed voter envelopes, voter list, and candidate registration list to be in the custody of the inspector of elections or at a designated location until after vote tabulation and would require these items and the ballots to be considered association records subject to inspection and copying.

Existing law requires an independent 3rd party to be selected by the association as the inspector of elections and prohibits a person, business entity, or subdivision of a business entity that is employed or under contract to the association for any compensable services from being an independent 3rd party unless otherwise expressly authorized by the rules of the association.

This bill would delete the exception made by rules of the association.

Existing law authorizes a member of an association to bring a civil action for declaratory or equitable relief for a violation of the above described provisions by the association within one year from the date the cause of action accrues and authorizes a court to void the election results, as specified. Existing law also authorizes a cause of action for certain violations of the provisions governing common interest development association elections to be brought in small claims court.

This bill would, among other things, authorize the civil action to be brought in Superior Court or, if the amount of the demand does not exceed the jurisdictional amount of the small claims court, in small claims court, within one year from the date that the inspector of elections notifies the board and membership of the election results, whichever is later. The bill would also require the court to void the elections results, as specified, unless the association establishes that the failure of the association to follow this article or the election operating rules was unintentional and did not affect the results of the election. The bill would also prohibit an association from filing a civil action regarding a dispute in which the member has requested dispute resolution unless the association has complied with provisions of existing law regarding dispute resolution. the internal dispute resolution procedures governing common interest developments, as specified.

The Davis-Stirling Common Interest Development Act governs the creation and management of common interest developments. The act requires a homeowners association to adopt rules that, among other things, specify the qualifications for candidates for the board of directors of the association and any other elected position, 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. The act requires the sealed ballots to be at all times in the custody of the inspector or inspectors of elections or at a designated location until after the tabulation of the vote.

This bill would delete the requirement that the rules specify the qualifications for candidates for the board and any other elected position and the qualifications for voting. The bill would prohibit a rule that specifies procedures for the nomination of candidates from being deemed reasonable if it disallows a member from being nominated for any reason other than not being a member at the time of the nomination. The bill would require the rules to ensure that the meeting at which ballots are counted is accessible to seniors and persons with disabilities. The bill would also require the rules to require a notice to be provided regarding the return and counting of ballots, nominations, and list of candidates names that will appear on the ballot. The bill would require the rules to mandate that the inspector of elections deliver to each member the ballots and a copy of the election operating rules at least 30 days before an election. The bill would require these rules to prohibit the denial of a ballot to a member and to a person with power of attorney for an owner. This bill would require the signed voter envelopes envelopes, voter list, and nominee candidate registration list to be in the custody of the inspector of elections or at a designated location until after vote tabulation. tabulation and would require these items and the ballots to be considered association records subject to inspection and copying.

The Davis-Stirling Common Interest Development Act governs the creation and management of common interest developments. The act requires a homeowners association to adopt rules that, among other things, specify the qualifications for candidates for the board of directors of the association and any other elected position, 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. The act requires the sealed ballots to be at all times in the custody of the inspector or inspectors of elections or at a designated location until after the tabulation of the vote.

This bill would delete the requirement that the rules specify the qualifications for candidates for the board and any other elected position and the qualifications for voting. The bill would prohibit a rule that specifies procedures for the nomination of candidates from being deemed reasonable if it disallows a member from being nominated for any reason other than not being a member at the time of the nomination. The bill would require the rules to ensure that the meeting at which ballots are counted is accessible to seniors and persons with disabilities. The bill would also require the rules to require a notice to be provided regarding the return and counting of ballots, nominations, and list of candidates names that will appear on the ballot. The bill would require the rules to mandate that the inspector of elections deliver to each member the ballots and a copy of the election operating rules at least 30 days before an election. The bill would require these rules to prohibit the denial of a ballot to a member and to a person with power of attorney for an owner. This bill would require the voter envelopes and nominee registration list to be in the custody of the inspector of elections or at a designated location until after vote tabulation.

 VETO  

Bill No: SB 1265

Author:

:

Vote:

SENATE TRANS. & HOUSING COMMITTEE: 8-2, 4/17/18

AYES: Beall, Cannella, Galgiani, McGuire, Roth, Skinner, Wieckowski, Wiener

NOES: Morrell, Vidak

NO VOTE RECORDED: Allen, Dodd, Gaines

SENATE JUDICIARY COMMITTEE: 4-2, 5/8/18

AYES: Jackson, Hertzberg, Monning, Wieckowski

NOES: Moorlach, Anderson

NO VOTE RECORDED: Stern

SENATE FLOOR: 25-12, 5/30/18

AYES: Allen, Atkins, Beall, Bradford, Dodd, Galgiani, Glazer, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leyva, McGuire, Mitchell, Monning, Newman, Pan, Portantino, Roth, Skinner, Stern, Wieckowski, Wiener

NOES: Anderson, Bates, Berryhill, Fuller, Gaines, Moorlach, Morrell, Nguyen, Nielsen, Stone, Vidak, Wilk

NO VOTE RECORDED: Cannella, De León

SENATE FLOOR: 27-11, 8/29/18

AYES: Allen, Atkins, Beall, Bradford, Cannella, De León, Delgado, Dodd, Galgiani, Glazer, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leyva, McGuire, Mitchell, Monning, Pan, Portantino, Roth, Skinner, Stern, Wieckowski, Wiener

NOES: Anderson, Bates, Fuller, Gaines, Moorlach, Morrell, Nguyen, Nielsen, Stone, Vidak, Wilk

NO VOTE RECORDED: Berryhill, Chang

ASSEMBLY FLOOR: 46-27, 8/28/18 - See last page for vote

SUBJECT:

SOURCE: Center for California Homeowner Association Law

DIGEST:

This bill makes several changes to the elections process held in common interest developments (CIDs). It also makes changes to the process for handling disputes between a member and a homeowner’s association (HOA).

ANALYSIS:

Existing law:

1. Provides that an HOA in a CID shall adopt rules relating to board elections that do all of the following:
   1. Ensure that if any candidate or member advocating a point of view is provided access to association media, newsletters, or Internet Web sites during a campaign, for purposes that are reasonably related to that election, equal access shall be provided to all candidates and members advocating a point of view, including those not endorsed by the board, for purposes that are reasonably related to the election.
   2. Ensure access to the common area meeting space, if any exists, during a campaign, at no cost, to all candidates, including those who are not incumbents, and to all members advocating a point of view, including those not endorsed by the board, for purposes reasonably related to the election.
   3. Specify the procedures for the nomination of candidates, consistent with the governing documents. A nomination or election procedure 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, 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.
   5. Specify a method of selecting one or three independent third parties as inspector or inspectors of elections, as specified.
   6. Allow the inspector or inspectors to appoint and oversee additional persons to verify signatures and to count and tabulate votes as the inspector or inspectors deem appropriate, provided that the persons are independent third parties.
2. Requires, at all times, the sealed ballots to 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 HOA.
3. Requires the HOA to select an independent third party or parties as an inspector of elections. 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 HOA for any compensable services unless expressly authorized by the HOA.
4. Permits a member of an HOA to bring a civil action against an HOA for declaratory or equitable relief for a violation of the member elections provisions under the Davis-Sterling Act including but not limited to injunctive relief, restitution, or a combination, within one year of the date the cause of action accrues. Upon a finding that the election procedures were not followed, a court may void the results of the election.
5. Permits a prevailing party in a civil action described in 4) above, to be entitled to reasonable attorney’s fees and court costs, and the court may impose a penalty of up to $500 for each violation.
6. Provides that a cause of action with respect to 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, or access to, ballots for inspection and review after tabulation may be brought in small claims court.
7. Requires an HOA to provide a fair, reasonable, and expeditious procedure for resolving a dispute between an HOA and a member and shall make maximum, reasonable use of available local dispute resolution programs involving a neutral third party, including low-cost mediation programs. The HOA’s internal dispute resolution (IDR) procedure, invoked by either party to the dispute, shall, at a minimum, satisfy specified requirements.
8. Prohibits an HOA or a member from filing an enforcement action in the superior court unless the parties have endeavored to submit their dispute to alternative dispute resolution (ADR). This prohibition only applies to an enforcement action that is solely for declaratory, injunctive, or writ relief, or for that relief in conjunction with a claim for monetary damages not in excess of the jurisdictional limits and does not apply to small claims actions or assessment disputes.

This bill:

1. Requires an HOA to adopt election rules at least 90 days before any election.
2. Requires the HOA election rules to ensure that the meeting at which the ballots are counted meets both of the following criteria:
   1. The meeting is accessible to all members and their representatives who want to witness the tabulation.
   2. The meeting is held at a common area meeting space of HOA property, or if no common area meeting space exists, at a location within a reasonable distance of the property.
3. Requires the elections rules to do all of the following:
   1. Prohibit the denial of a ballot to a member for any reason other than not being a member at the time when ballots are distributed.
   2. Prohibit the denial of a ballot to a person with general power of attorney for a member.
   3. Require the ballot of a person with general power of attorney for a member to be counted if returned in a timely manner.
4. Requires an HOA to disqualify an individual from nomination if either:
   1. The individual is not a member of the HOA at the time of the nomination.
   2. The individual has been convicted within the last 20 years of a felony related to embezzlement, extortion, theft, perjury, or conspiracy to commit any of these crimes, as specified.
5. Allows an HOA to disqualify a member from nomination if any of the following occur:
   1. The individual is not current in payment of regular assessments, as specified.
   2. The person has a joint ownership interest with another member of the board.
   3. The individual has been a member of the HOA for less than one year.
6. Defines disqualifying debt and outlines the circumstances under which a nominee may be disqualified for disqualifying debt.
7. Requires an HOA, prior to disqualifying a nominee, for nonpayment of regular assessments, to provide the nominee, in a timely manner, the opportunity to engage in the internal dispute resolution process pursuant to the Davis-Stirling Act, as specified.
8. Requires the HOA, unless individual notice has been requested, to provide general notice at least 30 days prior to ballots being distributed that includes, among other things, the date and time for ballots to be returned, the date and time of the meeting at which the ballots will be counted, the procedure and deadline for submitting a nomination, the list of names that will appear on the ballot, and the list of voters, as specified.
9. Require the inspector or inspectors of elections to deliver, or cause to be delivered, at least 30 days before an election, to each member, the ballot or ballots and a copy of the election rules. Delivery of the election rules must be either posted on an Internet Web site as specified or by individual delivery.
10. Removes references in the rules that permit the identification of qualifications for candidacy or voting.
11. Adds that the ballots, signed voter envelopes, voter list, proxies, and a candidate registration list 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.
12. Prohibits an HOA’s rules from permitting any person, business, or subdivision of a business entity currently employed or under contract with the HOA for any compensable services from serving as an inspector of elections.
13. Provides that a cause of action for a violation of member elections may be brought in either the Superior Court or, if the demand does not exceed the jurisdictional amount of small claims court, in small claims court.
14. Requires a court to void the results of an election upon a finding that the election procedures were not followed, unless the HOA establishes by a preponderance of the evidence that the failure of the HOA to follow this article or the election operating rules were unintentional and did not affect the results of the election.
15. Requires a member to be awarded court costs and reasonable attorney’s fees incurred for consulting an attorney in connection with this civil action if the member prevails in a civil action in small claims court.
16. Prohibits an HOA from filing a civil action regarding a dispute in which a member has requested internal dispute resolution unless the HOA has participated in the specified internal dispute resolution procedure.

Comments

1. CIDs. 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. CIDs are governed by an HOA, which is run by volunteer directors.

In order to perform its obligations under the governing documents, HOAs levy regular and special assessments. If a member is delinquent in paying an assessment, the HOA may recover reasonable costs incurred in collecting assessments, a late charge, and interest, as specified. An HOA may also impose a lien on the separate interest of the member if an assessment is past due, as specified.

1. Access to ballot counting and voting. Under existing law, HOAs conduct elections through a paper and mail based balloting system that resembles California’s vote by mail process. The author is seeking to provide more transparency in the ballot counting process to ensure a fair elections process. The sponsor points to examples where homeowners were barred or otherwise discouraged from being near the ballot counting location. In one instance, the inspectors shared how many ballots were discarded or considered ineligible but homeowners are not able to view the process of opening the ballots. The sponsor also points to instances in which a property manager has served as an elections inspector. Exclusion from the process only leads to further distrust between homeowners and the board.

In order to ensure homeowners have access to the ballot counting process, this bill requires notice of the time and location of ballot counting, as well as access to all members or their representatives who want to witness the tabulation. This bill prohibits third parties from serving as inspectors if they are currently employed or under contract with the HOA for any compensable services. It further prohibits the denial of a ballot to a member, or person with power of attorney, for any reason other than not being a member at the time when ballots are distributed.

1. Denial of candidacy. According to the sponsor, HOAs use the election rules as a means to prohibit a resident member from voting in an election. These rules can be used as a means of punishment for members who may have a dispute with the management or the management finds the resident to be in violation of HOA rules. This tactic can be used to keep specific board members in power and avoid would-be challengers. For example, the sponsor points to a court case involving an HOA that prohibited members from running for the board if they were presently involved in a legal action against the HOA. Other examples include age requirements, living in the HOA for a specified period of time, being current in assessments, and passing a background check. Existing law permits an HOA to enforce HOA rules in several ways, such as placing a lien on property when a member fails to pay his or her assessment fees. HOAs may also fine, impose disciplinary actions, and sue members for violating HOA rules and governing documents.

This bill prohibits an HOA from disallowing a member from being nominated for any other reason other than not being a member, unless that member has been convicted of specified financial crimes. It requires the election rules to provide notice of the procedure and deadline for submitting a nomination, at least 30 days before the deadline. Additionally, the bill requires that the notice shall a list of all the candidate’s names that will appear on the ballot.

1. Internal dispute resolution. An HOA is required to provide a “fair, reasonable, and expeditious procedure for resolving a dispute” between the HOA and a member involving the rights, duties or liabilities under the Davis-Stirling Act or the HOAs governing documents. This procedure is referred to as internal dispute resolution, the purpose of which is to provide a non-judicial forum to resolve disputes between a member and the HOA that will not result in a fee or a charge to the member. Existing law requires parties to attempt to participate in such a process before filing an enforcement action in court. If a member initiates internal dispute resolution, the HOA under existing law must participate in the procedure. According to the sponsor, some HOAs are either not meaningfully participating in this process or are not waiting for its completion before seeking legal action. This bill requires participation in the internal dispute resolution process before filing any action in court, thus potentially reducing the need to resolve disputes in court.
2. Do it again. The provisions limiting the circumstances under which a board may disqualify an individual from nomination are also included in SB 1128 (Roth, see below).

Related/Prior Legislation

SB 1128 (Roth, 2018) would have provided that an HOA in a CID may provide a document by electronic means if the recipient has consented by email; reduced the notice requirement of a proposed rule change by the HOA board from 30 days to 28 days; and provided that the nominees to a board shall be considered elected by acclamation if the number of nominees does not exceed the number of vacancies on the board, as specified. The bill was vetoed by the Governor.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 10/3/18)

Center for California Homeowner Association Law (source)

American Civil Liberties Union

California Alliance for Retired Americans

Citizens for Constitutional Local Government

El Dorado Institute, Inc.

Greater Sacramento Urban League

Insurance Commissioner Dave Jones

Non-Profit Housing Association of Northern California

Schiffer Buus, A.P.C.

34 individuals

OPPOSITION: (Verified 10/3/18)

California Association of Community Managers

Community Associations Institute – California Legislative Action Committee

Lake Forest II Master Homeowners Association

ARGUMENTS IN SUPPORT: According to the author, this bill better ensures fair HOA elections by ending the practice of depriving a member the right to vote or run in an HOA election simply because the member has a dispute with the HOA board. The bill also requires the location that ballots are counted be accessible to members with disabilities, and specifies other timing and procedural requirements for HOA elections.

ARGUMENTS IN OPPOSITION: Opponents are concerned about eliminating minimum candidate qualifications for the HOA board. California Association of Community Managers asserts that that the expansion of the IDR requirements is unnecessary because the statute already requires an HOA to go through the process if requested by a homeowner. Opponents state that the provisions around election transparency raise privacy concerns given that the bill requires a list of voters by name or parcel number to go to all members, and ballots would be available to any member. They also state that these requirements add significantly to the cost of an election.

GOVERNOR'S VETO MESSAGE:

I am returning Senate Bill 1265 without my signature.

This bill makes several changes to the elections process for homeowner associations within common interest developments.

California has over 50,000 common interest developments varying in purpose and size. Each one has governing documents that are tailored specifically for that individual community. This bill takes a once-size-fits-all approach, but not all homeowner associations are alike.

If changes to an election process are needed, they should be resolved by the members of that specific community.

ASSEMBLY FLOOR: 46-27, 8/28/18

AYES: Aguiar-Curry, Berman, Bloom, Bonta, Burke, Caballero, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Eggman, Friedman, Gabriel, Cristina Garcia, Gipson, Gloria, Gonzalez Fletcher, Gray, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Levine, Limón, Low, McCarty, Medina, Mullin, Nazarian, Quirk, Quirk-Silva, Reyes, Rivas, Rodriguez, Rubio, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Wood, Rendon

NOES: Acosta, Travis Allen, Arambula, Baker, Bigelow, Brough, Chávez, Chen, Choi, Cooley, Cunningham, Dahle, Flora, Fong, Gallagher, Harper, Kiley, Lackey, Maienschein, Mathis, Mayes, Melendez, Obernolte, Patterson, Steinorth, Voepel, Waldron

NO VOTE RECORDED: Cooper, Daly, Frazier, Eduardo Garcia, Grayson, Muratsuchi, O'Donnell

Prepared by:

10/9/18 10:57:37

**** END ****

 UNFINISHED BUSINESS  

Bill No: SB 1265

Author:

: 8/23/18

Vote:

SENATE TRANS. & HOUSING COMMITTEE: 8-2, 4/17/18

AYES: Beall, Cannella, Galgiani, McGuire, Roth, Skinner, Wieckowski, Wiener

NOES: Morrell, Vidak

NO VOTE RECORDED: Allen, Dodd, Gaines

SENATE JUDICIARY COMMITTEE: 4-2, 5/8/18

AYES: Jackson, Hertzberg, Monning, Wieckowski

NOES: Moorlach, Anderson

NO VOTE RECORDED: Stern

SENATE FLOOR: 25-12, 5/30/18

AYES: Allen, Atkins, Beall, Bradford, Dodd, Galgiani, Glazer, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leyva, McGuire, Mitchell, Monning, Newman, Pan, Portantino, Roth, Skinner, Stern, Wieckowski, Wiener

NOES: Anderson, Bates, Berryhill, Fuller, Gaines, Moorlach, Morrell, Nguyen, Nielsen, Stone, Vidak, Wilk

NO VOTE RECORDED: Cannella, De León

ASSEMBLY FLOOR: 46-27, 8/28/18 - See last page for vote

SUBJECT: Common interest developments: elections

SOURCE: Center for California Homeowner Association Law

DIGEST:

This bill makes several changes to the elections process held in common interest developments (CIDs). It also makes changes to the process for handling disputes between a member and a homeowner’s association (HOA).

