UNFINISHED BUSINESS  

Bill No: SB 754

Author: Moorlach (R)

Amended: 9/9/19

Vote: 21

SENATE HOUSING COMMITTEE: 10-0, 4/22/19

AYES: Wiener, Morrell, Bates, Caballero, Durazo, McGuire, Moorlach, Roth, Skinner, Umberg

NO VOTE RECORDED: Wieckowski

SENATE JUDICIARY COMMITTEE: 9-0, 4/30/19

AYES: Jackson, Borgeas, Allen, Caballero, Jones, Monning, Stern, Umberg, Wieckowski

SENATE FLOOR: 38-0, 5/20/19

AYES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

ASSEMBLY FLOOR: 65-0, 9/13/19

(ROLL CALL NOT AVAILABLE)

SUBJECT: Common interest developments: board members: election by acclamation

SOURCE: Laguna Woods Village

DIGEST:

This bill provides that if nominees to a homeowner association (HOA) board in a common interest development (CID) shall be considered elected by acclamation if the number of nominees does not exceed the number of vacancies on the board.

Assembly Amendments

limit the bill to HOAs of 6,000 or more units; require a nominee to be current on special assessments (in addition to regular assessments); allow a developer to nominate a person who is not a member of the HOA, as specified; and allow an HOA to disqualify a person as a candidate if the person has a criminal conviction that would prevent the HOA from purchasing fidelity bond insurance; and address chaptering issues with other legislation..

ANALYSIS:

Existing law governing CIDs:

1. Requires the election and removal of directors, amendments to governing documents, or the grant of exclusive use of common areas, to be held by secret ballot.
2. Provides that directors shall not be required to be elected if the governing documents provide that one member from each separate interest (e.g., unit or lot) is a director.
3. Requires the HOA to adopt election rules that do the following:
   1. Ensure that if any candidate or member advocating a point of view is provided access to association media, newsletters, or Web sites during a campaign, and that equal access shall be provided to all candidates and members, for purposes reasonably related to the election.
   2. Ensure access to common-area meeting space at no cost to all candidates.
   3. Specify the qualifications for candidates for the board and any other elected position, and procedures for the nomination of candidates, consistent with the governing documents. A rule shall not be deemed reasonable if it disallows any member from nominating himself or herself for election to the board.
   4. Specifies the qualifications for voting; the voting power of each membership; the authenticity, validity, effect of proxies; and the voting period for elections. This includes the times at which polls will open and close, consistent with the governing documents.
   5. Specifies a method for selecting one or three independent third parties as inspector or inspectors of elections. Inspectors may appoint or oversee additional independent third-party persons to verify signatures and to count and tabulate votes as the inspector or inspectors deem appropriate.
4. Requires the inspector of elections to be one or three individuals who have the following duties:
   1. Determine the number of memberships entitled to vote and the voting power of each.
   2. Determine the authenticity, validity, and effect of proxies.
   3. Receive votes and ballots and hear and determine all challenges and questions.
   4. Count and tabulate all votes.
   5. Determine when the polls will close.
   6. Determine the results of the election.
5. Permits the nomination of candidates from the floor of membership meetings or nomination by any other manner.
6. Permits a member of an HOA to bring a cause of action in small claims court against the HOA if the HOA restricts access to HOA resources by a candidate or member advocating a point of view; the receipt of the ballot by a member; or the counting, tabulation, or reporting of, or access to, ballots for inspection and review after the tabulation.
7. Requires the HOA board to provide notice of a proposed rule change, as specified, at least 30 days prior to making the rule change.

This bill:

1. Requires an HOA to hold an election for a seat on the board of directors at the expiration of the director’s term and at least once every four years.
2. Provides that if, at the close of the nomination period, the inspector or inspectors of elections determines that the number of nominees is not more than the number of vacancies on the board, the nominees shall be considered elected by acclamation if all of the following are true:
   1. The HOA includes 6,000 or more units.
   2. The HOA provided individual notice of the election and the nomination procedure at least 30 days prior to the close of nominations.
   3. The HOA allows all qualified candidates to run if nominated.
3. Requires an HOA to disqualify a person from nomination if either of the following applies:
   1. The person is not a member of the HOA at the time of the nomination, unless a developer nominates a non-member candidate consistent with its voting power under existing regulations.
   2. The person has a criminal conviction that would prevent the HOA from purchasing fidelity bond insurance.
4. Allows an HOA, through its bylaws or election operating rules only, to disqualify a person from nomination based on any of the following:
   1. The nominee has failed to be current in the payment of regular or special assessments, as specified. An HOA may not disqualify a nominee if the nominee has paid the regular or special assessment under protest, has entered into a payment plan, or has not been provided the opportunity to engage in internal dispute resolution, as specified.
   2. The nominee holds a joint ownership interest in the same parcel as another nominee or incumbent board member.
   3. The nominee has been a member of the HOA for less than one year.

Background

A CID is a form of real estate in which each homeowner has an exclusive interest in a unit or lot and a shared or undivided interest in common-area property. Condominiums, planned unit developments, stock cooperatives, community apartments, and many resident-owned mobilehome parks all fall under the umbrella of CIDs. There are more than 50,000 CIDs in California comprising over 4.8 million housing units, or approximately one-quarter of the state’s housing stock. CIDs are governed by HOAs. 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 HOA, collectively referred to as the governing documents.