Assembly Amendments make a number of changes, including limiting and defining the circumstances under which an HOA board may disqualify a candidate from nomination; ensuring that the meeting where ballots are counted is held at a location that is accessible to HOA members, as specified; and establishing timelines for elections procedures.

ANALYSIS:

Existing law:

1. Provides that an HOA in a CID shall adopt rules relating to board elections that do all of the following:
   1. Ensure that if any candidate or member advocating a point of view is provided access to association media, newsletters, or Internet Web sites during a campaign, for purposes that are reasonably related to that election, equal access shall be provided to all candidates and members advocating a point of view, including those not endorsed by the board, for purposes that are reasonably related to the election.
   2. Ensure access to the common area meeting space, if any exists, during a campaign, at no cost, to all candidates, including those who are not incumbents, and to all members advocating a point of view, including those not endorsed by the board, for purposes reasonably related to the election.
   3. Specify the procedures for the nomination of candidates, consistent with the governing documents. A nomination or election procedure 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, 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.
   5. Specify a method of selecting one or three independent third parties as inspector or inspectors of elections, as specified.
   6. Allow the inspector or inspectors to appoint and oversee additional persons to verify signatures and to count and tabulate votes as the inspector or inspectors deem appropriate, provided that the persons are independent third parties.
2. Requires, at all times, the sealed ballots to 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 HOA.
3. Requires the HOA to select an independent third party or parties as an inspector of elections. 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 HOA for any compensable services unless expressly authorized by the HOA.
4. Permits a member of an HOA to bring a civil action against an HOA for declaratory or equitable relief for a violation of the member elections provisions under the Davis-Sterling Act including but not limited to injunctive relief, restitution, or a combination, within one year of the date the cause of action accrues. Upon a finding that the election procedures were not followed, a court may void the results of the election.
5. Permits a prevailing party in a civil action described in 4) above, to be entitled to reasonable attorney’s fees and court costs, and the court may impose a penalty of up to $500 for each violation.
6. Provides that a cause of action with respect to 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, or access to, ballots for inspection and review after tabulation may be brought in small claims court.
7. Requires an HOA to provide a fair, reasonable, and expeditious procedure for resolving a dispute between an HOA and a member and shall make maximum, reasonable use of available local dispute resolution programs involving a neutral third party, including low-cost mediation programs. The HOA’s internal dispute resolution (IDR) procedure, invoked by either party to the dispute, shall, at a minimum, satisfy specified requirements.
8. Prohibits an HOA or a member from filing an enforcement action in the superior court unless the parties have endeavored to submit their dispute to alternative dispute resolution (ADR). This prohibition only applies to an enforcement action that is solely for declaratory, injunctive, or writ relief, or for that relief in conjunction with a claim for monetary damages not in excess of the jurisdictional limits and does not apply to small claims actions or assessment disputes.

This bill:

1. Requires an HOA to adopt election rules at least 90 days before any election.
2. Requires the HOA election rules to ensure that the meeting at which the ballots are counted meets both of the following criteria:
   1. The meeting is accessible to all members and their representatives who want to witness the tabulation.
   2. The meeting is held at a common area meeting space of HOA property, or if no common area meeting space exists, at a location within a reasonable distance of the property.
3. Requires the elections rules to do all of the following:
   1. Prohibit the denial of a ballot to a member for any reason other than not being a member at the time when ballots are distributed.
   2. Prohibit the denial of a ballot to a person with general power of attorney for a member.
   3. Require the ballot of a person with general power of attorney for a member to be counted if returned in a timely manner.
4. Requires an HOA to disqualify an individual from nomination if either:
   1. The individual is not a member of the HOA at the time of the nomination.
   2. The individual has been convicted within the last 20 years of a felony related to embezzlement, extortion, theft, perjury, or conspiracy to commit any of these crimes, as specified.
5. Allows an HOA to disqualify a member from nomination if any of the following occur:
   1. The individual is not current in payment of regular assessments, as specified.
   2. The person has a joint ownership interest with another member of the board.
   3. The individual has been a member of the HOA for less than one year.
6. Defines disqualifying debt and outlines the circumstances under which a nominee may be disqualified for disqualifying debt.
7. Requires an HOA, prior to disqualifying a nominee, for nonpayment of regular assessments, to provide the nominee, in a timely manner, the opportunity to engage in the internal dispute resolution process pursuant to the Davis-Stirling Act, as specified.
8. Requires the HOA, unless individual notice has been requested, to provide general notice at least 30 days prior to ballots being distributed that includes, among other things, the date and time for ballots to be returned, the date and time of the meeting at which the ballots will be counted, the procedure and deadline for submitting a nomination, the list of names that will appear on the ballot, and the list of voters, as specified.
9. Require the inspector or inspectors of elections to deliver, or cause to be delivered, at least 30 days before an election, to each member, the ballot or ballots and a copy of the election rules. Delivery of the election rules must be either posted on an Internet Web site as specified or by individual delivery.
10. Removes references in the rules that permit the identification of qualifications for candidacy or voting.
11. Adds that the ballots, signed voter envelopes, voter list, proxies, and a candidate registration list 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.
12. Prohibits an HOA’s rules from permitting any person, business, or subdivision of a business entity currently employed or under contract with the HOA for any compensable services from serving as an inspector of elections.
13. Provides that a cause of action for a violation of member elections may be brought in either the Superior Court or, if the demand does not exceed the jurisdictional amount of small claims court, in small claims court.
14. Requires a court to void the results of an election upon a finding that the election procedures were not followed, unless the HOA establishes by a preponderance of the evidence that the failure of the HOA to follow this article or the election operating rules were unintentional and did not affect the results of the election.
15. Requires a member to be awarded court costs and reasonable attorney’s fees incurred for consulting an attorney in connection with this civil action if the member prevails in a civil action in small claims court.
16. Prohibits an HOA from filing a civil action regarding a dispute in which a member has requested internal dispute resolution unless the HOA has participated in the specified internal dispute resolution procedure.

Comments

1. CIDs. 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. CIDs are governed by an HOA, which is run by volunteer directors.

In order to perform its obligations under the governing documents, HOAs levy regular and special assessments. If a member is delinquent in paying an assessment, the HOA may recover reasonable costs incurred in collecting assessments, a late charge, and interest, as specified. An HOA may also impose a lien on the separate interest of the member if an assessment is past due, as specified.

1. Access to ballot counting and voting. Under existing law, HOAs conduct elections through a paper and mail based balloting system that resembles California’s vote by mail process. The author is seeking to provide more transparency in the ballot counting process to ensure a fair elections process. The sponsor points to examples where homeowners were barred or otherwise discouraged from being near the ballot counting location. In one instance, the inspectors shared how many ballots were discarded or considered ineligible but homeowners are not able to view the process of opening the ballots. The sponsor also points to instances in which a property manager has served as an elections inspector. Exclusion from the process only leads to further distrust between homeowners and the board.

In order to ensure homeowners have access to the ballot counting process, this bill requires notice of the time and location of ballot counting, as well as access to all members or their representatives who want to witness the tabulation. This bill prohibits third parties from serving as inspectors if they are currently employed or under contract with the HOA for any compensable services. It further prohibits the denial of a ballot to a member, or person with power of attorney, for any reason other than not being a member at the time when ballots are distributed.

1. Denial of candidacy. According to the sponsor, HOAs use the election rules as a means to prohibit a resident member from voting in an election. These rules can be used as a means of punishment for members who may have a dispute with the management or the management finds the resident to be in violation of HOA rules. This tactic can be used to keep specific board members in power and avoid would-be challengers. For example, the sponsor points to a court case involving an HOA that prohibited members from running for the board if they were presently involved in a legal action against the HOA. Other examples include age requirements, living in the HOA for a specified period of time, being current in assessments, and passing a background check. Existing law permits an HOA to enforce HOA rules in several ways, such as placing a lien on property when a member fails to pay his or her assessment fees. HOAs may also fine, impose disciplinary actions, and sue members for violating HOA rules and governing documents.

This bill prohibits an HOA from disallowing a member from being nominated for any other reason other than not being a member, unless that member has been convicted of specified financial crimes. It requires the election rules to provide notice of the procedure and deadline for submitting a nomination, at least 30 days before the deadline. Additionally, the bill requires that the notice shall a list of all the candidate’s names that will appear on the ballot.

1. Internal dispute resolution. An HOA is required to provide a “fair, reasonable, and expeditious procedure for resolving a dispute” between the HOA and a member involving the rights, duties or liabilities under the Davis-Stirling Act or the HOAs governing documents. This procedure is referred to as internal dispute resolution, the purpose of which is to provide a non-judicial forum to resolve disputes between a member and the HOA that will not result in a fee or a charge to the member. Existing law requires parties to attempt to participate in such a process before filing an enforcement action in court. If a member initiates internal dispute resolution, the HOA under existing law must participate in the procedure. According to the sponsor, some HOAs are either not meaningfully participating in this process or are not waiting for its completion before seeking legal action. This bill requires participation in the internal dispute resolution process before filing any action in court, thus potentially reducing the need to resolve disputes in court.
2. Do it again. The provisions limiting the circumstances under which a board may disqualify an individual from nomination are also included in SB 1128 (Roth).

Related/Prior Legislation

SB 1128 (Roth, 2018) provides that an HOA in a CID may provide a document by electronic means if the recipient has consented by email; reduces the notice requirement of a proposed rule change by the HOA board from 30 days to 28 days; and provides that the nominees to a board shall be considered elected by acclamation if the number of nominees does not exceed the number of vacancies on the board, as specified. The bill is on the Assembly Floor.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 8/28/18)

Center for California Homeowner Association Law (source)

American Civil Liberties Union

California Alliance for Retired Americans

Citizens for Constitutional Local Government

El Dorado Institute, Inc.

Greater Sacramento Urban League

Insurance Commissioner Dave Jones

Non-Profit Housing Association of Northern California

Schiffer Buus, A.P.C.

34 individuals

OPPOSITION: (Verified 8/28/18)

California Association of Community Managers

Community Associations Institute – California Legislative Action Committee

Lake Forest II Master Homeowners Association

ARGUMENTS IN SUPPORT: According to the author, this bill better ensures fair HOA elections by ending the practice of depriving a member the right to vote or run in an HOA election simply because the member has a dispute with the HOA board. The bill also requires the location that ballots are counted be accessible to members with disabilities, and specifies other timing and procedural requirements for HOA elections.

ARGUMENTS IN OPPOSITION: Opponents are concerned about eliminating minimum candidate qualifications for the HOA board. California Association of Community Managers asserts that that the expansion of the IDR requirements is unnecessary because the statute already requires an HOA to go through the process if requested by a homeowner. Opponents state that the provisions around election transparency raise privacy concerns given that the bill requires a list of voters by name or parcel number to go to all members, and ballots would be available to any member. They also state that these requirements add significantly to the cost of an election.

ASSEMBLY FLOOR: 46-27, 8/28/18

AYES: Aguiar-Curry, Berman, Bloom, Bonta, Burke, Caballero, Calderon, Carrillo, Cervantes, Chau, Chiu, Chu, Eggman, Friedman, Gabriel, Cristina Garcia, Gipson, Gloria, Gonzalez Fletcher, Gray, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Levine, Limón, Low, McCarty, Medina, Mullin, Nazarian, Quirk, Quirk-Silva, Reyes, Rivas, Rodriguez, Rubio, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Wood, Rendon

NOES: Acosta, Travis Allen, Arambula, Baker, Bigelow, Brough, Chávez, Chen, Choi, Cooley, Cunningham, Dahle, Flora, Fong, Gallagher, Harper, Kiley, Lackey, Maienschein, Mathis, Mayes, Melendez, Obernolte, Patterson, Steinorth, Voepel, Waldron

NO VOTE RECORDED: Cooper, Daly, Frazier, Eduardo Garcia, Grayson, Muratsuchi, O'Donnell

Prepared by: Erin Riches

8/28/18 21:27:58

**** END ****

SENATE THIRD READING

STR Bill Id:SB 1265

Author:(Wieckowski)

As Amended Ver:August 23, 2018

Majority vote

SENATE VOTE: 25-12

SUMMARY: Proposes numerous reforms to the laws governing elections in common interest developments. Specifically, this bill:

1. Requires a homeowner's association (HOA) to adopt election rules at least 90 days before any election.
2. Requires the HOA election rules to ensure that the meeting at which ballots are counted is accessible to all members and their representatives who want to witness the tabulation, and that the meeting is held on the common area meeting space of association property or, if no common area exists, at a location within reasonable distance from association property.
3. Unless individual notice has been requested pursuant to Civil Code Section 4040, requires general notice to be provided according to the following timelines, as specified:
   1. The date and time by which, and the physical address where, ballots are to be returned by mail or handed to the inspector or inspectors of elections, which shall be provided at least 30 days before the ballot is distributed.
   2. The date and location of the meeting at which ballots will be counted, which shall be provided at least 30 days before the ballot is distributed.
   3. The procedure and deadline for submitting a nomination, which shall be provided at least 30 days before the deadline for submitting a nomination.
   4. The list of all candidates' names that will appear on the ballot, which shall be provided at least 30 days before the ballots are distributed.
   5. The list of all voters by name and parcel number, and voting power which shall be provided at least 30 days before the ballot is distributed.
4. Requires an HOA to disqualify a person from nomination as a candidate, as follows:
   1. A nominee is not a member of the HOA at the time of the nomination.
   2. 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.
5. Allows an HOA to disqualify a person from nomination as a candidate, through its bylaws only, as follows:
   1. An HOA may require a nominee for a board seat, and an incumbent board director during his or her 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. An HOA may prohibit more than one person with joint ownership interests in the same separate interest from serving as board directors at the same time, subject to the following:
      1. Allows the board to disqualify a person from nomination as a candidate only in cases where that person if elected could not serve on the board without violating this prohibition; and
      2. Allows the board to disqualify a person from nomination 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 owns is an incumbent board director.
   3. An HOA may disqualify a nominee if that person has been a member of the association for less than one year.
6. Requires the HOA to provide a nominee the opportunity to engage in the internal dispute resolution process set forth in the Davis-Stirling Act before disqualifying a nominee for alleged nonpayment of regular assessments.
7. Provides that a disqualifying debt includes regular assessments and interest owed the association, but that fines, fines renamed as assessments, collection charges, late charges, or other costs levied by a third party are not disqualifying debts.
8. Provides that the nominee shall not be disqualified for failure to be current in payment of regular assessments if any of the following circumstances are true:
   1. The nominee has paid the regular assessment under protest pursuant to Civil Code Section 5658;
   2. The nominee has entered into a payment plan pursuant to Civil Code Section 5665; and
   3. 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.
9. Prohibits an HOA's election rules from permitting any person, business, or subdivision of a business entity currently employed or under contract with the HOA for any compensable services to serve as an inspector of elections.
10. Provides that the ballots, signed voter envelopes, the voter list and a candidate registration list 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.
11. Defines “association election materials” to mean returned ballots, signed voter envelopes, a list of parcel numbers and voters to whom ballots were to be sent, and the candidate registration list. Clarifies that of these materials, signed voter envelopes may not be copied.
12. Provides that a cause of action for a violation of member elections may be brought within one year of the date that the inspector or inspectors notify the HOA board and membership of the election results or the cause of action accrues, whichever is later. Permits a cause of action in either the Superior Court or in small claims court, if the amount of the demand is within the jurisdictional amount.
13. Requires a court to void the results of an election upon a finding that the election procedures were not followed, unless the HOA establishes by a preponderance of the evidence, that its noncompliance with this article or the election operating rules were unintentional and did not affect the results of the election.
14. Requires a member to be awarded court costs and reasonable attorney's fees incurred for consulting an attorney in connection with this civil action if the member prevails in a civil action in small claims court.
15. Prohibits an HOA from filing a civil action regarding a dispute in which a member has requested internal dispute resolution unless the association has participated in the specified internal dispute resolution procedure.

FISCAL EFFECT: None.

COMMENTS:

Background: There are over 52,000 CIDs in the state that comprise over six 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 an association. CIDs are governed by the Davis-Stirling Act (the Act) as well as he governing documents of the association, including bylaws, declaration, and operating rules. The Act requires elections to conform to an extensive process, including double stuffed ballots and the selection of one or three independent third parties as an inspector or inspectors of elections. AB 569 (Chau), Chapter 661, Statutes of 2014, exempted associations from these procedures in cases where their bylaws require all of the members to serve on the board of directors.

CID elections procedures: Under existing 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, qualifications for voting, and 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 must be promptly reported to the board and be recorded in the minutes of the next meeting. Additionally, within 15 days of the election, the board must give general notice to all members of the results of the election.

Ensuring an independent elections inspector: Existing law requires an independent, third party to conduct an association election. (Sec. 5105 (a)(5).) The independent third party may be a member, but cannot be a director, a candidate for director, or someone related to a director or candidate. (Sec. 5100 (b).) In general, the independent, third party is not supposed to be any person or entity that has business with the association, but under current law, an association can override this general rule, through the adoption of an express rule to the contrary. Thus, if an association allows it, the current property manager, or another company doing business with the association, can oversee the election. Since such entities may have a financial stake in the outcome of the election, however, there can be a conflict of interest.

SB 1265 would eliminate the authority of HOAs to appoint any person or entity employed or under contract to the association to serve as the elections inspector. Proponents contend this is a common-sense rule to ensure the integrity of elections. Allowing the property manager who works for the association serve as elections inspector could, at a minimum, lead to the perception of a serious conflict of interest, particularly where homeowners may have some dispute with the property manager over various day-to-day issues.

Burden of proof and attorney fee provisions: Current law enables any association member to bring a civil action to challenge an association election. If the member can show that a violation of the legally required elections procedures took place, then the court may void the election outcome. (Section 5145 (a).) According to the sponsor, in at least one reported case, the court initially declined to void the election results, even though it found procedural violations, until the member was able to show that the violation was intentional and that it affected the results of the election. (Wittenberg v. Beachwalk Homeowners Assn. (2013) 217 Cal.App.4th 654.)

SB 1265 would still require courts to examine whether a violation of the legally required elections procedures was intentional and whether it affected the outcome of an election before voiding the result. The bill would, however, shift the burden of proof. Instead of requiring the member to show that the procedural violation was intentional and affected the outcome of the election, SB 1265 would require an association to prove that any procedural violation was unintentional and did not affect the outcome of the election. Otherwise, the court would have to void the outcome of the election.

Board qualifications: This bill would provide that an association may only disqualify a person from nomination as a candidate for the following reasons:

1. If the person is not a member of the association at the time of the nomination.
2. 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.
3. If the person is not "current "in the payment of regular assessments, with certain specified exceptions. 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.
4. Through its bylaws only, if that person is a joint owner of a separate interest parcel where one or more of the other joint owners is already an incumbent board director, or is already a nominee for a board seat in the current election.
5. Through its bylaws only, if that person has been a member of the association for less than one year.

These provisions are also in SB 1128 (Roth) of the current legislative session.

Analysis Prepared by: Lisa Engel / H. & C.D. / (916) 319-2085 FN: 0004739

SENATE THIRD READING

STR Bill Id:SB 1265

Author:()

As Amended Ver:August 7, 2018

Majority vote

SENATE VOTE: 25-12

SUMMARY: Proposes numerous reforms to the laws governing elections in common interest developments, particularly those that protect against disenfranchisement of member voters. Specifically, this bill:

1. Requires a Homeowner association (HOA) to adopt election rules at least 90 days before any election.
2. Requires the HOA election rules to ensure that the meeting at which ballots are counted is accessible to all members and their representatives who want to witness the tabulation, and that the meeting is held on the common area of association property or, if no common area exists, at a location within reasonable distance from association property.
3. Unless individual notice has been requested pursuant to Civil Code Section 4040, requires general notice to be provided according to the following timelines, as specified:
   1. The date and time by which, and the physical address where, ballots are to be returned by mail or handed to the inspector or inspectors of elections, which shall be provided at least 30 days before the ballot is distributed.
   2. The date and location of the meeting at which ballots will be counted, which shall be provided at least 30 days before the ballot is distributed.
   3. The procedure and deadline for submitting a nomination, which shall be provided at least 30 days before the deadline for submitting a nomination.
   4. The list of all candidates' names that will appear on the ballot, which shall be provided at least 30 days before the ballots are distributed.
   5. The list of all voters by name and parcel number, and voting power which shall be provided at least 30 days before the ballot is distributed.
4. Authorizes an HOA to disqualify a person from nomination as a candidate, only as follows:
   1. An association may disqualify a nominee for not being a member of the association at the time of the nomination.
   2. An association may 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.
   3. Subject to 7) below, an association may require a nominee for a board seat, and an incumbent board director during his or her 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.
   4. Through its bylaws only, an association may disqualify a nominee if that person is a joint owner of a separate interest parcel where one or more of the other joint owners is already an incumbent board director, or is already a nominee for a board seat in the current election.
   5. 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.
5. Requires the HOA to provide a nominee the opportunity to engage in the internal dispute resolution process set forth in the Davis-Stirling Act before disqualifying a nominee for alleged nonpayment of regular assessments.
6. Provides that a disqualifying debt includes regular assessments and interest owed the association, but that fines, fines renamed as assessments, collection charges, late charges, or other costs levied by a third party are not disqualifying debts.
7. Provides that the nominee shall not be disqualified for failure to be current in payment of regular assessments if any of the following circumstances are true:
   1. The nominee has paid the regular assessment under protest pursuant to Civil Code Section 5658.
   2. The nominee has entered into a payment plan pursuant to Civil Code Section 5665.
   3. 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.
   4. The nominee is determined not to owe a disqualifying debt at the conclusion of the internal dispute resolution process.
8. Prohibits an HOA's election rules from permitting any person, business, or subdivision of a business entity currently employed or under contract with the HOA for any compensable services to serve as an inspector of elections.
9. Provides that the ballots, signed voter envelopes, the voter list and a candidate registration list 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.
10. Defines "association election materials" to mean returned ballots, signed voter envelopes, a list of parcel numbers and voters to whom ballots were to be sent, and the candidate registration list. Clarifies that of these materials, signed voter envelopes may not be copied.
11. Provides that a cause of action for a violation of member elections may be brought within one year of the date that the inspector or inspectors notify the HOA board and membership of the election results or the cause of action accrues, whichever is later. Permits a cause of action in either the Superior Court or in small claims court, if the amount of the demand is within the jurisdictional amount.
12. Requires a court to void the results of an election upon a finding that the election procedures were not followed, unless the HOA establishes by a preponderance of the evidence, that its noncompliance with this article or the election operating rules were unintentional and did not affect the results of the election.
13. Requires a member to be awarded court costs and reasonable attorney's fees incurred for consulting an attorney in connection with this civil action if the member prevails in a civil action in small claims court.
14. Prohibits an HOA from filing a civil action regarding a dispute in which a member has requested internal dispute resolution unless the association has participated in the specified internal dispute resolution procedure.

FISCAL EFFECT: None.

COMMENTS:

Background: There are over 52,000 Common Interest Developments (CID) in the state that comprise over six 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 an association. CIDs are governed by the Davis-Stirling Act (the Act) as well as he governing documents of the association, including bylaws, declaration, and operating rules. The Act requires elections to conform to an extensive process, including double stuffed ballots and the selection of one or three independent third parties as an inspector or inspectors of elections. AB 569 (Chau), Chapter 661, Statutes of 2014, exempted associations from these procedures in cases where their bylaws require all of the members to serve on the board of directors.

CID elections procedures: Under existing 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, qualifications for voting, and 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 must be promptly reported to the board and be recorded in the minutes of the next meeting. Additionally, within 15 days of the election, the board must give general notice to all members of the results of the election.

Ensuring an independent elections inspector: Existing law requires an independent, third party to conduct an association election. (Civil Code Section 5105 (a)(5).) The independent third party may be a member, but cannot be a director, a candidate for director, or someone related to a director or candidate. (Civil Code Section 5100 (b).) In general, the independent, third party is not supposed to be any person or entity that has business with the association, but under current law, an association can override this general rule, through the adoption of an express rule to the contrary. Thus, if an association allows it, the current property manager, or another company doing business with the association, can oversee the election. Since such entities may have a financial stake in the outcome of the election, however, there can be a conflict of interest.

This bill would eliminate the authority of HOAs to appoint any person or entity employed or under contract to the association to serve as the elections inspector. Proponents contend this is a common-sense rule to ensure the integrity of elections. Allowing the property manager who works for the association serve as elections inspector could, at a minimum, lead to the perception of a serious conflict of interest, particularly where homeowners may have some dispute with the property manager over various day-to-day issues.

Burden of proof and attorney fee provisions: Current law enables any association member to bring a civil action to challenge an association election. If the member can show that a violation of the legally required elections procedures took place, then the court may void the election outcome. (Civil Code Section 5145 (a).) According to the sponsor, in at least one reported case, the court initially declined to void the election results, even though it found procedural violations, until the member was able to show that the violation was intentional and that it affected the results of the election. (Wittenberg v. Beachwalk Homeowners Assn. (2013) 217 Cal.App.4th 654.)

This bill would still require courts to examine whether a violation of the legally required elections procedures was intentional and whether it affected the outcome of an election before voiding the result. The bill would, however, shift the burden of proof. Instead of requiring the member to show that the procedural violation was intentional and affected the outcome of the election, this bill would require an association to prove that any procedural violation was unintentional and did not affect the outcome of the election. Otherwise, the court would have to void the outcome of the election.

Board qualifications: This bill would provide that an association may only disqualify a person from nomination as a candidate for the following reasons:

1. If the person is not a member of the association at the time of the nomination.
2. 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.
3. If the person is not "current "in the payment of regular assessments, with certain specified exceptions. 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.
4. Through its bylaws only, if that person is a joint owner of a separate interest parcel where one or more of the other joint owners is already an incumbent board director, or is already a nominee for a board seat in the current election.
5. Through its bylaws only, if that person has been a member of the association for less than one year.

These provisions are also in SB 1128 (Roth) of the current legislative session.

Analysis Prepared by: Lisa Engel / H. & C.D. / (916) 319-2085 FN: 0003858

Date of Hearing: July 3, 2018

ASSEMBLY COMMITTEE ON

, Chair

SBPCA Bill Id:

Author:(Wieckowski) – As Ver:

As Proposed to be Amended

SENATE VOTE:

SUBJECT:

KEY ISSUE: SHOULD APPROPRIATE REFORMS BE ENACTED TO protect the rights of homeowners to fully vote and participate in association board elections, AND to SAFEGUARD THE INDEPENDENCE AND INTEGRITY OF BOARD ELECTIONS?

SYNOPSIS

This bill, sponsored by the Center for California Homeowner Association Law, seeks numerous reforms to the laws governing elections in common interest developments (CIDs). According to the sponsor, the bill is needed to address myriad ways that homeowner associations (HOAs) attempt to undermine the voting and participation rights of homeowners in board elections. Among other things, this bill would: (1) limit the unchecked authority of homeowner associations to impose "qualifications" on members that may effectively disqualify them from running for the board of directors; (2) prohibit anyone currently employed or under contract to the HOA to serve as elections inspector; (3) protect against HOAs from disenfranchising members; (4) require access to observe the ballot tabulation; (5) require notice of specified election rules and procedures; (6) allow for inspection and limited copying of election-related documents; (7) allow a court to nullify the result of an election if a procedural violation is found, as specified; and (8) prohibit HOAs from suing homeowners who have requested internal dispute resolution until after the association participates in that process. The bill is opposed by the Community Associations Institute (representing HOAs), the California Association of Community Managers (representing professional CID managers), and several individual California homeowner associations. Opponents contend, generally, that these reforms are unnecessary and unfounded, will greatly increase operating and management costs for elections, threaten the privacy of members' personal voter information, unnecessarily strip HOAs from exercising discretion to govern, and result in fewer people participating in association elections.

Late last week, Committee staff and stakeholders on this bill and another bill, SB 1128, agreed to a set of negotiated amendments to enact appropriate safeguards to limit the discretion of HOAs to determine qualifications for board candidates. Instead of continuing to grant open-ended authority to determine qualifications needed to run for the board, the proposed amendments limit the HOA from disqualifying a candidate unless specified grounds for disqualification apply, as discussed in the analysis. These include not being a member, having been convicted of a financial felony, and not being current on regular assessments paid to the association, unless an exception applies. HOAs could, by passing bylaws, disqualify nominees for not having been a member for at least one year, and for being a joint owner in a property where two joint owners could not both serve on the board concurrently. The author of this bill and the author of SB 1128 negotiated these amendments about candidate qualifications with the agreement, at the Committee's request, that both bills include the proposed amendments so that if both bills are approved by this Committee, they will be consistent about that subject, although the bills are not contingently enacted. Because of the late timing of the negotiated amendments, it is not known if the amendments have caused any of the supporters or opponents of the bill in print to change their positions. This bill previously passed out of the Assembly Committee on Housing and Community Development by a vote of 5-2.

SUMMARY: Proposes numerous reforms to the laws governing elections in common interest developments, particularly those that protect against disenfranchisement of member voters. Specifically, this bill:

1. Requires an HOA to adopt election rules at least 90 days before any election.
2. Requires the HOA election rules to ensure that the meeting at which ballots are counted is accessible to all members and their representatives who want to witness the tabulation, and that the meeting is held on the common area of association property or, if no common area exists, at a location within reasonable distance from association property.
3. Unless individual notice has been requested pursuant to Section 4040, requires general notice to be provided according to the following timelines, as specified:
   1. The date and time by which, and the physical address where, ballots are to be returned by mail or handed to the inspector or inspectors of elections, which shall be provided at least 30 days before the ballot is distributed.
   2. The date and location of the meeting at which ballots will be counted, which shall be provided at least 30 days before the ballot is distributed.
   3. The procedure and deadline for submitting a nomination, which shall be provided at least 30 days before the deadline for submitting a nomination.
   4. The list of all candidates’ names that will appear on the ballot, which shall be provided at least 30 days before the ballots are distributed.
   5. The list of all voters by name and parcel number, and voting power which shall be provided at least 30 days before the ballot is distributed.
4. Authorizes an HOA to disqualify a person from nomination as a candidate, only as follows:
   1. An association may disqualify a nominee for not being a member of the association at the time of the nomination.
   2. An association may 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.
   3. Subject to 7) below, an association may require a nominee for a board seat, and an incumbent board director during his or her 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.
   4. Through its bylaws only, an association may disqualify a nominee if that person is a joint owner of a separate interest parcel where one or more of the other joint owners is already an incumbent board director, or is already a nominee for a board seat in the current election.
   5. 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.
5. Requires the HOA to provide a nominee the opportunity to engage in the internal dispute resolution process set forth in the Davis-Stirling Act before disqualifying a nominee for alleged nonpayment of regular assessments.
6. Provides that a disqualifying debt includes regular assessments and interest owed the association, but that fines, fines renamed as assessments, collection charges, late charges, or other costs levied by a third party are not disqualifying debts.
7. Provides that the nominee shall not be disqualified for failure to be current in payment of regular assessments if any of the following circumstances are true:
   1. The nominee has paid the regular assessment under protest pursuant to Section 5658.
   2. The nominee has entered into a payment plan pursuant to Section 5665.
   3. 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.
   4. The nominee is determined not to owe a disqualifying debt at the conclusion of the internal dispute resolution process.
8. Prohibits an HOA’s election rules from permitting any person, business, or subdivision of a business entity currently employed or under contract with the HOA for any compensable services to serve as an inspector of elections.
9. Provides that the ballots, signed voter envelopes, the voter list and a candidate registration list 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.
10. Defines “association election materials” to mean returned ballots, signed voter envelopes, a list of parcel numbers and voters to whom ballots were to be sent, and the candidate registration list. Clarifies that of these materials, signed voter envelopes may not be copied.
11. Provides that a cause of action for a violation of member elections may be brought within one year of the date that the inspector or inspectors notify the HOA board and membership of the election results or the cause of action accrues, whichever is later. Permits a cause of action in either the Superior Court or in small claims court, if the amount of the demand is within the jurisdictional amount.
12. Requires a court to void the results of an election upon a finding that the election procedures were not followed, unless the HOA establishes by a preponderance of the evidence, that its noncompliance with this article or the election operating rules were unintentional and did not affect the results of the election.
13. Requires a member to be awarded court costs and reasonable attorney’s fees incurred for consulting an attorney in connection with this civil action if the member prevails in a civil action in small claims court.
14. Prohibits an HOA from filing a civil action regarding a dispute in which a member has requested internal dispute resolution unless the association has participated in the specified internal dispute resolution procedure.

EXISTING LAW:

1. Provides, pursuant to the Davis-Stirling Act, 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. (Civil Code Section 4000 et seq. All further statutory references are to the Civil Code unless otherwise stated.)
2. 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. (Section 5100 (a).)
3. Provides that in the event of a conflict between the Davis-Stirling Act and the Nonprofit Mutual Benefit Corporation Law (Part 3 (commencing with Section 7110) of Division 2 of Title 1 of the Corporations Code) relating to elections, the provisions of Davis-Stirling shall prevail. (Section 5100(d).)
4. Requires associations to adopt rules that do all of the following:
   1. Ensure that if any candidate or member advocating a point of view is provided access to association media, newsletters, or Internet Web sites during a campaign, for purposes that are reasonably related to that election, equal access shall be provided to all candidates and members advocating a point of view, including those not endorsed by the board, for purposes that are reasonably related to the election. The association shall not edit or redact any content from these communications, but may include a statement specifying that the candidate or member, and not the association, is responsible for that content.
   2. Ensure access to the common area meeting space, if any exists, during a campaign, at no cost, to all candidates, including those who are not incumbents, and to all members advocating a point of view, including those not endorsed by the board, for purposes reasonably related to the election.
   3. Allow for the specification of the qualifications for candidates for the board and any other elected position, and procedures for the nomination of candidates, consistent with the governing documents.
   4. 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.
   5. Specify a method of selecting one or three independent third parties as inspector or inspectors of elections utilizing certain specified methods.
   6. Allow the inspector or inspectors to appoint and oversee additional persons to verify signatures and to count and tabulate votes as the inspector or inspectors deem appropriate, provided that the persons are independent third parties. (Section 5105 (a).)
5. Permits an association to provide for the nomination of candidates from the floor of membership meetings or nomination by any other manner. Those rules may permit write-in candidates for ballots. (Section 5105 (b).)
6. Requires the HOA to select an independent third party or parties as an inspector of elections. Prohibits the independent third party from being a person, business entity or subdivision of a business entity who is currently employed or under contract to the HOA for any compensable services unless expressly authorized by the HOA. (Section 5110 (a) and (b).)
7. Requires the inspector or inspectors of elections shall do all of the following:
8. Determine the number of memberships entitled to vote and the voting power of each.
9. Determine the authenticity, validity, and effect of proxies, if any.
10. Receive ballots.
11. Hear and determine all challenges and questions in any way arising out of or in connection with the right to vote.
12. Count and tabulate all votes.
13. Determine when the polls shall close, consistent with the governing documents.
14. Determine the tabulated results of the election.
15. Perform any acts as may be proper to conduct the election with fairness to all members in accordance with this article, the Corporations Code, and all applicable rules of the association regarding the conduct of the election that are not in conflict with this article. (Section 5110 (c).)
16. Specifies the voting procedure for an HOA election, providing among other things:
    1. 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.
    2. 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, as specified. (Section 5115 (a).)
17. 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. (Section 5115 (b).)
18. Provides that all votes shall be counted and tabulated by the inspector or inspectors of elections, or the designee of the inspector 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. (Section 5120 (a).)
19. Specifies 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. Within 15 days of the election, the board shall give general notice of the tabulated results of the election. (Section 5120 (b).)
20. Provides 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. (Section 5115 (b).)
21. Declares that an association shall allow for cumulative voting using the secret ballot procedures provided in this section, if cumulative voting is provided for in the governing documents. (Section 5115 (c).)
22. Requires that, for CID elections, 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. (Section 5125.)
23. Authorizes a member of an HOA to bring a civil action against an HOA for declaratory or equitable relief for a violation of the member elections provisions under the Davis-Stirling Act, including, but not limited to, injunctive relief, restitution, or a combination, within one year of the date the cause of action accrues. Upon a finding that the election procedures were not followed, a court may void the results of the election. (Section 5145 (a).)
24. Permits a prevailing homeowner in a civil action challenging association election proceedings to obtain reasonable attorney’s fees and court costs, and authorizes the court to impose a penalty of up to $500 for each violation. (Section 5145 (b).)
25. Provides that a cause of action related to 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, or access to, ballots for inspection and review after tabulation may be brought in small claims court. (Section 5145 (c).)