Comments

1. Purpose of the bill. The author states that elections are very expensive for large HOAs. Laguna Woods Village, the sponsor of this bill, serves more than 18,500 members, the vast majority of which are of modest means, living on fixed incomes. When an election is uncontested, it is a terrible and unnecessary drain on people with limited incomes. Laguna Woods Village has spent $60,000 on uncontested elections each year in the last two years alone. Most of Laguna Woods Village elections are uncontested, despite the best efforts of HOA leadership to recruit candidates. Yet the HOA board must hire elections officials, print and mail ballots, and conduct costly elections, shifting precious resources away from other important community needs. This bill seeks to remedy this situation by providing a process through which a board may initiate an election by acclamation when the number of candidates does not exceed the number of available seats on the board. This bill assures transparency, requiring that each individual voter receive notice of a pending election and be given the opportunity to nominate candidates no less than 30 days prior to the close of nominations.
2. Precedent for election by acclamation. Existing elections law for certain entities indicates precedent for making the election-by-acclamation change to CID law. For school districts, county boards of education, and special districts, if the number of candidates does not exceed the number of vacancies by the end of the nominating period, and no one has filed a petition signed by 10% of the voters of 50 voters (whichever is greater) requesting that an election be held, the nominees must be appointed and seated as if elected. Similarly, for municipal elections, if the number of candidates does not exceed the number of candidates by the end of the nominating period, the city elections official must inform the city’s governing body that it may adopt one of the following courses of action: appoint the nominee, appoint an eligible individual if no one has been nominated, or hold an election.

This bill is narrower than the above examples in that it does not allow for options such as a petition, an appointment of a non-nominee, or an election. A similar bill, AB 1799 (Mayes, 2016) would have required an HOA to provide notice to all its members at least 20 days before declaring an election uncontested; that provision, however, did not satisfy opposition concerns.

1. Trying again. The provisions of this bill were included in similar form in last year’s SB 1128 (Roth), which was vetoed. Governor Brown stated that “This bill takes a one-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.”

Related/Prior Legislation

SB 323 (Wieckowski, 2019) enacts a series of reforms to the laws governing board of director elections in CIDs to increase the regularity, fairness, formality and transparency of HOA elections. The bill is on the Assembly Floor.

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

SB 1265 (Wieckowski, 2018) would have made several changes to the elections process held in CIDs, as well as making changes in the process for handling disputes between a member and an HOA. The bill was vetoed.

AB 1799 (Mayes, 2016) would have exempted HOAs in CIDs from election procedure requirements in uncontested elections. The bill passed out of the Senate Transportation and Housing Committee but died in the Senate Judiciary Committee.

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

SUPPORT: (Verified 9/6/19)

Laguna Woods Village (source)
California Association of Community Managers
Community Associations Institute - California Legislative Action Committee

OPPOSITION: (Verified 9/6/19)

California Alliance for Retired Americans
Center For California Homeowner Association Law
Schiffer Buus

ARGUMENTS IN SUPPORT: Laguna Woods Village, sponsor of this bill, states that it will provide much-needed relief from expensive and unnecessary elections for HOAs. The sponsor states that it has spent $60,000 on uncontested elections each year in the last two years alone, despite outcomes predetermined by the fact that there were more board seats available than there were people willing to fill those seats. The cost of these elections directly impacts residents, as it increases monthly assessments.

ARGUMENTS IN OPPOSITION: Opponents state that allowing election by acclamation would enable an HOA board to ignore or prevent nominations by non-incumbents, then determine that no election is required due to an insufficient number of candidates. The Center for California Homeowner Association Law cites a number of reports from homeowners describing how they were either discouraged from running for a seat on an HOA board, or were prevented from running for a seat because they did not meet certain qualifications set by the board.

Prepared by: Erin Riches / HOUSING / (916) 651-4124

9/13/19 19:33:35

**** END ****

SENATE THIRD READING

STR Bill Id:SB 754

Author:(Moorlach)

As Amended Ver:September 9, 2019

Majority vote

SUMMARY:

Creates a process for homeowners associations (HOAs) in common interest developments (CID) to approve board members by acclamation.

Major Provisions

1. Requires an HOA to hold elections for members of the board of directors every four years.
2. Provides that once members of the HOA have been nominated for the board of directors if the number of nominees is equal to the number of vacancies on the board the nominees shall be elected by acclamation if all of the following are true:
   1. The HOA includes 6,000 units or more;
   2. The HOA provided individual notice of the election and procedure for nominating candidates at least 30 days before the close of the nomination;
   3. The HOA permits all candidates to run if nominated; and
   4. The HOA permits all candidates to run if nominated except for the following:
      1. If the person is not a member of the HOA at the time of the nomination however a developer can nominate a nonmember candidate consistent with the voting power of the developer as set forth in the regulations of the Department of Real Estate.
3. Allows a HOA through its bylaws or election operating rules to disqualify a person from nomination as a candidate if any of the following are true:
   1. If a person discloses or the HOA is aware or becomes aware of a criminal conviction that would prevent the HOA from purchasing fidelity bond insurance;
   2. If a nominee is not current in the payment of regular and special assessments. Allows an HOA to require a sitting director to be current on payment of regular and special assessments;
   3. If a person who if elected would be serving on the board with another person who holds a joint ownership in the same separate interest as the person or person nominated or an incumbent director;
   4. If the person has been a member of the HOA for less than a year; and,
   5. A person for not paying assessments, but may not disqualify a nominee for nonpayment of fines, fines renamed as assessments, collection charges, late charges, or costs levied by a third party. Provides that a person may be not disqualified for failure to be current in payment of assessments if either of the following circumstances are true:
      1. The person has paid the assessment under protest;
      2. The person entered into a payment plan; and,
      3. Prohibits an HOA from disqualifying a person who has not been offered an opportunity to engage in internal dispute resolution.