FISCAL EFFECT: As currently in print this bill is keyed non-fiscal.

COMMENTS: In California, there are over 52,000 CIDs 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 an 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.

Background on the Davis-Stirling Act. The Davis-Stirling Act sets forth a system for common interest development self-governance. The owners of the separate properties within the common interest development are the members of the homeowners association. Association members vote for the board of directors of the association that oversees operation of the common interest development.

The board manages the common interest development, frequently by hiring an individual or entity to do so on its behalf. The board determines the annual assessments – much like taxes – that members must pay in order to cover communal expenses. The board enforces the community rules and can propose and make changes to those rules. If members do not pay their assessments in full or on time, or if members violate the community rules, the board has the power to fine the members, place liens on the offending member’s property, and, if ultimately necessary, the power to foreclose. This array of responsibilities and powers has led multiple courts to observe that common interest development associations function in many ways almost “as a second municipal government, regulating many aspects of [the homeowners’] daily lives.” (Villa Milano Homeowners Ass’n v. Il Davorge (2000) 84 Cal.App.4th 819, 836 [citations omitted].)

Much like municipal governments, homeowner associations use elections to choose members to serve on the association’s board of directors. The homeowner associations conduct these elections through a paper and mail based balloting system that closely resembles California’s vote-by-mail process. The basic ground rules for these elections are found in the Davis-Stirling Act. Because HOAs are generally nonprofit corporations, they are potentially subject to the Nonprofit Mutual Benefit Corporation Law as well. It is not always clear where Davis-Stirling and the Nonprofit Corporations Act conflict or do not conflict on an issue by issue basis; sometimes one act is silent on an issue that the other is very specific on. For example, while the Nonprofit Corporations Law specifies four-year term limits for directors, thus requiring elections every four years (Corporations Code Section 52220 (a)), curiously there does not appear to be any provision in the Davis-Stirling Act expressly requiring HOAs to hold elections at all. Existing law provides, however, that in the event of a conflict between the Davis-Stirling Act and the Nonprofit Mutual Benefit Corporation Law (Part 3 (commencing with Section 7110) of Division 2 of Title 1 of the Corporations Code) relating to elections, the provisions of Davis-Stirling shall prevail. (Section 5100 (d).)

Need for the bill. According to the author:

Existing law currently doesn’t limit an HOA board’s ability to prohibit an HOA resident member from voting in an HOA election or running for the board. More than a few boards are using this as a means of punishment for members who may have a dispute with the management or the management finds the resident to be in some violation of HOA rules. Boards also use this tactic to maintain power and avoid would-be challengers.

Not only is suppressing or extinguishing the voting rights and election rights of members per-se inappropriate, but it is not even necessary because HOAs have other very powerful tools for punishment and enforcement: They can, and do, place liens on property when a member fails to pay his/her fees. They also have the ability to fine, impose disciplinary actions, and sue members for violating HOA rules and governing documents.

Unfortunately, far too many HOA boards have used arbitrary & unjust rules to maintain their power and control over the association, excluding and disenfranchising other residents who seek to challenge them. Boards manipulate elections by failing to notice an election, failing to deliver ballots to all residents, throwing out valid ballots, and denying access to ballot counting. Sometimes they don’t even hold elections at all.

SB 1265 will strengthen the democratic governance in California’s over 52,000 homeowner’s associations [and] ensure that those holding positions of power over other residents in HOAs properly establish elections rules and adhere to them.

The bill is sponsored by the Center For California Homeowner Association Law (CCHAL), who explain that the bill is needed to address the various ways that HOAs attempt to undermine the voting and participation rights of homeowners in CIDs. They state:

Since 2006, HOA elections have been governed by statutes created through the bi-partisan efforts of then-Senator Jim Battin [R-Riverside] and Assemblymember Dave Jones [D-Sacramento.] Unfortunately, since their enactment, the California laws governing association elections have been ignored or violated or undermined.

How have associations undermined association voting rights?

(1) By setting arbitrary “qualifications” to be met by candidates for board seats, e.g, the candidate must have owned the home for a specific number of years or must be of a certain age;

(2) By setting arbitrary “qualifications” for voting, e.g., the owner must live on-site and have no outstanding fines for an obscure violation of the CC&Rs;

(3) By allowing third parties with a vested interest in the outcome of an election to manage the election process, distribute and receive ballots, and count the votes;

(4) By requiring candidates to warrant to unreasonable rules restricting campaigning and refusing candidates access to association media; refusal to “warrant” means they can’t run for office.

SB 1265 aims to address these abuses.

Proposed amendments limit association discretion to determine candidate qualifications. Existing law, Civil Code Section 5105 (a)(3), requires the board to adopt rules 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. Other than disfavoring a nomination or election procedure that disallows any member from nominating himself or herself for election to the board, the statute grants the board broad leeway to determine the qualifications of candidates for the board.

CCHAL contends that the open-ended authority to establish qualifications for voting and candidacy provided to HOA boards under existing law has led to extraordinary abuses of power by boards since the statutes governing association elections were enacted. They have provided the Committee with “many testimonials… from association owners, who were blocked in various ways by incumbent boards and/or property managers from running for a board seat.” To address these reported problems, this bill seeks to enact appropriate safeguards to ensure that qualification rules are not used to inappropriately bar others from voting or running for elected board positions.

After discussions with stakeholders on this bill and SB 1128 (Roth), a set of negotiated amendments were developed that seek to enact appropriate safeguards to limit the discretion of HOA's to determine candidate qualifications by rule. As proposed to be amended, the bill would provide that an association may only disqualify a person from nomination as a candidate for the following reasons:

(1) If the person is not a member of the association at the time of the nomination.

(2) 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.

(3) If the person is not "current "in the payment of regular assessments, with certain specified exceptions. 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.

(4) Through its bylaws only, if that person is a joint owner of a separate interest parcel where one or more of the other joint owners is already an incumbent board director, or is already a nominee for a board seat in the current election.

(5) Through its bylaws only, if that person has been a member of the association for less than one year.

It should be noted that Item (4) is intended to ensure that not more than one joint owner of a single parcel may serve on the board at any one time, but further clarification of the amendment may be necessary to accomplish this intent without infringing on a joint owner's right to run for the board, even if he or she cannot ultimately serve.

California Association of Community Managers (CACM) previously cited the extra costs associated with the bill's previous requirements that disqualification rules be enacted through the HOA's bylaw process; in some cases, that might amount to between $2,000 and $20,000 depending on the size of the HOA. Under the proposed amendments, the bylaw requirement has been dropped, as suggested by CACM, for Items (1) to (3) above, which are statutory in nature and thus applicable in all cases. Items (4) and (5) must be passed by the HOA though its bylaw process in order to be effective, as some HOAs may not desire to employ those.

Additional proposed amendments provide due process to homeowners before they may be disqualified for not being current in paying a regular assessment. An HOA seeking to disqualify a person for alleged nonpayment of an assessment must first provide an opportunity to engage in the internal dispute resolution process specified by the Davis-Stirling Act—an informal process often used in HOAs to resolve all types of disputes without going to court. The proposed amendments potentially save the person from being disqualified as a nominee under four sets of circumstances: (1) the nominee has paid the regular assessment under protest pursuant to Section 5658; (2) the nominee has entered into a payment plan pursuant to Section 5665; (3) 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; and (4) the nominee is determined not to owe a disqualifying debt at the conclusion of the internal dispute resolution process.

Pending Related Legislation contains negotiated language on qualifications. SB 1128 (Roth) authorizes HOA boards to engage in a process for seating nominees to the board by acclamation when there are not enough candidates to create contested elections. Certain amendments related to candidate qualifications were negotiated between the proponents of SB 1265 and this bill, and these amendments will appear in both bills, as they are proposed to be amended. SB 1128 will also being heard by this Committee on the same day when this bill is heard.

Ensuring an independent elections inspector. Existing law requires an independent, third party to conduct an association election. (Sec. 5105 (a)(5).) The independent third party may be a member, but cannot be a director, a candidate for director, or someone related to a director or candidate. (Sec. 5100 (b).) In general, the independent, third party is not supposed to be any person or entity that has business with the association, but under current law, an association can override this general rule, through the adoption of an express rule to the contrary. Thus, if an association allows it, the current property manager, or another company doing business with the association, can oversee the election. Since such entities may have a financial stake in the outcome of the election, however, there can be a conflict of interest.

SB 1265 would eliminate the authority of HOAs to appoint any person or entity employed or under contract to the association to serve as the elections inspector. Proponents contend this is a common-sense rule to ensure the integrity of elections. Allowing the property manager who works for the association serve as elections inspector could, at a minimum, lead to the perception of a serious conflict of interest, particularly where homeowners may have some dispute with the property manager over various day-to-day issues.

Opponents of this rule regard it as overly burdensome, since a property manager, in particular, is an obvious and easy choice to serve as elections inspector. Writing in opposition, the Mesa Verde Orcutt HOA notes that prohibiting existing board members or paid property managers from fulfilling this duty will make things very challenging for small HOAs where there are few owners who volunteer or who are willing to work on HOA matters. However, this may be another example where saving costs wherever easy and convenient may have to take a backseat to ensuring fairness and due process, which sometimes has financial costs.

Burden of proof and attorney fee provisions. Current law enables any association member to bring a civil action to challenge an association election. If the member can show that a violation of the legally required elections procedures took place, then the court may void the election outcome. (Section 5145 (a).) According to the sponsor, in at least one reported case, the court initially declined to void the election results, even though it found procedural violations, until the member was able to show that the violation was intentional and that it affected the results of the election. (Wittenberg v. Beachwalk Homeowners Assn. (2013) 217 Cal.App.4th 654.)

SB 1265 would still require courts to examine whether a violation of the legally required elections procedures was intentional and whether it affected the outcome of an election before voiding the result. The bill would, however, shift the burden of proof. Instead of requiring the member to show that the procedural violation was intentional and affected the outcome of the election, SB 1265 would require an association to prove that any procedural violation was unintentional and did not affect the outcome of the election. Otherwise, the court would have to void the outcome of the election.

Opponents, including CAI, argue that there has been no justification provided, other than anecdotal evidence (apparently referring to the Wittenberg decision), to show why this change is necessary. Proponents contend that if the court determines that a violation did occur (even a technical or procedural one), it is more appropriate to shift the burden of proof to the association—which committed the violation—to show that it was unintentional, rather than require the homeowner to prove that the violation was in fact intentional.

Finally, SB 1265 addresses the award of attorney fees in cases involving a challenge to an association election. Existing law entitles a prevailing homeowner association member to an attorney fees award if the member prevails in an action challenging an association election. (Section 5145 (b).) SB 1265 provides that if a member prevails in a civil action brought in small claims court, the member shall be awarded court costs and reasonable attorney fees incurred for consulting an attorney in connection with this civil action.

Opponents correctly note that attorneys are not permitted to appear in small claims cases, and that this provision is "unprecedented and an overreach." According to the sponsor, however, permitting homeowners to take complex election issues into small claims court "is rendered worthless if the homeowner: (1) hasn't mastered the complex statutes; (2) can't properly prepare the pleadings; (3) doesn't know the court procedures; and (4) has to hire an attorney to help him with these tasks, but has no way to recover the expenditures."

It is not clear that recovery of attorney fees would be available in small claims court, even limited to "consulting an attorney in connection with the civil action," as stated in the bill. Nevertheless, this is as a worthy proposal that seeks to level the playing field in resolving such disputes, where the HOA is likely to have consulted with attorneys in preparing for such a case and can even spend association fees on such consultations. Committee staff notes, however, that Section 116.780 (c) of the Code of Civil Procedure limits the award of attorney fees in small claims appeals (where attorneys can appear) to $150.

REGISTERED SUPPORT / OPPOSITION:

Support

Center For California Homeowner Association Law (sponsor)

American Civil Liberties Union

California Alliance For Retired Americans (CARA)

Dave Jones, CA Insurance Commissioner

Citizens For Constitutional Local Government Support

El Dorado Institute, Inc.

Greater Sacramento Urban League

Nonprofit Housing Association of Northern California

Numerous individuals

Opposition

California Association of Community Managers (CACM)

Community Associations Institute (CAI)

Lake Wildwood Association

Mesa Verde Orcutt Homeowners Association

Sun City Roseville Community Association

Analysis Prepared by:

Date of Hearing: June 20, 2018

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

David Chiu, Chair

SBPCA Bill Id:SB 1265

Author:(Wieckowski) – As Amended Ver:May 25, 2018

SENATE VOTE: 25-12

SUBJECT: Common interest developments: elections

SUMMARY: Makes changes to the election procedures in common interest developments (CID). Specifically, this bill:

1. Requires election rules be adopted at least 90 days before any election and that the rules require any errors or omissions to the list of candidates’ names or list of voters to be immediately reported to the inspector or inspectors of elections and require necessary corrections to be made within two business days.
2. Requires that the association ensure that the meeting at which ballots are counted is held on association property and accessible to all members or their representatives who want to witness the tabulation.
3. Requires notice be provided of all of the following:
   1. The date and time by which, and the physical address where, ballots are to be returned by mail or handed to the inspector or inspectors of elections;
   2. The date and location of the meeting at which ballots will be counted;
   3. The procedure and deadline for submitting a nomination, which shall be provided at least 30 days before that deadline;
   4. The list of all candidates’ names that will appear on the ballot, which shall be provided at least 30 days before the ballots are distributed; and
   5. The list of all voters by either name or parcel number, and voting power.
4. Requires the elections rules to do all of the following:
   1. Prohibit the denial of a ballot to a member for any reason other than not being a member at the time when ballots are distributed;
   2. Prohibit the denial of a ballot to a person with general power of attorney for a member;
   3. Require the ballot of a person with general power of attorney for a member to be counted if returned in a timely manner;
   4. Require the inspector or inspectors of elections to deliver, or cause to be delivered, at least 30 days before an election, to each member both of the following documents:
      1. The ballot or ballots;
      2. A copy of the election operating rules. Delivery of the election operating rules may be accomplished by either the following methods:
         1. Posting election operating rules to an Internet Web site and including the corresponding Web address on the ballot together with the phrase, in at least 12-point font: “The rules governing this election may be found here:”
         2. Individual delivery.
5. Removes references in the rules that permit the identification of qualifications for candidacy or voting.
6. Provides that an association may only disqualify a member from running for office pursuant to the following:
7. The owner is not a member at the time of the nomination;
8. Within the past 20 years, the member has been convicted of a felony involving bribery, embezzlement of money, the extortion or theft of money, perjury, or conspiracy to commit any of these crimes; or
9. Require a nominee to be current on regular assessments however, before disqualifying a nominee the association must engage in internal dispute resolution (IDR) to validate the debt before the association's deadline for submitting a nomination. Provides that if the association fails to meet with the owner to validate the date in a timely session then the member may be named as a candidate for election.
10. Adds that signed voter envelopes and a candidate registration list 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.
11. Prohibits an association’s rules from permitting any person, business, or subdivision of a business entity currently employed or under contract with the association for any compensable services from serving as an inspector of elections.
12. Requires ballots, signed voter envelopes, voter lists, and candidate registration lists to be association records subject to inspection and copying by a member.
13. Provides that a cause of action for a violation of member elections may be brought within one year of the date that the inspector or inspectors notify the association board and membership of the election results or the cause of action accrues, whichever is later.
14. Requires a court to void the results of an election upon a finding that the election procedures were not followed, unless the association establishes by a preponderance of the evidence that the failure of the association to follow this article or the election operating rules were unintentional and did not affect the results of the election.
15. Requires a member to be awarded court costs and reasonable attorney’s fees incurred for consulting an attorney in connection with this civil action if the member prevails in a civil action in small claims court.
16. Permits a cause of action with respect to 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, or access to, ballots for inspection and review after tabulation may be brought either in superior court or, if the amount of the demand does not exceed the jurisdictional amount of the small claims court, in small claims court.
17. Prohibits an association from filing a civil action regarding a dispute in which a member has requested IDR unless the association has participated in good faith in the IDR procedures after a member invokes those procedures.
18. Prohibits an association from filing an enforcement action solely for declaratory, injunctive, or write relief in superior court without first pursuing ADR for an assessment dispute.

EXISTING LAW:

1. Provides that an association in a CID shall adopt rules relating to board elections that do all of the following:
   1. Ensure that if any candidate or member advocating a point of view is provided access to association media, newsletters, or Internet Web sites during a campaign, for purposes that are reasonably related to that election, equal access shall be provided to all candidates and members advocating a point of view, including those not endorsed by the board, for purposes that are reasonably related to the election.
   2. Ensure access to the common area meeting space, if any exists, during a campaign, at no cost, to all candidates, including those who are not incumbents, and to all members advocating a point of view, including those not endorsed by the board, for purposes reasonably related to the election.
   3. Specify the procedures for the nomination of candidates, consistent with the governing documents. A nomination or election procedure 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, 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.
   5. Specify a method of selecting one or three independent third parties as inspector or inspectors of elections, as specified.
   6. Allow the inspector or inspectors to appoint and oversee additional persons to verify signatures and to count and tabulate votes as the inspector or inspectors deem appropriate, provided that the persons are independent third parties.
2. Requires, at all times, the sealed ballots to 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 .
3. Requires the association to select an independent third party or parties as an inspector of elections. 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 the association.
4. Permits a member of an association to bring a civil action against an association for declaratory or equitable relief for a violation of the member elections provisions under the Davis-Sterling Act including but not limited to injunctive relief, restitution, or a combination, within one year of the date the cause of action accrues. Upon a finding that the election procedures were not followed, a court may void the results of the election.
5. Permits a prevailing party in a civil action described in 4) above, to be entitled to reasonable attorney’s fees and court costs, and the court may impose a penalty of up to $500 for each violation.
6. Provides that a cause of action with respect to 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, or access to, ballots for inspection and review after tabulation may be brought in small claims court.
7. Requires an association to provide a fair, reasonable, and expeditious procedure for resolving a dispute between an association and a member and shall make maximum, reasonable use of available local dispute resolution programs involving a neutral third party, including low-cost mediation programs. The association’s internal dispute resolution (IDR) procedure, invoked by either party to the dispute, shall, at a minimum, satisfy specified requirements.
8. Prohibits an association or a member from filing an enforcement action in the superior court unless the parties have endeavored to submit their dispute to alternative dispute resolution (ADR).

FISCAL EFFECT: Unknown.

COMMENTS:

Background: There are over 52,000 CIDs in the state that comprise over six 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 an association. CIDs are governed by the Davis-Stirling Act (the Act) as well as he governing documents of the association, including bylaws, declaration, and operating rules. The Act requires elections to conform to an extensive process, including double stuffed ballots and the selection of one or three independent third parties as an inspector or inspectors of elections. AB 569 (Chau), Chapter 661, Statutes of 2014, exempted associations from these procedures in cases where their bylaws require all of the members to serve on the board of directors.

CID elections procedures: Under existing 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, qualifications for voting, and 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 must be promptly reported to the board and be recorded in the minutes of the next meeting. Additionally, within 15 days of the election, the board must give general notice to all members of the results of the election.

Changes to the election procedures: Existing law requires association to adopt rules to specify the qualifications for board members. This bill would only allow an association to disqualify a member from being nominated for the board if he or she is not a member at the time of the nomination or has committed a felony in the last 20 years. Although an association could require a nominee to be current on assessments, the association would be required to offer the owner internal dispute resolution (IDR) to validate the debt in time to resolve the issue of outstanding assessments before the association's deadline for submitting a nomination. If the association fails to meet with the owner or does not validate the debt then the member can be included as a nominee in the election. It is unclear what is meant by validating the debt. The author has indicated the intent is to require the association to meet with an owner who wants to run for office and is barred from running because of a debt to the association but not necessarily to resolve the dispute. This should be clarified in the bill. In addition, the committee may wish to consider allowing an owner to pay-under-protest in order to be included as a nominee if IDR does not result in resolution by the deadline for nominees.

Changes to vote counting procedure: Existing law requires that an inspector of elections count and tabulate votes for an election. This bill would make several changes to that process. Ballots would be counted at a meeting on association property. The inspector of election could not be employed by the association. Existing law allows an inspector of election to be employed by the association if the rules of the association expressing authorize it. In some case there may not be a common area on site that can be used to count the ballots. To clarify, the committee may wish to specify that the ballots must be counted either on association property or a location within a reasonable distance from the CID that is accessible to members.

Non-profit corporation vs. quasi-governmental entity: CIDs are typically formed as non-profit corporations. They are governed by state law, the Davis Stirling Act, as well as the by-laws of the association. CIDs are governed by volunteer boards of directors elected by the membership. Some association s, typically larger ones, contract with community managers to run the

day-to-day work of the association. Most CIDS, in fact close to 70% of CIDS in the state, are made up of fewer than 50 units. In a few cases, court decisions have compared common interest developments to quasi-governmental entities because of the role they play and influence they have over owner's interest in the association. CIDs do not have the same immunities as local governments and their authority does not have the police powers of local governments. This bill would state the intent of the Legislature that the CIDs are quasi-governmental entities with parallel powers, duties, and responsibilities and as a result it is the Legislature's intent that democratic principles and practices are in place with respect to the governance of CID. It's not entirely clear what the intent of this language is, what it would actually achieve, or its impact would be. The committee may wish to delete the language and rather work to ensure that the election process is fair and transparent for owners and association s.

Arguments in support: The supporters of this bill argue that homeowners association s have undermined association voting rights by setting arbitrary qualifications to be met by candidates for board seats, allowing third parties with a vested interest in the outcome of an election to manage the election process, and requiring candidates to warrant unreasonable rules restricting campaigning and refusing candidates access to association media.

Arguments in opposition: Opponents of this bill argue that CIDs are formed as private, non-profit organizations under the Corporations Code and are not quasi-governments. A CID has the legal authority given to it by contracting the governing documents and its authority and responsibilities can be dramatically changed by a vote of the members.

Committee amendments:

1. Delete the intent language in the bill.
2. Require ballots be counted either on the association property or at a location within a reasonable distance of the association that is accessible to all members.
3. Clarify that IDR is intended to give the owner an opportunity to discuss the debt but if it doesn't result in a resolution that the nominations go forward.

Double-referred: This bill was also referred to the Committee on Judiciary where it will be heard should it pass out of this committee

REGISTERED SUPPORT / OPPOSITION:

Support

Center For California Homeowner Association Law (sponsor)

American Civil Liberties Union Of California
California Alliance For Retired Americans
David Jones, Insurance Commissioner, California Department Of Insurance
Citizens For Constitutional Local Government Support
El Dorado Institute, Inc.
Greater Sacramento Urban League
Non-profit Housing Association Of Northern California

Individuals (40)

Opposition

California Association of Community Managers
Community Associations Institute
Lake Wildwood Association
Sun City Roseville Community Association

Individuals (317)

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

 THIRD READING  

Bill No: SB 1265

Author:

:

Vote:

SENATE TRANS. & HOUSING COMMITTEE: 8-2, 4/17/18

AYES: Beall, Cannella, Galgiani, McGuire, Roth, Skinner, Wieckowski, Wiener

NOES: Morrell, Vidak

NO VOTE RECORDED: Allen, Dodd, Gaines

SENATE JUDICIARY COMMITTEE: 4-2, 5/8/18

AYES: Jackson, Hertzberg, Monning, Wieckowski

NOES: Moorlach, Anderson

NO VOTE RECORDED: Stern

SUBJECT: Common interest developments: elections

SOURCE: Center for California Homeowner Association Law

DIGEST:

This bill makes several changes to the elections process held in common interest developments (CIDs). It also makes changes to the process for handling disputes between a member and a homeowner’s association (HOA).

Senate Floor Amendments of 5/25/18 provide that an HOA may disqualify a member from nomination if the candidate is not a member at the time of the nomination, and the HOA may require a nominee for a board seat to be current in their payment of regular assessments, as specified.

ANALYSIS:

Existing law:

1. Provides that an HOA in a CID shall adopt rules relating to board elections that do all of the following:
   1. Ensure that if any candidate or member advocating a point of view is provided access to association media, newsletters, or Internet Web sites during a campaign, for purposes that are reasonably related to that election, equal access shall be provided to all candidates and members advocating a point of view, including those not endorsed by the board, for purposes that are reasonably related to the election.
   2. Ensure access to the common area meeting space, if any exists, during a campaign, at no cost, to all candidates, including those who are not incumbents, and to all members advocating a point of view, including those not endorsed by the board, for purposes reasonably related to the election.
   3. Specify the procedures for the nomination of candidates, consistent with the governing documents. A nomination or election procedure 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, 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.
   5. Specify a method of selecting one or three independent third parties as inspector or inspectors of elections, as specified.
   6. Allow the inspector or inspectors to appoint and oversee additional persons to verify signatures and to count and tabulate votes as the inspector or inspectors deem appropriate, provided that the persons are independent third parties.
2. Requires, at all times, the sealed ballots to 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 HOA.
3. Requires the HOA to select an independent third party or parties as an inspector of elections. 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 HOA for any compensable services unless expressly authorized by the HOA.
4. Permits a member of an HOA to bring a civil action against an HOA for declaratory or equitable relief for a violation of the member elections provisions under the Davis-Sterling Act including but not limited to injunctive relief, restitution, or a combination, within one year of the date the cause of action accrues. Upon a finding that the election procedures were not followed, a court may void the results of the election.
5. Permits a prevailing party in a civil action described in 4) above, to be entitled to reasonable attorney’s fees and court costs, and the court may impose a penalty of up to $500 for each violation.
6. Provides that a cause of action with respect to 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, or access to, ballots for inspection and review after tabulation may be brought in small claims court.
7. Requires an HOA to provide a fair, reasonable, and expeditious procedure for resolving a dispute between an HOA and a member and shall make maximum, reasonable use of available local dispute resolution programs involving a neutral third party, including low-cost mediation programs. The HOA’s internal dispute resolution (IDR) procedure, invoked by either party to the dispute, shall, at a minimum, satisfy specified requirements.
8. Prohibits an HOA or a member from filing an enforcement action in the superior court unless the parties have endeavored to submit their dispute to alternative dispute resolution (ADR). This prohibition only applies to an enforcement action that is solely for declaratory, injunctive, or writ relief, or for that relief in conjunction with a claim for monetary damages not in excess of the jurisdictional limits and does not apply to small claims actions or assessment disputes.

This bill:

1. Requires election rules be adopted at least 90 days before any election and that the rules require any errors or omissions to the list of candidates’ names or list of voters to be immediately reported to the inspector or inspectors and require necessary corrections to be made within two business days.
2. Requires that the HOA ensure that the meeting at which ballots are counted is held on association property and accessible to all members or their representatives who want to witness the tabulation.
3. Requires notice be provided of all of the following:
   1. The date and time by which, and the physical address where, ballots are to be returned by mail or handed to the inspector or inspectors of elections.
   2. The date and location of the meeting at which ballots will be counted.
   3. The procedure and deadline for submitting a nomination, which shall be provided at least 30 days before that deadline.
   4. The list of all candidates’ names that will appear on the ballot, which shall be provided at least 30 days before the ballots are distributed.
   5. The list of all voters by either name or parcel number, and voting power.
4. Requires the elections rules to do all of the following:
   1. Prohibit the denial of a ballot to a member for any reason other than not being a member at the time when ballots are distributed.
   2. Prohibit the denial of a ballot to a person with general power of attorney for a member.
   3. Require the ballot of a person with general power of attorney for a member to be counted if returned in a timely manner.
   4. Require the inspector or inspectors of elections to deliver, or cause to be delivered, at least 30 days before an election, to each member both of the following documents:
      1. The ballot or ballots.
      2. A copy of the election operating rules. Delivery of the election operating rules may be accomplished by either the following methods:
         1. Posting election operating rules to an Internet Web site and including the corresponding Web address on the ballot together with the phrase, in at least 12-point font: “The rules governing this election may be found here:”
         2. Individual delivery.
5. Removes references in the rules that permit the identification of qualifications for candidacy or voting. An HOA may disqualify a member from running for office if, within the past 20 years, the member has been convicted of a felony involving bribery, embezzlement of money, the extortion or theft of money, perjury, or conspiracy to commit any of these crimes.
6. Adds that signed voter envelopes and a candidate registration list 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.
7. Prohibits an HOA’s rules from permitting any person, business, or subdivision of a business entity currently employed or under contract with the HOA for any compensable services from serving as an inspector of elections.
8. Requires ballots, signed voter envelopes, voter lists, and candidate registration lists to be association records subject to inspection and copying by a member.
9. Provides that a cause of action for a violation of member elections may be brought within one year of the date that the inspector or inspectors notify the HOA board and membership of the election results or the cause of action accrues, whichever is later.
10. Requires a court to void the results of an election upon a finding that the election procedures were not followed, unless the HOA establishes by a preponderance of the evidence that the failure of the HOA to follow this article or the election operating rules were unintentional and did not affect the results of the election.
11. Requires a member to be awarded court costs and reasonable attorney’s fees incurred for consulting an attorney in connection with this civil action if the member prevails in a civil action in small claims court.
12. Permits a cause of action with respect to access to HOA 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, or access to, ballots for inspection and review after tabulation may be brought either in superior court or, if the amount of the demand does not exceed the jurisdictional amount of the small claims court, in small claims court.
13. Prohibits an HOA from filing a civil action regarding a dispute in which a member has requested IDR unless the association has participated in good faith in the IDR procedures after a member invokes those procedures.
14. Prohibits an HOA or member to file an enforcement action solely for declaratory, injunctive, or write relief in superior court without first pursuing ADR for an assessment dispute.

Comments

1. CIDs. 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 (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. CIDs are governed by an HOA, 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.’… 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.” (Villa Milano Homeowners Ass’n v. Il Davorge (2000) 84 Cal.App.4th 819, 836)

In order to perform its obligations under the governing documents, HOAs levy regular and special assessments. If a member is delinquent in paying an assessment, the HOA may recover reasonable costs incurred in collecting assessments, a late charge, and interest, as specified. An HOA may also impose a lien on the separate interest of the member if an assessment is past due, as specified.

1. Access to ballot counting and voting. Just as with municipal governments, HOAs use elections to choose members to serve on an association’s board of directors. Under existing law, HOAs conduct elections through a paper and mail based balloting system that resembles California’s vote by mail process.

The author is seeking to provide more transparency in the ballot counting process to ensure a fair elections process. The sponsor points to examples where homeowners were barred or otherwise discouraged from being near the ballot counting location. In one instance, the inspectors shared how many ballots were discarded or considered ineligible but homeowners are not able to view the process of opening the ballots. The sponsor also points to instances in which a property manager has served as an elections inspector. Exclusion from the process only leads to further distrust between homeowners and the board.

In order to ensure homeowners have access to the ballot counting process, this bill requires notice of the time and location of ballot counting, as well as access to all members or their representatives who want to witness the tabulation. This bill prohibits third parties from serving as inspectors if they are currently employed or under contract with the HOA for any compensable services. It further prohibits the denial of a ballot to a member, or person with power of attorney, for any reason other than not being a member at the time when ballots are distributed.

1. Denial of candidacy. According to the sponsor, HOAs use the elections rules as a means to prohibit a resident member from voting in an election. These rules can be used as a means of punishment for members who may have a dispute with the management or the management finds the resident to be in violation of HOA rules. This tactic can be used to keep specific board members in power and avoid would-be challengers. For example, the sponsor points to a court case involving an HOA that prohibited members from running for the board if they were presently involved in a legal action against the HOA. Other examples include age requirements, living in the HOA for a specified period of time, being current in assessments, and passing a background check. Existing law permits an HOA to enforce HOA rules in several ways, such as placing a lien on property when a member fails to pay his or her assessment fees. HOAs may also fine, impose disciplinary actions, and sue members for violating HOA rules and governing documents.

This bill prohibits an HOA from disallowing a member from being nominated for any other reason other than not being a member, unless that member has been convicted of specified financial crimes. It requires the election rules to provide notice of the procedure and deadline for submitting a nomination, at least 30 days before the deadline. Additionally, the bill requires that the notice shall a list of all the candidate’s names that will appear on the ballot.

1. ADR. An HOA is required to provide a “fair, reasonable, and expeditious procedure for resolving a dispute” between the HOA and a member involving the rights, duties or liabilities under the Davis-Stirling Act or the HOAs governing documents. This procedure is referred to as IDR, the purpose of which is to provide a non-judicial forum to resolve disputes between a member and the HOA that will not result in a fee or a charge to the member. Existing law requires parties to attempt to participate in ADR before filing an enforcement action in court. ADR refers to any means of settling disputes outside of the courtroom, typically negotiation, conciliation, mediation, and arbitration. However, if a member initiates IDR, the HOA, under existing law must participate in the procedure. According to the sponsor, some HOAs are either not meaningfully participating in the IDR process or are not waiting for its completion before seeking legal action. This bill requires participation in the IDR process before filing any action in court, thus potentially reducing the need to resolve disputes in court.

Related/Prior Legislation

SB 1228 (Roth, 2017) provides that an HOA in a CID may provide a document by electronic means if the recipient has consented by email; reduces the notice requirement of a proposed rule change by the HOA board from 30 days to 28 days; and provides that the nominees to a board shall be considered elected by acclamation if the number of nominees does not exceed the number of vacancies on the board. The bill is pending on the Senate Floor.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 5/15/18)

Center for California Homeowner Association Law (source)

American Civil Liberties Union

California Alliance for Retired Americans

Citizens for Constitutional Local Government

El Dorado Institute, Inc.

Greater Sacramento Urban League

Non-Profit Housing Association of Northern California

Schiffer Buus, A.P.C.

31 individuals

OPPOSITION: (Verified 5/15/18)

California Association of Community Managers

Community Associations Institute – California Legislative Action Committee

ARGUMENTS IN SUPPORT: According to the author, this bill better ensures fair HOA elections by ending the practice of depriving a member the right to vote or run in an HOA election simply because the member has a dispute with the HOA board. The bill also requires the location that ballots are counted be accessible to members with disabilities, and specifies other timing and procedural requirements for HOA elections.

ARGUMENTS IN OPPOSITION: Opponents to a prior version of this bill are concerned about eliminating minimum candidate qualifications for the HOA board. California Association of Community Managers asserts that that the expansion of the IDR requirements is unnecessary because the statute already requires an HOA to go through the process if requested by a homeowner. Community Associations Institute states that the provisions around elections transparency raise privacy concerns given that the bill requires a list of voters by name or parcel number to go to all members, and that ballots would be available to any member. They also state that these requirements add significantly to the cost of an election.

Prepared by:

5/29/18 17:44:37

**** END ****

 THIRD READING  

Bill No: SB 1265

Author:

:

Vote:

SENATE TRANS. & HOUSING COMMITTEE: 8-2, 4/17/18

AYES: Beall, Cannella, Galgiani, McGuire, Roth, Skinner, Wieckowski, Wiener

NOES: Morrell, Vidak

NO VOTE RECORDED: Allen, Dodd, Gaines

SENATE JUDICIARY COMMITTEE: 4-2, 5/8/18

AYES: Jackson, Hertzberg, Monning, Wieckowski

NOES: Moorlach, Anderson

NO VOTE RECORDED: Stern

SUBJECT:

SOURCE: Center for California Homeowner Association Law

DIGEST:

This bill makes several changes to the elections process held in common interest developments (CIDs). It also makes changes to the process for handling disputes between a member and a homeowner’s association (HOA).