COMMENTS:

In HOAs with 6,000 separate interests or more, this bill would all an election to be made by acclamation. Once the nominations for the board of directors are complete, if the total number of nominees equals the number of open board seats, the election could be conducted by acclamation. This would bypass the election procedure in existing law. The HOA would be required to provide notice to the members 30 days prior to the nominations of the procedure for nominating candidates and all qualified candidates would be permitted to run. HOAs are required to adopt operating rules that govern the elections including qualifications for candidates for the board of directors. This bill would require an HOA to disqualify a candidate for the board if he or she is not a member of the HOA or if the person has been convicted of a felony in the last 20 years. HOAs would allowed to disqualify a candidate who has owned in the CID for less than one year. An HOA could also disqualify a person or board member who is delinquent on regular and special assessments, except that the person has to have been offered a payment plan, the person may pay the assessment under protest, and the person must be given an opportunity to participate internal dispute resolution.

According to the Author:

According to the author, "Elections are very expensive for large HOAs. Laguna Woods Village, the sponsor of this bill, serves more than 18,500 members, the vast majority of which are of modest means, living on fixed incomes. When an election is uncontested, it is a terrible and unnecessary drain on people with limited incomes. Laguna Woods Village has spent $60,000 on uncontested elections each year in the last two years alone. Most of Laguna Woods Village elections are uncontested, despite the best efforts of HOA leadership to recruit candidates. Yet the HOA board must hire elections officials, print and mail ballots, and conduct costly elections, shifting precious resources away from other important community needs."

Arguments in Support:

According to the sponsor of this bill, Laguna Woods, "SB 754 allows for election of board members by acclamation when the number of available director nominees does not exceed the number of vacant positions. Even on occasions when not enough members have the time or inclination to fill available board seats, we are still required to conduct a full election. Board election costs for Laguna Woods Village from 2016 to 2018 there were nine board elections costing a total of $116,760. Four of the nine elections were for uncontested seats and cost more than $70,000 to conduct, a significant budgetary hit that would no longer be necessary under SB 754."

Arguments in Opposition:

The Community Associations Institute's California Legislative Action Committee is supportive of giving HOAS the option of voting by acclamation when the number of candidates equals the number of open board seats; however, they are opposed to establish qualifications for board members in statute and believe it should be left up to individual HOAs to determine those qualifications.

FISCAL COMMENTS:

Unknown. This bill is keyed non-fiscal by the Legislative Counsel.

VOTES:

SENATE FLOOR: 38-0-0

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

ASM HOUSING AND COMMUNITY DEVELOPMENT: 8-0-0

YES: Chiu, Diep, Gabriel, Gloria, Kiley, Limón, Maienschein, Quirk-Silva

UPDATED:

VERSION: September 9, 2019

CONSULTANT: Lisa Engel / H. & C.D. / (916) 319-2085 FN: 0002215

SENATE THIRD READING

STR Bill Id:SB 754

Author:(Moorlach)

As Amended Ver:September 5, 2019

Majority vote

SUMMARY:

Creates a process for homeowners associations (HOAs) in common interest developments (CID) to approve board members by acclamation.

Major Provisions

1. Requires an HOA to hold elections for members of the board of directors every four years.
2. Provides that once members of the HOA have been nominated for the board of directors if the number of nominees is equal to the number of vacancies on the board the nominees shall be elected by acclamation if all of the following are true:
3. The HOA includes 6,000 units or more;
4. The HOA provided individual notice of the election and procedure for nominating candidates at least 30 days before the close of the nomination;
5. The HOA permits all candidates to run if nominated; and
6. The HOA permits all candidates to run if nominated except for the following:
   • 1. If the person is not a member of the HOA at the time of the nomination however a developer can nominate a nonmember candidate consistent with the voting power of the developer as set forth in the regulations of the Department of Real Estate.
7. Allows a HOA through its bylaws or election operating rules to disqualify a person from nomination as a candidate if any of the following are true:
8. If a person discloses or the HOA is aware or becomes aware of a criminal conviction that would prevent the HOA from purchasing fidelity bond insurance;
9. If a nominee is not current in the payment of regular and special assessments. Allows an HOA to require a sitting director to be current on payment of regular and special assessments;
10. If a person who if elected would be serving on the board with another person who holds a joint ownership in the same separate interest as the person or person nominated or an incumbent director;
11. If the person has been a member of the HOA for less than a year; and,
12. A person for not paying assessments, but may not disqualify a nominee for nonpayment of fines, fines renamed as assessments, collection charges, late charges, or costs levied by a third party. Provides that a person may be not disqualified for failure to be current in payment of assessments if either of the following circumstances are true:
13. The person has paid the assessment under protest;
14. The person entered into a payment plan; and,
15. Prohibits an HOA from disqualifying a person who has not been offered an opportunity to engage in internal dispute resolution.

COMMENTS:

In HOAs with 6,000 separate interests or more, this bill would all an election to be made by acclamation. Once the nominations for the board of directors are complete, if the total number of nominees equals the number of open board seats, the election could be conducted by acclamation. This would bypass the election procedure in existing law. The HOA would be required to provide notice to the members 30 days prior to the nominations of the procedure for nominating candidates and all qualified candidates would be permitted to run. HOAs are required to adopt operating rules that govern the elections including qualifications for candidates for the board of directors. This bill would require an HOA to disqualify a candidate for the board if he or she is not a member of the HOA or if the person has been convicted of a felony in the last 20 years. HOAs would allowed to disqualify a candidate who has owned in the CID for less than one year. An HOA could also disqualify a person or board member who is delinquent on regular and special assessments, except that the person has to have been offered a payment plan, the person may pay the assessment under protest, and the person must be given an opportunity to participate internal dispute resolution.