ANALYSIS:

Existing law:

1. Provides that an HOA in a CID shall adopt rules relating to board elections that do all of the following:
   1. Ensure that if any candidate or member advocating a point of view is provided access to association media, newsletters, or Internet Web sites during a campaign, for purposes that are reasonably related to that election, equal access shall be provided to all candidates and members advocating a point of view, including those not endorsed by the board, for purposes that are reasonably related to the election.
   2. Ensure access to the common area meeting space, if any exists, during a campaign, at no cost, to all candidates, including those who are not incumbents, and to all members advocating a point of view, including those not endorsed by the board, for purposes reasonably related to the election.
   3. Specify the procedures for the nomination of candidates, consistent with the governing documents. A nomination or election procedure 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, 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.
   5. Specify a method of selecting one or three independent third parties as inspector or inspectors of elections, as specified.
   6. Allow the inspector or inspectors to appoint and oversee additional persons to verify signatures and to count and tabulate votes as the inspector or inspectors deem appropriate, provided that the persons are independent third parties.
2. Requires, at all times, the sealed ballots to 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 HOA.
3. Requires the HOA to select an independent third party or parties as an inspector of elections. 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 HOA for any compensable services unless expressly authorized by the HOA.
4. Permits a member of an HOA to bring a civil action against an HOA for declaratory or equitable relief for a violation of the member elections provisions under the Davis-Sterling Act including but not limited to injunctive relief, restitution, or a combination, within one year of the date the cause of action accrues. Upon a finding that the election procedures were not followed, a court may void the results of the election.
5. Permits a prevailing party in a civil action described in 4) above, to be entitled to reasonable attorney’s fees and court costs, and the court may impose a penalty of up to $500 for each violation.
6. Provides that a cause of action with respect to 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, or access to, ballots for inspection and review after tabulation may be brought in small claims court.
7. Requires an HOA to provide a fair, reasonable, and expeditious procedure for resolving a dispute between an HOA and a member and shall make maximum, reasonable use of available local dispute resolution programs involving a neutral third party, including low-cost mediation programs. The HOA’s internal dispute resolution (IDR) procedure, invoked by either party to the dispute, shall, at a minimum, satisfy specified requirements.
8. Prohibits an HOA or a member from filing an enforcement action in the superior court unless the parties have endeavored to submit their dispute to alternative dispute resolution (ADR). This prohibition only applies to an enforcement action that is solely for declaratory, injunctive, or writ relief, or for that relief in conjunction with a claim for monetary damages not in excess of the jurisdictional limits and does not apply to small claims actions or assessment disputes.

This bill:

1. Requires election rules be adopted at least 90 days before any election and that the rules require any errors or omissions to the list of candidates’ names or list of voters to be immediately reported to the inspector or inspectors and require necessary corrections to be made within two business days.
2. Requires that the HOA ensure that the meeting at which ballots are counted is held on association property and accessible to all members or their representatives who want to witness the tabulation.
3. Requires notice be provided of all of the following:
   1. The date and time by which, and the physical address where, ballots are to be returned by mail or handed to the inspector or inspectors of elections.
   2. The date and location of the meeting at which ballots will be counted.
   3. The procedure and deadline for submitting a nomination, which shall be provided at least 30 days before that deadline.
   4. The list of all candidates’ names that will appear on the ballot, which shall be provided at least 30 days before the ballots are distributed.
   5. The list of all voters by either name or parcel number, and voting power.
4. Requires the elections rules to do all of the following:
   1. Prohibit the denial of a ballot to a member for any reason other than not being a member at the time when ballots are distributed.
   2. Prohibit the denial of a ballot to a person with general power of attorney for a member.
   3. Require the ballot of a person with general power of attorney for a member to be counted if returned in a timely manner.
   4. Require the inspector or inspectors of elections to deliver, or cause to be delivered, at least 30 days before an election, to each member both of the following documents:
      1. The ballot or ballots.
      2. A copy of the election operating rules. Delivery of the election operating rules may be accomplished by either the following methods:
         1. Posting election operating rules to an Internet Web site and including the corresponding Web address on the ballot together with the phrase, in at least 12-point font: “The rules governing this election may be found here:”
         2. Individual delivery.
5. Removes references in the rules that permit the identification of qualifications for candidacy or voting. An HOA may disqualify a member from running for office if, within the past 20 years, the member has been convicted of a felony involving bribery, embezzlement of money, the extortion or theft of money, perjury, or conspiracy to commit any of these crimes.
6. Adds that signed voter envelopes and a candidate registration list 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.
7. Prohibits an HOA’s rules from permitting any person, business, or subdivision of a business entity currently employed or under contract with the HOA for any compensable services from serving as an inspector of elections.
8. Requires ballots, signed voter envelopes, voter lists, and candidate registration lists to be association records subject to inspection and copying by a member.
9. Provides that a cause of action for a violation of member elections may be brought within one year of the date that the inspector or inspectors notify the HOA board and membership of the election results or the cause of action accrues, whichever is later.
10. Requires a court to void the results of an election upon a finding that the election procedures were not followed, unless the HOA establishes by a preponderance of the evidence that the failure of the HOA to follow this article or the election operating rules were unintentional and did not affect the results of the election.
11. Requires a member to be awarded court costs and reasonable attorney’s fees incurred for consulting an attorney in connection with this civil action if the member prevails in a civil action in small claims court.
12. Permits a cause of action with respect to access to HOA 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, or access to, ballots for inspection and review after tabulation may be brought either in superior court or, if the amount of the demand does not exceed the jurisdictional amount of the small claims court, in small claims court.
13. Prohibits an HOA from filing a civil action regarding a dispute in which a member has requested IDR unless the association has participated in good faith in the IDR procedures after a member invokes those procedures.
14. Prohibits an HOA or member to file an enforcement action solely for declaratory, injunctive, or write relief in superior court without first pursuing ADR for an assessment dispute.

Comments

1. CIDs. 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 (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. CIDs are governed by an HOA, 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.’… 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.” (Villa Milano Homeowners Ass’n v. Il Davorge (2000) 84 Cal.App.4th 819, 836)

In order to perform its obligations under the governing documents, HOAs levy regular and special assessments. If a member is delinquent in paying an assessment, the HOA may recover reasonable costs incurred in collecting assessments, a late charge, and interest, as specified. An HOA may also impose a lien on the separate interest of the member if an assessment is past due, as specified.

1. Access to ballot counting and voting. Just as with municipal governments, HOAs use elections to choose members to serve on an association’s board of directors. Under existing law, HOAs conduct elections through a paper and mail based balloting system that resembles California’s vote by mail process.

The author is seeking to provide more transparency in the ballot counting process to ensure a fair elections process. The sponsor points to examples where homeowners were barred or otherwise discouraged from being near the ballot counting location. In one instance, the inspectors shared how many ballots were discarded or considered ineligible but homeowners are not able to view the process of opening the ballots. The sponsor also points to instances in which a property manager has served as an elections inspector. Exclusion from the process only leads to further distrust between homeowners and the board.

In order to ensure homeowners have access to the ballot counting process, this bill requires notice of the time and location of ballot counting, as well as access to all members or their representatives who want to witness the tabulation. This bill prohibits third parties from serving as inspectors if they are currently employed or under contract with the HOA for any compensable services. It further prohibits the denial of a ballot to a member, or person with power of attorney, for any reason other than not being a member at the time when ballots are distributed.

1. Denial of candidacy. According to the sponsor, HOAs use the elections rules as a means to prohibit a resident member from voting in an election. These rules can be used as a means of punishment for members who may have a dispute with the management or the management finds the resident to be in violation of HOA rules. This tactic can be used to keep specific board members in power and avoid would-be challengers. For example, the sponsor points to a court case involving an HOA that prohibited members from running for the board if they were presently involved in a legal action against the HOA. Other examples include age requirements, living in the HOA for a specified period of time, being current in assessments, and passing a background check. Existing law permits an HOA to enforce HOA rules in several ways, such as placing a lien on property when a member fails to pay his or her assessment fees. HOAs may also fine, impose disciplinary actions, and sue members for violating HOA rules and governing documents.

This bill prohibits an HOA from disallowing a member from being nominated for any other reason other than not being a member, unless that member has been convicted of specified financial crimes. It requires the election rules to provide notice of the procedure and deadline for submitting a nomination, at least 30 days before the deadline. Additionally, the bill requires that the notice shall a list of all the candidate’s names that will appear on the ballot.

1. ADR. An HOA is required to provide a “fair, reasonable, and expeditious procedure for resolving a dispute” between the HOA and a member involving the rights, duties or liabilities under the Davis-Stirling Act or the HOAs governing documents. This procedure is referred to as IDR, the purpose of which is to provide a non-judicial forum to resolve disputes between a member and the HOA that will not result in a fee or a charge to the member. Existing law requires parties to attempt to participate in ADR before filing an enforcement action in court. ADR refers to any means of settling disputes outside of the courtroom, typically negotiation, conciliation, mediation, and arbitration. However, if a member initiates IDR, the HOA, under existing law must participate in the procedure. According to the sponsor, some HOAs are either not meaningfully participating in the IDR process or are not waiting for its completion before seeking legal action. This bill requires participation in the IDR process before filing any action in court, thus potentially reducing the need to resolve disputes in court.

Related/Prior Legislation

SB 1228 (Roth, 2017) provides that an HOA in a CID may provide a document by electronic means if the recipient has consented by email; reduces the notice requirement of a proposed rule change by the HOA board from 30 days to 28 days; and provides that the nominees to a board shall be considered elected by acclamation if the number of nominees does not exceed the number of vacancies on the board. The bill is pending in the Senate Appropriations Committee.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 5/15/18)

Center for California Homeowner Association Law (source)

American Civil Liberties Union

California Alliance for Retired Americans

Citizens for Constitutional Local Government

El Dorado Institute, Inc.

Greater Sacramento Urban League

Non-Profit Housing Association of Northern California

Schiffer Buus, A.P.C.

31 individuals

OPPOSITION: (Verified 5/15/18)

California Association of Community Managers

Community Associations Institute – California Legislative Action Committee

ARGUMENTS IN SUPPORT: According to the author, this bill better ensures fair HOA elections by ending the practice of depriving a member the right to vote or run in an HOA election simply because the member has a dispute with the HOA board. The bill also requires the location that ballots are counted be accessible to members with disabilities, and specifies other timing and procedural requirements for HOA elections.

ARGUMENTS IN OPPOSITION: Opponents to a prior version of this bill are concerned about eliminating minimum candidate qualifications for the HOA board. California Association of Community Managers asserts that that the expansion of the IDR requirements is unnecessary because the statute already requires an HOA to go through the process if requested by a homeowner. Community Associations Institute states that the provisions around elections transparency raise privacy concerns given that the bill requires a list of voters by name or parcel number to go to all members, and that ballots would be available to any member. They also state that these requirements add significantly to the cost of an election.

Prepared by:

5/17/18 11:36:12

**** END ****

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2017-2018 Regular Session

Bill No: SB 1265 (Author:Wieckowski)

Version: April 2, 2018

Hearing Date: May 8, 2018

Fiscal: No

Urgency: No

TSG

SUBJECT

Common interest developments: elections

DESCRIPTION

This bill would enact a series of reforms to the laws governing common interest development association elections. Specifically, this bill would: (1) codify court decisions likening the function of common interest development associations to that of local government; (2) prohibit homeowner associations from disqualifying members from running for the board of directors; (3) prohibit homeowner associations from disenfranchising members; (4) require access to observe the ballot tabulation; (5) require notice of specified election rules and procedures; (6) prohibit anyone currently employed or under contract to the homeowners association to serve as elections inspector; (7) allow for inspection and copying of election-related documents; (8) allow a court to nullify the result of an election if a procedural violation is found, unless the association can show by clear and convincing evidence that the violation was unintentional and did not affect the results of the election; and (9) prohibit homeowner associations from suing homeowners who have requested internal dispute resolution, until after the association participates in that process.

BACKGROUND

Common interest developments are self-governing groups of dwellings that share common spaces and amenities. They come in a wide variety of physical layouts: condominium complexes, apartment buildings, and neighborhoods of detached, single-family residences, for example. Some consist of thousands of units. Others are made up of just a handful. Dwellings within common housing developments currently account for approximately a quarter of the state’s overall housing stock, meaning that the laws governing such development have a large impact on the population. In California, common interest developments are governed by the Davis-Stirling Act. (Civ. Code Secs. 4000-6150.)

The Davis-Stirling Act sets forth a system for common interest development self-governance. The owners of the separate properties within the common interest development are the members of the homeowners association. Association members vote for the board of directors of the association that oversees operation of the common interest development.

The board manages the common interest development, frequently by hiring an individual or entity to do so on its behalf. The board determines the annual assessments – much like taxes – that members must pay in order to cover communal expenses. The board enforces the community rules and can propose and make changes to those rules. If members do not pay their assessments in full or on time, or if members violate the community rules, the board has the power to fine the members, place liens on the offending member’s property, and, if ultimately necessary, the power to foreclose. This array of responsibilities and powers has led multiple courts to observe that common interest development associations function in many ways almost “as a second municipal government, regulating many aspects of [the homeowners’] daily lives.” (Villa Milano Homeowners Ass’n v. Il Davorge (2000) 84 Cal.App.4th 819, 836 [citations omitted].)

Much like municipal governments, homeowner associations use elections to choose members to serve on the association’s board of directors. The Davis-Stirling Act sets forth certain basic ground rules for these elections. The homeowner associations conduct these elections through a paper and mail based balloting system that closely resembles California’s vote-by-mail process.

Beyond these basic ground rules, however, the Davis-Stirling Act leaves many aspects of the association elections process to the discretion of the association, including the board itself. The proponents of this bill assert that associations and incumbent boards have seized upon this discretion to undermine the democratic function of the elections by, among other things, disqualifying members from running for the board, limiting members’ ability to vote, and rigging the balloting procedures.

This bill would enact a series of reforms to the laws governing common interest development association elections. Each of these proposed reforms is detailed in the Comment section of this analysis, below. Taken together, however, these reforms can be characterized as restricting the ability of associations to disqualify potential candidates and disenfranchise members; promoting election transparency; and making it easier to overturn election results when procedural violations are found.

This bill passed out of the Senate Committee on Transportation and Housing by a vote of 8-2.

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 the HOA to select an independent third party or parties as an inspector of elections. 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 HOA for any compensable services unless expressly authorized by the HOA. (Civ. Code Sec. 5110(a) and (b).)

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:

o 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

o 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.)

Existing law permits a member of an HOA to bring a civil action against an HOA for declaratory or equitable relief for a violation of the member elections provisions under the Davis-Sterling Act, including, but not limited to, injunctive relief, restitution, or a combination, within one year of the date the cause of action accrues. Upon a finding that the election procedures were not followed, a court may void the results of the election. (Civ. Code Sec. 5145(a).)

Existing law permits a prevailing homeowner in a civil action challenging association election proceedings to obtain reasonable attorney’s fees and court costs, and the court may impose a penalty of up to $500 for each violation. (Civ. Code Sec. 5145(b).)

Existing law provides that a cause of action with respect to 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, or access to, ballots for inspection and review after tabulation may be brought in small claims court. (Civ. Code Sec. 5145(c).)

Existing law requires an HOA to provide a fair, reasonable, and expeditious procedure for resolving a dispute between an HOA and a member and shall make maximum, reasonable use of available local dispute resolution programs involving a neutral third party, including low-cost mediation programs. The HOA’s internal dispute resolution procedure, invoked by either party to the dispute, shall, at a minimum, satisfy specified requirements. (Civ. Code Secs. 5905 and 5910.)

Existing law prohibits an HOA or a member from filing an enforcement action in the superior court unless the parties have endeavored to submit their dispute to alternative dispute resolution. This prohibition only applies to an enforcement action that is solely for declaratory, injunctive, or writ relief, or for that relief in conjunction with a claim for monetary damages not in excess of the jurisdictional limits and does not apply to small claims actions or assessment disputes. (Civ. Code Sec. 5930.)

This bill would codify, in the form of legislative findings and declarations, court rulings drawing parallels between the function of common interest development associations and local governments.

This bill would state the intent of the Legislature that the laws about HOA governance ensure democratic principles and practices.

This bill would require an HOA to adopt its election rules at least 90 days before the election.

This bill would require the HOA election rules to allow any member of the association to run for the board.

This bill would require the HOA election rules to ensure that the meeting at which ballots are counted is accessible to persons with disabilities.

This bill would require an HOA’s election rules to include provision of notice about all of the following:

• the date and time by which, and the physical address where, ballots are to be returned by mail or handed to the inspector or inspectors of elections;
• the date and location of the meeting at which ballots will be counted;
• the procedure and deadline for submitting a nomination, which shall be provided at least 30 days before that deadline;
• the list of all candidates’ names that will appear on the ballot, which shall be provided at least 30 days before the ballots are distributed; and
• the list of all voters by either name or parcel number, and voting power.

This bill would require an HOA’s election rules to mandate the immediate report of any errors or omissions to the list of candidates’ names or list of voters to the inspector or inspectors and with necessary corrections to be made within two business days.

This bill would require an HOA’s election rules to do all of the following:

• prohibit the denial of a ballot to a member for any reason other than not being a member at the time when ballots are distributed;
• prohibit the denial of a ballot to a person with power of attorney for a member;
• require the ballot of a person with power of attorney for a member to be counted if returned in a timely manner; and
• require the inspector or inspectors of elections to deliver, or cause to be delivered, at least 30 days before an election, to each member both of the following documents:
• a copy of the election operating rules; and
• the ballot or ballots.

This bill would prohibit an HOA’s election rules from permitting any person, business, or subdivision of a business entity currently employed or under contract with the HOA for any compensable services to serve as an inspector of elections.

This bill would add that signed voter envelopes and a candidate registration list 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.

This bill would require ballots, signed voter envelopes, voter lists, and candidate registration lists to be association records subject to inspection and copying by a member.

This bill would provide that a cause of action for a violation of member elections may be brought within one year of the date that the inspector or inspectors notify the HOA board and membership of the election results or the cause of action accrues, whichever is later.

This bill would require a court to void the results of an election upon a finding that the election procedures were not followed, unless the HOA establishes by clear and convincing evidence that the failure of the HOA to follow this article or the election operating rules were unintentional and did not affect the results of the election.

This bill would require a member to be awarded court costs and reasonable attorney’s fees incurred for consulting an attorney in connection with this civil action if the member prevails in a civil action in small claims court.

This bill would permit a cause of action with respect to access to HOA 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, or access to, ballots for inspection and review after tabulation may be brought either in superior court or, if the amount of the demand does not exceed the jurisdictional amount of the small claims court, in small claims court.

This bill would prohibit an HOA from filing a civil action regarding a dispute in which a member has requested internal dispute resolution unless the association has participated in the specified internal dispute resolution procedure.

This bill would prohibit an HOA or member to file an enforcement action solely for declaratory, injunctive, or writ relief in superior court without first pursuing alternative dispute resolution for an assessment dispute.

COMMENT

1. Stated need for the bill

According to the author:

SB 1265 is needed to ensure voting rights of members living in HOAs are preserved and not treated as a mere privilege and available for use as an enforcement tool. If HOA boards can strip away voting rights of perceived “problem residents,” who may be seeking to unseat them from their position of power, board members can act with frivolity and impunity in silencing dissent. Just as we defend voting rights in local, state, and national elections, we must also do the same in these HOA elections, whose outcomes ultimately control the day-to-day personal lives of the nearly 1:5 people living in a common interest development.