According to the Author:

According to the author, "Elections are very expensive for large HOAs. Laguna Woods Village, the sponsor of this bill, serves more than 18,500 members, the vast majority of which are of modest means, living on fixed incomes. When an election is uncontested, it is a terrible and unnecessary drain on people with limited incomes. Laguna Woods Village has spent $60,000 on uncontested elections each year in the last two years alone. Most of Laguna Woods Village elections are uncontested, despite the best efforts of HOA leadership to recruit candidates. Yet the HOA board must hire elections officials, print and mail ballots, and conduct costly elections, shifting precious resources away from other important community needs."

Arguments in Support:

According to the sponsor of this bill, Laguna Woods, "SB 754 allows for election of board members by acclamation when the number of available director nominees does not exceed the number of vacant positions. Even on occasions when not enough members have the time or inclination to fill available board seats, we are still required to conduct a full election. Board election costs for Laguna Woods Village from 2016 to 2018 there were nine board elections costing a total of $116,760. Four of the nine elections were for uncontested seats and cost more than $70,000 to conduct, a significant budgetary hit that would no longer be necessary under SB 754."

Arguments in Opposition:

The Community Associations Institute's California Legislative Action Committee is supportive of giving HOAS the option of voting by acclamation when the number of candidates equals the number of open board seats; however, they are opposed to establish qualifications for board members in statute and believe it should be left up to individual HOAs to determine those qualifications.

FISCAL COMMENTS:

Unknown. This bill is keyed non-fiscal by the Legislative Counsel.

VOTES:

SENATE FLOOR: 38-0-0

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

ASM HOUSING AND COMMUNITY DEVELOPMENT: 8-0-0

YES: Chiu, Diep, Gabriel, Gloria, Kiley, Limón, Maienschein, Quirk-Silva

UPDATED:

VERSION: September 5, 2019

CONSULTANT: Lisa Engel / H. & C.D. / (916) 319-2085 FN: 0001995

SENATE THIRD READING

STR Bill Id:SB 754

Author:(Moorlach)

As Amended Ver:June 24, 2019

Majority vote

SUMMARY:

Creates a process for homeowners associations (HOAs) in common interest developments (CID) to approve board members by acclamation.

Major Provisions

1. Requires an HOA to hold elections for members of the board of directors every four years.
2. Provides that once members of the HOA have been nominated for the board of directors if the number of nominees is equal to the number of vacancies on the board the nominees shall be elected by acclamation if all of the following are true:
   1. The HOA includes 6,000 units or more;
   2. The HOA provided individual notice of the election and procedure for nominating candidates at least 30 days before the close of the nomination;
   3. The HOA permits all candidates to run if nominated.
   4. The HOA permits all candidates to run if nominated except for the following:
      1. If the person is not a member of the HOA at the time of the nomination; and
      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.
   5. Allows a HOA through its bylaws or election operating rules to disqualify a person from nomination as a candidate if any of the following are true:
      1. If a nominee is not current in the payment of regular and special assessments. Allows an HOA to require a sitting director to be current on payment of regular and special assessments;
      2. If a person who if elected would be serving on the board with another person who holds a joint ownership in the same separate interest as the person or person nominated or an incumbent director;
      3. If the person has been a member of the HOA for less than a year; and,
      4. A person for not paying regular assessments, but may not disqualify a nominee for nonpayment of fines, fines renamed as assessments, collection charges, late charges, or costs levied by a third party. Provides that a person may be not disqualified for failure to be current in payment of regular and special assessments if either of the following circumstances are true:
         1. The person has paid the regular and special assessment under protest;
         2. The person entered into a payment plan; and,
         3. Prohibits an HOA from disqualifying a person who has not been offered an opportunity to engage in internal dispute resolution.

COMMENTS:

In HOAs with 6,000 separate interests or more, this bill would all an election to be made by acclamation. Once the nominations for the board of directors are complete, if the total number of nominees equals the number of open board seats, the election could be conducted by acclamation. This would bypass the election procedure in existing law. The HOA would be required to provide notice to the members 30 days prior to the nominations of the procedure for nominating candidates and all qualified candidates would be permitted to run. HOAs are required to adopt operating rules that govern the elections including qualifications for candidates for the board of directors. This bill would require an HOA to disqualify a candidate for the board if he or she is not a member of the HOA or if the person has been convicted of a felony in the last 20 years. HOAs would allowed to disqualify a candidate who has owned in the CID for less than one year. An HOA could also disqualify a person or board member who is delinquent on regular and special assessments, except that the person has to have been offered a payment plan, the person may pay the assessment under protest, and the person must be given an opportunity to participate internal dispute resolution.

According to the Author:

According to the author, "Elections are very expensive for large HOAs. Laguna Woods Village, the sponsor of this bill, serves more than 18,500 members, the vast majority of which are of modest means, living on fixed incomes. When an election is uncontested, it is a terrible and unnecessary drain on people with limited incomes. Laguna Woods Village has spent $60,000 on uncontested elections each year in the last two years alone. Most of Laguna Woods Village elections are uncontested, despite the best efforts of HOA leadership to recruit candidates. Yet the HOA board must hire elections officials, print and mail ballots, and conduct costly elections, shifting precious resources away from other important community needs."

Arguments in Support:

According to the sponsor of this bill, Laguna Woods, "SB 754 allows for election of board members by acclamation when the number of available director nominees does not exceed the number of vacant positions. Even on occasions when not enough members have the time or inclination to fill available board seats, we are still required to conduct a full election. Board election costs for Laguna Woods Village from 2016 to 2018 there were nine board elections costing a total of $116,760. Four of the nine elections were for uncontested seats and cost more than $70,000 to conduct, a significant budgetary hit that would no longer be necessary under SB 754."

Arguments in Opposition:

The Community Associations Institute's California Legislative Action Committee is supportive of giving HOAS the option of voting by acclamation when the number of candidates equals the number of open board seats; however, they are opposed to establish qualifications for board members in statute and believe it should be left up to individual HOAs to determine those qualifications.

FISCAL COMMENTS:

Unknown. This bill is keyed non-fiscal by the Legislative Counsel.

VOTES:

SENATE FLOOR: 38-0-0

YES: Allen, Archuleta, Atkins, Bates, Beall, Borgeas, Bradford, Caballero, Chang, Dodd, Durazo, Galgiani, Glazer, Grove, Hertzberg, Hill, Hueso, Hurtado, Jackson, Jones, Leyva, McGuire, Mitchell, Monning, Moorlach, Morrell, Nielsen, Pan, Portantino, Roth, Rubio, Skinner, Stern, Stone, Umberg, Wieckowski, Wiener, Wilk

ASM HOUSING AND COMMUNITY DEVELOPMENT: 8-0-0

YES: Chiu, Diep, Gabriel, Gloria, Kiley, Limón, Maienschein, Quirk-Silva

UPDATED:

VERSION: June 24, 2019

CONSULTANT: Lisa Engel / H. & C.D. / (916) 319-2085 FN: 0001243

Date of Hearing: July 3, 2019

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

David Chiu, Chair

SBPCA Bill Id:SB 754

Author:(Moorlach) – As Amended Ver:June 24, 2019

SENATE VOTE: 38-0

SUBJECT: Common interest developments: board members: election by acclamation

SUMMARY: Creates a process for homeowners associations (HOAs) in common interest developments (CID) to approve board members by acclamation. Specifically, this bill:

1. Requires an HOA to hold elections for members of the board of directors every four years.
2. Provides that once members of the HOA have been nominated for the board of directors if the number of nominees is equal to the number of vacancies on the board the nominees shall be elected by acclamation if all of the following are true:
3. The HOA includes 6,000 units or more;
4. The HOA provided individual notice of the election and procedure for nominating candidates at least 30 days before the close of the nomination;
5. The HOA permits all candidates to run if nominated.
6. The HOA permits all candidates to run if nominated except for the following:
7. If the person is not a member of the HOA at the time of the nomination; and
8. 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.
9. Allows a HOA through its bylaws or election operating rules to disqualify a person from nomination as a candidate if any of the following are true:
10. If a nominee is not current in the payment of regular assessments. Allows an HOA to require a sitting director to be current on payment of regular assessments;
11. If a person who if elected would be serving on the board with another person who holds a joint ownership in the same separate interest as the person or person nominated or an incumbent director;
12. If the person has been a member of the HOA for less than a year; and,
13. A person for not paying regular assessments, but may not disqualify a nominee for nonpayment of fines, fines renamed as assessments, collection charges, late charges, or costs levied by a third party. Provides that a person may be not disqualified for failure to be current in payment of regular assessments if either of the following circumstances are true:
14. The person has paid the regular assessment under protest;
15. The person entered into a payment plan; and,
16. Prohibits an HOA from disqualifying a person who has not been offered an opportunity to engage in internal dispute resolution.

EXISTING LAW:

1. Requires the election and removal of directors, amendments to governing documents, or the grant of exclusive use of common areas, to be held by secret ballot.
2. Provides that directors shall not be required to be elected if the governing documents provide that one member from each separate interest (e.g., unit or lot) is a director.
3. Requires the HOA to adopt election rules that do the following:
   1. Ensure that if any candidate or member advocating a point of view is provided access to association media, newsletters, or websites during a campaign, and that equal access shall be provided to all candidates and members, for purposes reasonably related to the election.
   2. Ensure access to common area meeting space at no cost to all candidates.
   3. Specify the qualifications for candidates for the board and any other elected position, and procedures for the nomination of candidates, consistent with the governing documents. A rule shall not be deemed reasonable if it disallows any member from nominating himself or herself for election to the board.
   4. Specify the qualifications for voting; the voting power of each membership; the authenticity, validity, effect of proxies; and the voting period for elections. This includes the times at which polls will open and close, consistent with the governing documents.
   5. Specify a method for selecting one or three independent third parties as inspector or inspectors of elections. Inspectors may appoint or oversee additional independent third-party persons to verify signatures and to count and tabulate votes as the inspector or inspectors deem appropriate.
4. Requires the inspector of elections to be one or three individuals who have the following duties:
5. Determine the number of memberships entitled to vote and the voting power of each;
6. Determine the authenticity, validity, and effect of proxies;
7. Receive votes and ballots and hear and determine all challenges and questions;
8. Count and tabulate all votes;
9. Determine when the polls will close; and
10. Determine the results of the election.
11. Permits the nomination of candidates from the floor of membership meetings or nomination by any other manner.
12. Permits a member of an association to bring a cause of action in small claims court against the HOA if the HOA restricts access to association resources by a candidate or member advocating a point of view; the receipt of the ballot by a member; or the counting, tabulation, or reporting of, or access to, ballots for inspection and review after the tabulation.
13. Requires the HOA board to provide notice of a proposed rule change, as specified, at least 30 days prior to making the rule change.
14. Provides that if an HOA must deliver a document by “individual delivery” or “individual notice,” it may deliver the document by email, fax, or other electronic means if the recipient has consented in writing to that method of delivery.

FISCAL EFFECT: Unknown.