As sponsor of the bill, the Center for California Homeowner Association Law writes:

The Committee will soon have before it SB 1265, legislation strengthening the democratic governance of California’s 52,000 mini-governments known in law as “homeowner associations.” […] Nowhere in association governance are democratic principles more vital than during elections, the process in local government for

• choosing association leaders

• setting special assessments, i.e. the equivalent of taxes and

• amending governing documents, i.e. the ordinances under which the community chooses to govern itself.

Since 2006, these election events have been governed by statutes created through the bi-partisan efforts of then-Senator Jim Battin [R-Riverside] and Assemblymember Dave Jones [D-Sacramento.] Unfortunately, since their enactment, the California laws governing association elections have been ignored or violated or undermined… How have associations undermined association voting rights? By

• setting arbitrary “qualifications” to be met by candidates for board seats, e.g, the candidate must have owned the home for a specific number of years or must be of a certain age;
• setting arbitrary “qualifications” for voting, e.g., the owner must live on-site and have no outstanding fines for an obscure violation of the CC&Rs;
• allowing third parties with a vested interest in the outcome of an election to manage the election process, distribute and receive ballots, and count the votes;
• requiring candidates to warrant to unreasonable rules restricting campaigning and refusing candidates access to association media; refusal to “warrant” means they can’t run for office.

SB 1265 aims to address these abuses.

In support of the bill, the California Alliance for Retired Americans writes:

According to the AARP Public Policy Institute, more than a million seniors live in California’s age-restricted communities… managed by homeowner association corporations. We agree with the AARP Policy Institute that seniors living in associations have an inalienable “right to run for office and a right to vote for directors.” […] Unfortunately, seniors report to us too often how they are denied the right to vote and the right to run for a board seat.

2. Concerns expressed about the bill

In opposition to the bill, the Community Associations Institute’s California Legislative Action Committee (CAI-CLAC) writes:

As written, SB 1265 threatens the privacy of residents, will drastically increase costs faced by these not-for-profit entities, and suppress voter participation. […] CAI-CLAC supports fair and open elections. However, absent any evidence current law is insufficient to protect the interests of our members, we cannot support the changes proposed in SB 1265. The California legislature has reducing [sic] the cost of housing a primary goal of the last few years. SB 1265 heads in the exact opposite direction increasing costs to homeowners in an attempt to create a solution where no problem exists.

In further opposition to the bill, the California Association of Community Managers (CACM) writes:

CACM’s opposition is focused on the removal of all substantive board candidacy requirements and the inappropriate codification of a characterization that common interest developments… are “quasi-governmental” entities. They are not.

The foundational principle of an HOA is that community members contractually agree to conditions that exist for the benefit of the entire community. […] A CID only has legal authority given to it by contract in the governing documents and its authority and responsibilities can be dramatically changed by a vote of the members. Unlike government entities, CID’s do not enjoy government immunities and their authority does not rise to the level of police powers.

3. Overarching points of disagreement

As the foregoing statement from supporters and opponents of this bill illustrate, there is a strong and fundamental divide between the parties, not to mention a certain element of distrust. In general, proponents of the bill believe that there is widespread abuse of the elections process by incumbent HOA boards clinging to power. Opponents believe the existing elections process is sufficiently democratic as it is and that any abuses are isolated. Proponents of the bill assert that much is at stake in HOA elections and that strict rules are needed to ensure democratic procedures. Opponents counter that HOAs are largely volunteer operations and that excessive bureaucracy is oppressive, unrealistic, and expensive. Proponents draw close parallels between the function of local governments and the role of HOA boards. Opponents emphasize that common interest developments are private entities based on contractual agreements between community members.

These divergent perspectives play out in the debates over each nuanced detail of the reforms proposed by this bill. The following Comments provide a summary of the main arguments relating to each of the most significant changes the bill proposes to enact.

4. Declarations and findings related to the function of common interest developments

This bill would codify findings and declarations that note strong parallels between the function of common interest development associations in relation to members and the function of local governments in relation to their residents. Accordingly, the bill would declare the intent of the Legislature to ensure that democratic principles and practices are followed in the common interest development context.

Textually, these findings and declarations draw heavily upon case law. (See Villa Milano Homeowner’s Association v. Il Davorge (2000) 84 Cal.App.4th 819; Chantiles v. Lake Forest II Master Homeowners Assn. (1995) 37 Cal.App.4th 914; Duffy v. Superior Court (1992) 3 Cal. App. 4th 425; Cohen v. Kite Hill Community Assn. (1983) 142 Cal.App.3d 642.)) In that sense, the bill may be seen as codifying existing law, though the language taken from the court opinions could perhaps be characterized as dicta.

In any event, opponents of the bill reject the direct comparison. While they concede that some of the larger, more sophisticated common interest developments may act very much like small cities, complete with their own police and fire departments, opponents of the bill point out that many common interest developments operate on a much smaller scale and feature few or none of the amenities that a municipality provides. To opponents, the whole premise behind common interest developments is that they are private communities based upon covenants to which all parties agree upon purchasing the property. Even though these are merely findings and declarations, therefore, the way that common interest developments are characterized by the bill is a source of considerable consternation for opponents. The Community Associations Institute of California writes: “[s]ince codified statements of this nature can be used for other purposes in the future, this language must be deleted unless more appropriate justification is provided to show that it applies to all associations governed by the Davis-Stirling Act.”

There is certainly truth behind the observation that common interest developments come in a wide variety of formats and sizes. On the other hand, all HOAs have certain basic powers that they can wield over their members: the ability to levy assessments; the ability to impose fines and record liens; the ability to exercise control over common areas that the members use; and, ultimately, the ability to foreclose upon member’s separate property. Arguably, these powers and functions alone are sufficient to justify the need to ensure some core level of democratic process and procedure in HOA governance.

5. Disqualifying candidates from running for association board positions

One of the main purposes behind this bill is an attempt to greatly reduce the discretion that homeowners associations otherwise have to impose qualification requirements on candidates running for the board of directors. Existing law places relatively few restrictions on what associations can do to disqualify candidates. There is anecdotal evidence that boards utilize this discretion to consolidate power.

The experience of one part-time resident in a common interest development in Oxnard provides a good example:

In 2016, I decided to run for the board as I felt the interests of absentee owners were being sorely neglected. In short, the board runs the association like a country club for the benefit of a small number of resident owners. They cater to this group and provide funding for their social activities using association funds.

Although my wife and I own this unit, it was titled in her name only for tax purposes. When I discovered that my name needed to be listed as an owner of record in order to serve on the board, we filed a quit claim deed to become joint owners of record. The HOA set up a date of record where none had existed and precluded me from having my name on the ballot since my deed was filed a few minutes beyond their “as of” cut-off time. Their cut-off time was established after I had recorded my deed. I therefore had to run as a write-in candidate.

This bill would deem all candidate qualifications unreasonable, and thus, unenforceable, except for the basic requirement that a candidate be a member of the association.

Opponents of the bill express concern that such a reform deprives associations of all control over who runs for the board. That is the point of the bill, of course, but opponents to the bill argue that at least some candidate qualifications are necessary and healthy for the operation of the community.

Some opponents would prefer to maintain quite broad authority to disqualify candidates, including things like full-time residency, or some minimum amount of time – one year, say – that a person should have to be a member before they can run for the board. There are evident policy rationales for why these characteristics might make for better HOA directors: someone who has been around for a while presumably knows more about how the community operates, and someone who resides in the community full time has more at stake, at least in terms of day-to-day life, than someone who is there for only a few weeks out of the year. Yet, debate over the importance of these characteristics – and whether they truly apply to any individual candidate – would seem to be precisely the things that voters should consider when weighing candidates. It is not difficult to imagine the campaign rhetoric: “Vote for Suzy! She’s lived here for decades and really knows the place! Don’t vote for Dave! He’s a total newcomer!” And, conversely: “Vote for Dave! A fresh face for change! Don’t vote for Suzy! She’s stuck in the past!” Existing law allows associations to cut off such a debate in advance by disqualifying candidates rather than letting the voting membership decide what is best for the community in any given election.

Even those stakeholders who concede that candidates should not be disqualified from running in most circumstances still argue for at least three key candidate qualifications they would like to be able to keep: not having a criminal record, being a member “in good standing,”and not having conflicts of interest.

1. Qualifications relating to criminal records

Opponents of the current bill argue that HOA board positions come with both the power and duty to manage association funds. Preventing people who have been convicted of certain financial crimes from serving on the board is, from that perspective, a matter of protecting the community against theft and corruption. Opponents of the current bill point out that even regular government elections law disqualifies people from running for office if they have been convicted of certain crimes. (Elec. Code Sec. 20.) At a minimum, therefore, the opponents urge that associations should be able to disqualify members from running for the association board of directors if they have been convicted of similar felonies. Acknowledging these concerns, the author proposes to offer a responsive amendment in Committee.

1. Qualifications relating to being a member in good standing

What it means to be a “member in good standing” of a common interest development association depends on the particular rules of each association, but as a general matter, the phrase refers to being current on all payments due to the association. As it is currently written, SB 1265 would not allow associations to disqualify members from running for the board just because they are behind on payments.

Opponents of the bill assert that staying current on payments to the association is a matter of fairness and demonstrates a proper sense of responsibility to the community as a whole. The argument is well-captured by the California Association of Community Managers, which writes:

candidates should be required to pay their monthly assessments in order to run for the board. Associations run on zero-based budgeting and most commonly, assessments are the only source of income for the community. Requiring good standing shows a level of commitment to and respect for the community and is consistent with the collection efforts that exists for the good of the whole. When owners are delinquent, it necessarily increases the assessments that all other rule-abiding owners have to pay. Board members who are responsible for enforcing the rules of the associations should be required to also play by the same rules.

Proponents of the bill, on the other hand, point out that policy disagreements between HOAs and individual members often take the form of, or ultimately turn into, financial disputes. For example, if a member disagrees with a fine that the association has assessed against the member, the member will quickly fall out of “good standing” unless the member capitulates and pays. If, as a result, the member is also disqualified from running for the board, the member loses the ability to try to address the underlying policy issue by seeking a position on the governing board.

Stakeholders who want the ability to maintain “good standing” requirements for board candidates also acknowledge that it is useful for getting delinquent members to pay up. Proponents of SB 1265 respond that associations already have a potent series of collections tools at their disposal without the need to resort to disqualifying members from running and, that, ultimately, the right to participate in elections should not be used for collections purposes.

Finally, the proponents of SB 1265 point out that requiring members to be in “good standing” in order to run for the board means that some members will be disqualified simply because they have fallen on hard financial times.

There has been some discussion among the stakeholders about finding some middle ground. Perhaps, for example, associations should have to allow for a hardship exception to any “good standing” qualification they require of candidates. Similarly, some stakeholders have suggested an exception to any “good standing” requirement for members who dispute the unpaid bill. In theory, either suggestion might serve to permit associations to disqualify members who are actually shirking their responsibility to contribute to the community, while preserving the right to run for those who have a genuine disagreement with the association or who have truly fallen on hard times. In practice, however, both true hardship and genuine disagreement would be hard to define and even harder to prove in any specific case. The current bill makes the policy choice, in light of the goal to ensure that HOA elections are as democratic as possible, that it is better to err on the side of permitting deadbeat candidates to run, than to risk the possibility that incumbent boards could use financial disputes as a mechanism for suppressing viewpoints with which they disagree.

Still, assuming a leadership position within the community arguably requires a higher level of accountability to that community. With that in mind, the author may wish to consider amending the bill to permit the disqualification of board candidates who are not involved in a financial dispute with the association, or whose dispute with the association has reached final resolution, and who nonetheless remain consistently delinquent in their basic assessment payments even after having had a reasonable time – 24 months, perhaps – to come current.

1. Qualifications relating to conflicts of interest

In relation to candidate disqualifications based on potential conflicts of interest, the Community Associations Institute, in opposition to the bill, writes:

[a]ssociations have a fiduciary responsibility to the members and legal responsibilities established by the Corporations Code which could be violated if members who… present specific conflicts are elected to the Board. As an example, many associations prohibit spouses from serving at the same time due to the inherent conflict presented. SB 1265 would prohibit rules of this nature from being established, even if they were included in the governing documents of the Association.

Some perceived conflicts of interest could be considered appropriate campaign issues. (“Don’t vote for Dave! Dave is just running to steer association contracts to his buddies!”) Opponents of the current bill argue that the issue runs deeper, though, since for incorporated associations at least, the law prohibits board members from serving if they have certain conflicts. These and other conflicts may also affect the ability of the association to obtain liability insurance for their officers and directors.

Certainly, if the goal of the bill is to ensure more open and democratic HOA governance, then preventing conflicts of interest on boards would appear to be in line with those goals. There are ongoing conversations among the author and stakeholders about responsive amendments that might avoid unlawful conflicts without empowering associations to disqualify board candidates more broadly. At the time of publication of this analysis, however, no agreement had been reached about any specific language.

6. Prohibiting homeowner associations from disenfranchising members

Existing law requires common interest development associations to adopt rules that specify the qualifications for voting. (Civ. Code Sec. 5105(a)(4).) However, the law does not provide parameters around what qualifications an association may impose. As a result, some associations place restrictions on who can vote in an association election. For example, there are reports that some associations require members to be in “good standing” in order to vote.

In contrast, this bill would prohibit associations from adopting rules denying members a ballot for any reason other than not being a member at the time when ballots are distributed.

7. Proposed reforms relating to elections procedures and transparency

In addition to limiting the power of associations and incumbent boards to restrict voting and candidacy, this bill also proposes a series of detailed reforms to HOA elections procedures. Some of the more significant or controversial reforms are discussed below. In general, these reforms can be characterized as ensuring notice and increasing transparency in HOA elections. In the process, critics suggest, they create additional expenses and bureaucratic hurdles for associations.

1. Requiring notice of specified election rules and procedures

Existing law requires common interest development association boards to adopt elections rules. (Civ. Code Sec. 5105(a).) These rules are part of the association’s records and, as such, open to members for inspection and copying upon request. (Civ. Code Secs. 4150; 5200(a)(11); and 5205.) Apart from a member’s ability to request to inspect and copy the election rules, however, there does not appear to be anything in existing law that expressly requires associations to actively notify their members that an election will be taking place, how members can nominate candidates, and what the election procedures will be.

Proponents of SB 1265 report numerous incidents in which HOA members were left unaware that any election was taking place. As a result, these members could not run for the board or voice much of an opinion in the governance of the association.

SB 1265 would require HOAs to adopt elections rules at least 90 days ahead of any election, to provide notice of the nominating procedures at least 30 days prior to the deadline for nominating candidates to the board, and to post a voter list, by name or parcel, 30 days in advance of the election.

As currently written, the bill would also require associations to deliver a copy of the elections operating rules to all members 30 days before the election. Regarding this provision, the Community Associations Institute writes:

SB 1265 will significantly increase the costs of conducting an election. It will now require an association to provide every member a copy of the election rules 30 days prior to the election. These documents are available to any member upon request. Many associations also provide these documents on their website. However, SB 1265 states the availability already provided in law is not good enough and will require associations to incur the additional postage and copying charges to send documents to people that don’t want them.

While it is arguably vital for all members to have access to the rules by which the election will be conducted, the point may be well taken that not every member needs or desires to have a hard copy of the rules delivered to them. Accordingly, the author has agreed to take an amendment in Committee that will clarify alternative ways for an association to ensure that all members have access to the election rules, without requiring individual delivery of hard copies of those rules, except to any individual member who requests it.

1. Prohibiting financially interested parties from serving as elections inspector

Existing law requires an independent, third party to conduct an association election. (Civ. Code Sec. 5105(a)(5).) The independent third party may be a member, but cannot be a director, a candidate for director, or someone related to a director or candidate. (Civ. Code Sec. 5100(b).) In general, the independent, third party is not supposed to be any person or entity that has business with the association, but under current law, an association can override this general rule, through the adoption of an express rule to the contrary. (Ibid.) Thus, if an association allows it, the current property manager, or another company doing business with the association, can oversee the election. Since such entities may have a financial stake in the outcome of the election, however, there can be a conflict of interest.

SB 1265 would eliminate the authority of associations to appoint any person or entity employed or under contract to the association to serve as the elections inspector.

Opponents of this provision regard it as overly burdensome, since a property manager, in particular, is an obvious and easy choice to serve as elections inspector. If some of the homeowner association membership is unhappy with the property manager, however, it is not hard to see how having the property manager serve as elections inspector could, at a minimum, lead to the perception that the election was rigged.

c. Requiring access to the ballot tabulation

Existing law requires the elections inspector to tabulate the ballots in a common interest development association election. (Civ. Code Sec. 5100(c)(5).) Current law does not address where the tabulation must take place.

In its current form, SB 1265 would require notice to be given of the date and location of the meeting at which ballots will be counted and require the location to accessible to people with disabilities. The author proposes to amend the bill in Committee to specify that the ballot tabulation must take place on association property, in a location accessible to all members and their representatives.

8. Allowing for inspection and copying of elections documents

Existing law requires an association elections inspector to turn over the ballots to the association once the deadline for challenging an election has expired. (Civ. Code Sec. 5125(a).) Current law does not specify whether those ballots, or the associated envelopes and voter lists, must be made accessible to members for inspection.

Opponents of this provision of the bill worry that making this information available to members for inspection and copying could allow it to be used nefariously. The Community Associations Institute, for example, writes: “SB 1265 creates significant privacy concerns for residents who participate in the secret ballot election.” They point out that, unlike other membership lists that are available to members, individual members cannot opt out of appearing in the voter list. At the same time, limiting the availability of documentation of everything that took place in the election undermines the goal of transparency.

There are ongoing discussions between the author’s office and stakeholders on striking the right balance between the need for elections transparency and any legitimate privacy concerns. At the time of publishing this analysis, however, there was no agreement as to specific language that might form the basis of amendments.

9. Standard of proof, burden of proof, and award of attorneys fees in elections violations cases

Current law enables any association member to bring a civil action to challenge an association election. (Civ. Code Section 5145(a).) If the member can show that a violation of the legally required elections procedures took place, then the court may void the election outcome. (Ibid.)

In at least one reported case, however, the court initially declined to void the election results, even though it found procedural violations, until the member was able to show that the violation was intentional and that it affected the results of the election. (Wittenberg v. Beachwalk Homeowners Assn. (2013) 217 Cal.App.4th 654.)