COMMENTS:

Purpose of the bill: According to the author, “Elections are very expensive for large HOAs. Laguna Woods Village, the sponsor of this bill, serves more than 18,500 members, the vast majority of which are of modest means, living on fixed incomes. When an election is uncontested, it is a terrible and unnecessary drain on people with limited incomes. Laguna Woods Village has spent $60,000 on uncontested elections each year in the last two years alone. Most of Laguna Woods Village elections are uncontested, despite the best efforts of HOA leadership to recruit candidates. Yet the HOA board must hire elections officials, print and mail ballots, and conduct costly elections, shifting precious resources away from other important community needs. This bill seeks to remedy this situation by providing a process through which a board may initiate an election by acclamation when the number of candidates does not exceed the number of available seats on the board. This bill assures transparency, requiring that each individual voter receive notice of a pending election and be given the opportunity to nominate candidates no less than 30 days prior to the close of nominations.”

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

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.

Acclamation: In HOAs with 6,000 separate interests or more, this bill would all an election to be made by acclamation. Once the nominations for the board of directors are complete, if the total number of nominees equals the number of open board seats, the election could be conducted by acclamation. This would bypass the election procedure in existing law. The HOA would be required to provide notice to the members 30 days prior to the nominations of the procedure for nominating candidates and all qualified candidates would be permitted to run. This bill is narrower than past bills in that it is limited to HOAS of 6,000 separate interests or more.

Precedent for election by acclamation: Existing law relating to elections for school district boards, county boards of education, special district boards, and city councils indicates precedent for making the election-by-acclamation change to CID law:

• 1. School districts, county boards of education, and special districts: If, by the end of the nominating period, the number of candidates does not exceed the number of vacancies, and no one has filed a petition signed by 10% of the voters or 50 voters (whichever is greater) requesting that an election be held, the nominees shall be appointed and seated as if elected.
  2. Municipal elections: If, by the end of the nominating period, the number of candidates is less than or does not exceed the number of vacancies, the city elections official shall inform the city’s governing body that it may adopt one of the following courses of action: appoint the nominees, appoint an eligible individual if no one has been nominated, or hold the election.

Qualifications of board members: HOAs are required to adopt operating rules that govern the elections including qualifications for candidates for the board of directors. This bill would require an HOA to disqualify a candidate for the board if he or she is not a member of the HOA or if the person has been convicted of a felony in the last 20 years. HOAs would not be allowed to disqualify a candidate who has owned in the CID for less than one year. An HOA could also disqualify a person who is delinquent on regular assessments, except that the person has to have been offered a payment plan, the person may pay the assessment under protest, or if the person was not given an opportunity to participate internal dispute resolution. Board members could also not serve on the board if delinquent on regular assessments. Regular assessments are payments made by the membership of the HOA to pay for the basic operations of the CID. CIDs also can approve special assessments necessary to pay for larger expenses like significant construction or renovations of the CID. This bill would only allow an HOA to prevent a member from serving on the board if he or she is delinquent on regular assessments. The committee may wish to consider including special assessments in this prohibition. Board members will be required to take actions against members who are delinquent on both regular and special assessments, a board member should be current on their own assessments, both regular and special, if they are enforcing on another member.

The provisions in this bill regarding qualifications of a board member are identical to the provisions in SB 323 (Wieckowski) which this committee voted to approve 5-1 on June 19, 2019.

Arguments in opposition: The Community Associations Institute’s California Legislative Action Committee is supportive of giving HOAS the option of voting by acclamation when the number of candidates equals the number of open board seats; however, they are opposed to establish qualifications for board members in statute and believe it should be left up to individual HOAs to determine those qualifications.

Committee amendment: Consistent with the amendment this committee requested of a similar bill, the committee may wish to consider requiring that a candidate and a member of the board of directors to be current on special assessments, in addition to regular assessments, in order to run for and serve on the board of directors of a CID.

Related legislation:

SB 323 (Wieckowski, 2019) enacts a series of reforms to the laws governing board of director elections in CIDs to increase the regularity, fairness, formality and transparency of HOA elections. This bill passed out of this committee and is pending hearing in Assembly Judiciary Committee.

Previous legislation:

SB 261 (Monning) Chapter 836, Statutes of 2018 authorized an HOA in a CID to provide a document by electronic means if the recipient has consented by email and reduces the notice requirement of a proposed rule change by the HOA board from 30 days to 28 days.

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

SB 1265 (Wieckowski, 2018) would have made several changes to the elections process held in CIDs, as well as making changes in the process for handling disputes between a member and an HOA. The bill was vetoed.

REGISTERED SUPPORT / OPPOSITION:

Support

Laguna Woods Village (Sponsor)

Laguna Woods Residents (50)

Opposition

Community Associations Institute’s California Legislative Action Committee

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

 THIRD READING  

Bill No: SB 754

Author: Moorlach (R)

Amended: 5/14/19

Vote: 21

SENATE HOUSING COMMITTEE: 10-0, 4/22/19

AYES: Wiener, Morrell, Bates, Caballero, Durazo, McGuire, Moorlach, Roth, Skinner, Umberg

NO VOTE RECORDED: Wieckowski

SENATE JUDICIARY COMMITTEE: 9-0, 4/30/19

AYES: Jackson, Borgeas, Allen, Caballero, Jones, Monning, Stern, Umberg, Wieckowski

SUBJECT: Common interest developments: board members: election by acclamation

SOURCE: Laguna Woods Village

DIGEST:

This bill provides that if nominees to a homeowner association (HOA) board in a common interest development (CID) shall be considered elected by acclamation if the number of nominees does not exceed the number of vacancies on the board.

Senate Floor Amendments of 5/14/19 correct an erroneous code section reference and clarify the provision relating to disqualification of a candidate who holds a joint ownership interest in the same parcel as another candidate or incumbent HOA board member.