SB 1265 would still require courts to examine whether a procedural elections violation was intentional and whether it affected the outcome of an election before voiding the result. The bill would, however, shift the burden of proof. Instead of requiring the member to show that the procedural violation was intentional and affected the outcome of the election, SB 1265 would require an association to prove that any procedural violation was unintentional and did not affect the outcome of the election. Otherwise, the court would have to void the outcome of the election.

While it arguably makes sense to shift this burden to the association, SB 1265 would also heighten the association’s standard of proof to “clear and convincing.” Though it falls short of the criminal standard of “beyond a reasonable doubt,” the “clear and convincing” standard is quite high and arguably unnecessary to this situation, since there is no obvious public policy benefit to requiring an election to be undertaken all over again in circumstances where it is more likely than not that the violations were unintentional and did not alter the outcome of the election. With this in mind, the author has agreed to accept an amendment that would reduce the burden of proof on the association from “clear and convincing” to “preponderance of the evidence.” The association would still retain the overall burden of showing that the procedural violation was unintentional and did not affect the outcome of the election.

Finally, SB 1265 addresses the award of attorney’s fees in cases involving a challenge to an association election. Existing law entitles a prevailing homeowner association member to an attorney’s fees award if the member prevails in an action challenging an association election. (Civ. Code Sec. 5145(b).) SB 1265 would specify that such an attorney’s fee award is available even when the action is brought in small claims court.

Whether such an award would be possible under existing law is unclear. Attorneys themselves are not permitted to appear in small claims cases, but small claims litigants can and do consult with attorneys in preparation for representing themselves. The statute regarding small claims judgments is silent regarding the award of attorney’s fees. (Code Civ. Proc. Sec. 1116.610(g)(1).) That silence could be interpreted to endorse the general rule that attorney’s fees may be awarded to the prevailing where the underlying contract or statute provides for such an award. Alternatively, that silence could be interpreted to mean that attorney’s fees are not available in small claims court. The latter interpretation would seem to gain support from the fact that existing law limits the award of attorney’s fees in small claims appeals (where attorneys can appear) to $150. (Code Civ. Proc. Sec. 116.780(c); Dorsey v. Superior Court (2015) 241 Cal. App. 4th 583.)

If it were to pass, however, SB 1265 would be a later enacted statute and would therefore supersede existing law (however interpreted) with regard to the award of attorney’s fees in small claims cases involving challenges to common interest development elections.

10. Provisions regarding participation in internal dispute resolution

Existing law requires common interest developments to have an internal dispute resolution (IDR) process with specified characteristics, including that if the procedure is invoked by a member, the association must participate in the procedure. (Civ. Code Sec. 5910(c).) The proponents of SB 1265 believe that associations are not taking this requirement seriously. Accordingly, SB 1265 would add a provision to the law prohibiting an association from filing a civil action in any dispute in which a homeowner has requested IDR, unless the association has participated in that process.

In opposition to this provision of the bill, the Brio Homeowners Association writes:

Civil Code section 5190 as it is currently written provides that the association must go through IDR if the owner requests it, but does not limit the owner to IDR if the association requests it. CACM believe the existing process is balanced and is unaware of the need to upset this balance. Judicial recourse should be fair and there should be no restriction on the rights of associations to file suit in court.

Arguably, however, SB 1265’s provisions regarding IDR do little more than require associations to take their existing legal obligation to participate in such a process seriously. Going forward, however, the author may wish to amend the bill to clarify what it means to “participate” in IDR, so that all parties have a better sense of their rights and obligations.

11. Proposed Committee Amendments

In order to address the issues set forth in the analysis, above, the author has agreed to incorporate amendments into the bill that would:

• allow disqualification of board candidates convicted of certain felony financial crimes and not pardoned, consistent with the Elections Code;
• provide alternate methods of delivering election operating rules to members, including through posting to the internet, unless a member requests individual delivery; and
• require tabulation of ballots to take place at a location on the common interest development property accessible to all members.

The specific amendments are as follows:

Amendment 1

On page 3, in line 5, strike out “almost every way” and insert:

many ways

Amendment 2

On page 4, in line 2, after “documents.” insert:

(A)

Amendment 3

On page 4, in between lines 6 and 7 insert:

(B) Notwithstanding paragraph (A), an association’s by-laws may disqualify a member from running for an elective office if, within the past 20 years, the member has been convicted of a felony involving accepting or giving, or offering to give, any bribe, the embezzlement of money, 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 such pardons.

Amendment 4

On page 4, in line 22, after “is” insert:

held on association property and

Amendment 5

On page 4, in line 23, strike out “persons with disabilities” and insert:

all members or their representatives who want to witness the tabulation.

Amendment 6

On page 5, in line 11, after “with” insert:

general

Amendment 7

On page 5, in line 13, after “with” insert:

general

Amendment 8

On page 5, strike out lines 18 and 19 and insert:

(A) The ballot or ballots.

(B) A copy of the election operating rules. Delivery of the election operating rules may be accomplished by any of the following methods:

(i) Posting the election operating rules to an Internet Web site and including the corresponding Web site address on the ballot together with the phrase: “The rules governing this election may be found here:” in at least 12 point font;

(ii) Individual delivery.

Amendment 9

On page 5, in line 34, strike out “services.” and insert:

services other than serving as inspector of elections.

Amendment 10

On page 7, in line 10, strike out “clear and convincing” and insert:

a preponderance of the

Amendment 11

On page 7, in line 39, strike out “5910.” and insert:

5910 by engaging in good faith in the Internal Dispute Resolution procedures as set forth therein after a member invokes those procedures.

Support: American Civil Liberties Union of California; California Alliance for Retired Americans; Citizens for Constitutional Local Government; El Dorado Institute, Inc.; Greater Sacramento Urban League; Non-Profit Housing Association of Northern California; Schiffer Buus, A.P.C.; 31 individuals

Opposition: BelleFountaine Homeowners Association Board of Directors; Brio Homeowners Association; California Association of Community Managers; Community Associations Institute of California, California Legislative Action Committee; Parkside Community Association Board of Directors; 2 individuals

HISTORY

Source: Center for California Homeowner Association Law

Related Pending Legislation: SB 1128 (Roth, 2018), in addition to more minor changes to the common interest development governing procedures, would allow for the board of directors to be seated by acclamation, without holding an election, if the number of available seats is equal to or greater than the number of candidates. SB 1128 is scheduled to be heard on May 8, 2018 before the Senate Committee on Judiciary.

Prior Legislation:

AB 1426 (Irwin, 2017) would have allowed the board of directors of a common interest development association to be seated by acclamation if the election was uncontested, meaning, among other things, that there are at least as many board seats available as there are candidates. AB 1426 died in the Assembly Committee on Housing and Community Development.

AB 1799 (Mayes, 2016) would have allowed the board of directors of a common interest development association to be seated by acclamation if the election is uncontested, as defined, and would have provided a procedure for an election to be declared uncontested. In addition, AB 1799 would have ensured 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. AB 1799 died in the Senate Committee on Judiciary.

SB 61 (Battin, Ch. 450, Stats. 2005) enacted the basic requirements for conduct of a common interest development election, including access to association publications for candidates, appointment of an elections inspector, and the methods for conducting balloting.

AB 1098 (Jones, Ch. 458, Stats. 2005) enacted a series of requirements related giving homeowner association members access to inspect and copy homeowner association records upon request.

Prior Vote: Senate Transportation and Housing Committee (Ayes 8, Noes 2)

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SENATE COMMITTEE ON TRANSPORTATION AND HOUSING

Senator Jim Beall, Chair

2017 - 2018 Regular

Bill No: Hearing Date: 4/17/2018

SUBJECT:

DIGEST: This bill makes several changes to the elections process held in common interest developments (CIDs). It also makes changes to the process for handling disputes between a member and a homeowner’s association (HOA).

ANALYSIS:

Existing law:

1. Provides that an HOA in a CID shall adopt rules relating to board elections that do all of the following:
   1. Ensure that if any candidate or member advocating a point of view is provided access to association media, newsletters, or Internet Web sites during a campaign, for purposes that are reasonably related to that election, equal access shall be provided to all candidates and members advocating a point of view, including those not endorsed by the board, for purposes that are reasonably related to the election.
   2. Ensure access to the common area meeting space, if any exists, during a campaign, at no cost, to all candidates, including those who are not incumbents, and to all members advocating a point of view, including those not endorsed by the board, for purposes reasonably related to the election.
   3. Specify the procedures for the nomination of candidates, consistent with the governing documents. A nomination or election procedure 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, 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.
   5. Specify a method of selecting one or three independent third parties as inspector or inspectors of elections, as specified.
   6. Allow the inspector or inspectors to appoint and oversee additional persons to verify signatures and to count and tabulate votes as the inspector or inspectors deem appropriate, provided that the persons are independent third parties.
2. Requires, at all times, the sealed ballots to 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 HOA.
3. Requires the HOA to select an independent third party or parties as an inspector of elections. 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 HOA for any compensable services unless expressly authorized by the HOA.
4. Permits a member of an HOA to bring a civil action against an HOA for declaratory or equitable relief for a violation of the member elections provisions under the Davis-Sterling Act including but not limited to injunctive relief, restitution, or a combination, within one year of the date the cause of action accrues. Upon a finding that the election procedures were not followed, a court may void the results of the election.
5. Permits a prevailing party in a civil action described in (4) to be entitled to reasonable attorney’s fees and court costs, and the court may impose a penalty of up to $500 for each violation.
6. Provides that a cause of action with respect to 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, or access to, ballots for inspection and review after tabulation may be brought in small claims court.
7. Requires an HOA to provide a fair, reasonable, and expeditious procedure for resolving a dispute between an HOA and a member and shall make maximum, reasonable use of available local dispute resolution programs involving a neutral third party, including low-cost mediation programs. The HOA’s internal dispute resolution procedure, invoked by either party to the dispute, shall, at a minimum, satisfy specified requirements.
8. Prohibits an HOA or a member from filing an enforcement action in the superior court unless the parties have endeavored to submit their dispute to alternative dispute resolution. This prohibition only applies to an enforcement action that is solely for declaratory, injunctive, or writ relief, or for that relief in conjunction with a claim for monetary damages not in excess of the jurisdictional limits and does not apply to small claims actions or assessment disputes.

This bill:

1. Requires election rules be adopted at least 90 days before any election and that the rules require any errors or omissions to the list of candidates’ names or list of voters to be immediately reported to the inspector or inspectors and require necessary corrections to be made within two business days.
2. Requires that the HOA ensure that the meeting at which ballots are counted is accessible to persons with disabilities.
3. Requires notice be provided of all of the following:
   1. The date and time by which, and the physical address where, ballots are to be returned by mail or handed to the inspector or inspectors of elections.
   2. The date and location of the meeting at which ballots will be counted.
   3. The procedure and deadline for submitting a nomination, which shall be provided at least 30 days before that deadline.
   4. The list of all candidates’ names that will appear on the ballot, which shall be provided at least 30 days before the ballots are distributed.
   5. The list of all voters by either name or parcel number, and voting power.
4. Requires the elections rules to do all of the following:
   1. Prohibit the denial of a ballot to a member for any reason other than not being a member at the time when ballots are distributed.
   2. Prohibit the denial of a ballot to a person with power of attorney for a member.
   3. Require the ballot of a person with power of attorney for a member to be counted if returned in a timely manner.
   4. Require the inspector or inspectors of elections to deliver, or cause to be delivered, at least 30 days before an election, to each member both of the following documents:
      1. A copy of the election operating rules.
      2. The ballot or ballots.
5. Removes references in the rules that permit the identification of qualifications for candidacy or voting.
6. Adds that signed voter envelopes and a candidate registration list 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.
7. Prohibits an HOA’s rules from permitting any person, business, or subdivision of a business entity currently employed or under contract with the HOA for any compensable services from serving as an inspector of elections.
8. Requires ballots, signed voter envelopes, voter lists, and candidate registration lists to be association records subject to inspection and copying by a member.
9. Provides that a cause of action for a violation of member elections may be brought within one year of the date that the inspector or inspectors notify the HOA board and membership of the election results or the cause of action accrues, whichever is later.
10. Requires a court to void the results of an election upon a finding that the election procedures were not followed, unless the HOA establishes by clear and convincing evidence that the failure of the HOA to follow this article or the election operating rules were unintentional and did not affect the results of the election.
11. Requires a member to be awarded court costs and reasonable attorney’s fees incurred for consulting an attorney in connection with this civil action if the member prevails in a civil action in small claims court.
12. Permits a cause of action with respect to access to HOA 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, or access to, ballots for inspection and review after tabulation may be brought either in superior court or, if the amount of the demand does not exceed the jurisdictional amount of the small claims court, in small claims court.
13. Prohibits an HOA from filing a civil action regarding a dispute in which a member has requested internal dispute resolution unless the association has participated in the specified internal dispute resolution procedure.
14. Prohibits an HOA or member to file an enforcement action solely for declaratory, injunctive, or write relief in superior court without first pursuing alternative dispute resolution for an assessment dispute.

COMMENTS:

1. Purpose. According to the author, this bill better ensures fair HOA elections by ending the practice of depriving a member the right to vote or run in an HOA election simply because the member has a dispute with the HOA board. The bill also requires the location that ballots are counted be accessible to members with disabilities, and specifies other timing and procedural requirements for HOA elections.
2. CIDs. 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 (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. CIDs are governed by an HOA, 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.’… 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.” (Villa Milano Homeowners Ass’n v. Il Davorge (2000) 84 Cal.App.4th 819, 836)

In order to perform its obligations under the governing documents, HOAs levy regular and special assessments. If a member is delinquent in paying an assessment, the HOA may recover reasonable costs incurred in collecting assessments, a late charge, and interest, as specified. An HOA may also impose a lien on the separate interest of the member if an assessment is past due, as specified.

1. Access to ballot counting and voting. Just as with municipal governments, homeowner associations use elections to choose members to serve on an association’s board of directors. Under existing law, HOAs conduct elections through a paper and mail based balloting system that resembles California’s vote by mail process.

The author is seeking to provide more transparency in the ballot counting process to ensure a fair elections process. The sponsors point to examples where homeowners were barred or otherwise discouraged from being near the ballot counting location. In one instance, the inspectors shared how many ballots were discarded or considered ineligible but homeowners are not able to view the process of opening the ballots. The sponsors also point to instances in which a property manager has served as an elections inspector. Exclusion from the process only leads to further distrust between homeowners and the board.

In order to ensure homeowners have access to the ballot counting process, this bill requires notice of the time and location of ballot counting, as well as access to persons with disabilities. This bill would prohibit third parties from serving as inspectors if they are currently employed or under contract with the HOA for any compensable services. It further prohibits the denial of a ballot to a member, or person with power of attorney, for any reason other than not being a member at the time when ballots are distributed.

1. Denial of candidacy. According to the sponsors, HOAs use the elections rules as a means to prohibit a resident member from voting in an election. These rules can be used as a means of punishment for members who may have a dispute with the management or the management finds the resident to be in violation of HOA rules. This tactic can be used to keep specific board members in power and avoid would-be challengers. For example, the sponsors point to a court case involving an HOA that prohibited members from running for the board if they were presently involved in a legal action against the HOA. Other examples include age requirements, living in the HOA for a specified period of time, being current in assessments, and passing a background check. Existing law permits an HOA to enforce HOA rules in several ways, such as placing a lien on property when a member fails to pay his or her assessment fees. HOAs may also fine, impose disciplinary actions, and sue members for violating HOA rules and governing documents.

This bill prohibits an HOA from disallowing a member from being nominated for any other reason other than not being a member. It requires the election rules to provide notice of the procedure and deadline for submitting a nomination, at least 30 days before the deadline. Additionally, the bill requires that the notice shall a list of all the candidate’s names that will appear on the ballot.

The opposition notes that there are legitimate reasons to prohibit a member from candidacy, such as a criminal conviction for embezzlement or other financial crime, or preventing a consolidation of power, such as two spouses both serving on a board in a community with a small board membership. The author moving forward may wish to instead create a tailored list of disqualifications from candidacy for the board rather than a blanket prohibition.

1. ADR. An HOA is required to provide a “fair, reasonable, and expeditious procedure for resolving a dispute” between the HOA and a member involving the rights, duties or liabilities under the Davis-Stirling Act or the HOAs governing documents. This procedure is referred to as Internal Dispute Resolution (IDR), the purpose of which is to provide a non-judicial forum to resolve disputes between a member and the HOA that will not result in a fee or a charge to the member. Existing law requires parties to attempt to participate in alternative dispute resolution (ADR) before filing an enforcement action in court. Alternative Dispute Resolution ("ADR") refers to any means of settling disputes outside of the courtroom, typically negotiation, conciliation, mediation, and arbitration. However, if a member initiates IDR, the HOA, under existing law must participate in the procedure. According to the sponsors, some HOAs are either not meaningfully participating in the IDR process or are not waiting for its completion before seeking legal action. This bill would require participation in the IDR process before filing any action in court, thus potentially reducing the need to resolve disputes in court.
2. Opposition. Opponents are concerned about the elimination of minimum candidate qualifications for the HOA board. CACM states that most associations currently only require basic minimums, including prohibiting felons convicted of financial crimes and requiring a candidate be a member in good standing (i.e. current on their monthly assessments). CACM also writes that the expansion of the internal dispute resolution requirements is unnecessary because the statute already requires an HOA to go through the process if requested by a homeowner. CAI-CALC states that the provisions around elections transparency raise privacy concerns given that the bill requires a list of voters by name or parcel number to go to all members, and that ballots would be available to any member. They also state that these requirements would add significantly to the cost of an election.
3. Double-referral. This bill is double-referred to the Senate Judiciary Committee.

Related Legislation:

SB 1228 (Roth, 2017) — provides that a homeowner association (HOA) in a common interest development (CID) may provide a document by electronic means if the recipient has consented by email; reduces the notice requirement of a proposed rule change by the HOA board from 30 days to 28 days; and provides that the nominees to a board shall be considered elected by acclamation if the number of nominees does not exceed the number of vacancies on the board. This bill is pending before the Senate Transportation and Housing Committee.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

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

April 11, 2018.)

SUPPORT:

Center for California Homeowner Association Law (sponsor)

El Dorado Institute, Inc.

1 individual

OPPOSITION:

California Association of Community Managers (CACM)

Community Associations Institute – California Legislative Action Committee (CAI-CLAC)

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