ANALYSIS:

Existing law governing CIDs:

1. Requires the election and removal of directors, amendments to governing documents, or the grant of exclusive use of common areas, to be held by secret ballot.
2. Provides that directors shall not be required to be elected if the governing documents provide that one member from each separate interest (e.g., unit or lot) is a director.
3. Requires the HOA to adopt election rules that do the following:
   1. Ensure that if any candidate or member advocating a point of view is provided access to association media, newsletters, or websites during a campaign, and that equal access shall be provided to all candidates and members, for purposes reasonably related to the election.
   2. Ensure access to common-area meeting space at no cost to all candidates.
   3. Specify the qualifications for candidates for the board and any other elected position, and procedures for the nomination of candidates, consistent with the governing documents. A rule shall not be deemed reasonable if it disallows any member from nominating himself or herself for election to the board.
   4. Specifies the qualifications for voting; the voting power of each membership; the authenticity, validity, effect of proxies; and the voting period for elections. This includes the times at which polls will open and close, consistent with the governing documents.
   5. Specifies a method for selecting one or three independent third parties as inspector or inspectors of elections. Inspectors may appoint or oversee additional independent third-party persons to verify signatures and to count and tabulate votes as the inspector or inspectors deem appropriate.
4. Requires the inspector of elections to be one or three individuals who have the following duties:
   1. Determine the number of memberships entitled to vote and the voting power of each.
   2. Determine the authenticity, validity, and effect of proxies.
   3. Receive votes and ballots and hear and determine all challenges and questions.
   4. Count and tabulate all votes.
   5. Determine when the polls will close.
   6. Determine the results of the election.
5. Permits the nomination of candidates from the floor of membership meetings or nomination by any other manner.
6. Permits a member of an HOA to bring a cause of action in small claims court against the HOA if the HOA restricts access to HOA resources by a candidate or member advocating a point of view; the receipt of the ballot by a member; or the counting, tabulation, or reporting of, or access to, ballots for inspection and review after the tabulation.
7. Requires the HOA board to provide notice of a proposed rule change, as specified, at least 30 days prior to making the rule change.

This bill:

1. Requires an HOA to hold an election for a seat on the board of directors at the expiration of the director’s term and at least once every four years.
2. Provides that if, at the close of the nomination period, the inspector or inspectors of elections determines that the number of nominees is not more than the number of vacancies on the board, the nominees shall be considered elected by acclamation if both of the following are true:
   1. The HOA provided individual notice of the election and the nomination procedure at least 30 days prior to the close of nominations.
   2. The HOA allows all qualified candidates to run if nominated.
3. Requires an HOA to disqualify a person from nomination if either of the following applies:
   1. The person 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, as specified.
4. Allows an HOA, through its bylaws or election operating rules only, to disqualify a person from nomination based on any of the following:
   1. The nominee has failed to be current in the payment of regular assessments, as specified. An HOA may not disqualify a nominee if the nominee has paid the regular assessment under protest, has entered into a payment plan, or has not been provided the opportunity to engage in internal dispute resolution, as specified.
   2. The nominee holds a joint ownership interest in the same parcel as another nominee or incumbent board member.
   3. The nominee has been a member of the HOA for less than one year.

Background

A CID is a form of real estate in which each homeowner has an exclusive interest in a unit or lot and a shared or undivided interest in common-area property. Condominiums, planned unit developments, stock cooperatives, community apartments, and many resident-owned mobilehome parks all fall under the umbrella of CIDs. There are more than 50,000 CIDs in California comprising over 4.8 million housing units, or approximately one-quarter of the state’s housing stock. CIDs are governed by HOAs. 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 HOA, collectively referred to as the governing documents.

Comments

1. Purpose of the bill. The author states that elections are very expensive for large HOAs. Laguna Woods Village, the sponsor of this bill, serves more than 18,500 members, the vast majority of which are of modest means, living on fixed incomes. When an election is uncontested, it is a terrible and unnecessary drain on people with limited incomes. Laguna Woods Village has spent $60,000 on uncontested elections each year in the last two years alone. Most of Laguna Woods Village elections are uncontested, despite the best efforts of HOA leadership to recruit candidates. Yet the HOA board must hire elections officials, print and mail ballots, and conduct costly elections, shifting precious resources away from other important community needs. This bill seeks to remedy this situation by providing a process through which a board may initiate an election by acclamation when the number of candidates does not exceed the number of available seats on the board. This bill assures transparency, requiring that each individual voter receive notice of a pending election and be given the opportunity to nominate candidates no less than 30 days prior to the close of nominations.
2. Precedent for election by acclamation. Existing elections law for certain entities indicates precedent for making the election-by-acclamation change to CID law. For school districts, county boards of education, and special districts, if the number of candidates does not exceed the number of vacancies by the end of the nominating period, and no one has filed a petition signed by 10% of the voters of 50 voters (whichever is greater) requesting that an election be held, the nominees must be appointed and seated as if elected. Similarly, for municipal elections, if the number of candidates does not exceed the number of candidates by the end of the nominating period, the city elections official must inform the city’s governing body that it may adopt one of the following courses of action: appoint the nominee, appoint an eligible individual if no one has been nominated, or hold an election.

This bill is narrower than the above examples in that it does not allow for options such as a petition, an appointment of a non-nominee, or an election. A similar bill, AB 1799 (Mayes, 2016) would have required an HOA to provide notice to all its members at least 20 days before declaring an election uncontested; that provision, however, did not satisfy opposition concerns.

1. Opposition concerns. Opponents state that allowing election by acclamation would enable an HOA board to ignore or prevent nominations by non-incumbents, then determine that no election is required due to an insufficient number of candidates. To address these concerns, the May 7, 2019 amendments:
   1. Require HOAs that want to use seating by acclamation to limit the grounds on which candidates can be disqualified from running for the board.
   2. Require HOAs to conduct an election at the end of each director’s expiring term but in no event less often than once every four years.
2. Trying again. The provisions of this bill were included in similar form in last year’s SB 1128 (Roth), which was vetoed. Governor Brown stated that “This bill takes a one-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.”

Related/Prior Legislation

SB 323 (Wieckowski, 2019) enacts a series of reforms to the laws governing board of director elections in CIDs to increase the regularity, fairness, formality and transparency of HOA elections. This bill is on the Senate Floor.

SB 261 (Monning, Chapter 836, Statutes of 2018) authorized an HOA in a CID to provide a document by electronic means if the recipient has consented by email and reduces the notice requirement of a proposed rule change by the HOA board from 30 days to 28 days.

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

SB 1265 (Wieckowski, 2018) would have made several changes to the elections process held in CIDs, as well as making changes in the process for handling disputes between a member and an HOA. The bill was vetoed.

AB 1799 (Mayes, 2016) would have exempted HOAs in CIDs from election procedure requirements in uncontested elections. This bill passed out of the Senate Transportation and Housing Committee but died in the Senate Judiciary Committee.

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

SUPPORT: (Verified 5/14/19)

Laguna Woods Village (source)
California Association of Community Managers
Community Associations Institute - California Legislative Action Committee

OPPOSITION: (Verified 5/14/19)

California Alliance For Retired Americans
Center For California Homeowner Association Law
1 Individual

ARGUMENTS IN SUPPORT: Laguna Woods Village, sponsor of this bill, states that it will provide much-needed relief from expensive and unnecessary elections for HOAs. The sponsor states that it has spent $60,000 on uncontested elections each year in the last two years alone, despite outcomes predetermined by the fact that there were more board seats available than there were people willing to fill those seats. The cost of these elections directly impacts residents, as it increases monthly assessments.

ARGUMENTS IN OPPOSITION: Opponents state that allowing election by acclamation would enable an HOA board to ignore or prevent nominations by non-incumbents, then determine that no election is required due to an insufficient number of candidates. The Center for California Homeowner Association Law cites a number of reports from homeowners describing how they were either discouraged from running for a seat on an HOA board, or were prevented from running for a seat because they did not meet certain qualifications set by the board.

Prepared by: Erin Riches / HOUSING / (916) 651-4124

5/15/19 15:03:17

**** END ****

 THIRD READING  

Bill No: SB 754

Author: Moorlach (R)

Amended: 5/7/19

Vote: 21

SENATE HOUSING COMMITTEE: 10-0, 4/22/19

AYES: Wiener, Morrell, Bates, Caballero, Durazo, McGuire, Moorlach, Roth, Skinner, Umberg

NO VOTE RECORDED: Wieckowski

SENATE JUDICIARY COMMITTEE: 9-0, 4/30/19

AYES: Jackson, Borgeas, Allen, Caballero, Jones, Monning, Stern, Umberg, Wieckowski

SUBJECT: Common interest developments: board members: election by acclamation

SOURCE: Laguna Woods Village

DIGEST:

This bill provides that if nominees to a homeowner association (HOA) board in a common interest development (CID) shall be considered elected by acclamation if the number of nominees does not exceed the number of vacancies on the board.

ANALYSIS:

Existing law governing CIDs:

1. Requires the election and removal of directors, amendments to governing documents, or the grant of exclusive use of common areas, to be held by secret ballot.
2. Provides that directors shall not be required to be elected if the governing documents provide that one member from each separate interest (e.g., unit or lot) is a director.
3. Requires the HOA to adopt election rules that do the following:
   1. Ensure that if any candidate or member advocating a point of view is provided access to association media, newsletters, or websites during a campaign, and that equal access shall be provided to all candidates and members, for purposes reasonably related to the election.
   2. Ensure access to common-area meeting space at no cost to all candidates.
   3. Specify the qualifications for candidates for the board and any other elected position, and procedures for the nomination of candidates, consistent with the governing documents. A rule shall not be deemed reasonable if it disallows any member from nominating himself or herself for election to the board.
   4. Specifies the qualifications for voting; the voting power of each membership; the authenticity, validity, effect of proxies; and the voting period for elections. This includes the times at which polls will open and close, consistent with the governing documents.
   5. Specifies a method for selecting one or three independent third parties as inspector or inspectors of elections. Inspectors may appoint or oversee additional independent third-party persons to verify signatures and to count and tabulate votes as the inspector or inspectors deem appropriate.
4. Requires the inspector of elections to be one or three individuals who have the following duties:
   1. Determine the number of memberships entitled to vote and the voting power of each.
   2. Determine the authenticity, validity, and effect of proxies.
   3. Receive votes and ballots and hear and determine all challenges and questions.
   4. Count and tabulate all votes.
   5. Determine when the polls will close.
   6. Determine the results of the election.
5. Permits the nomination of candidates from the floor of membership meetings or nomination by any other manner.
6. Permits a member of an HOA to bring a cause of action in small claims court against the HOA if the HOA restricts access to HOA resources by a candidate or member advocating a point of view; the receipt of the ballot by a member; or the counting, tabulation, or reporting of, or access to, ballots for inspection and review after the tabulation.
7. Requires the HOA board to provide notice of a proposed rule change, as specified, at least 30 days prior to making the rule change.

This bill:

1. Requires an HOA to hold an election for a seat on the board of directors at the expiration of the director’s term and at least once every four years.
2. Provides that if, at the close of the nomination period, the inspector or inspectors of elections determines that the number of nominees is not more than the number of vacancies on the board, the nominees shall be considered elected by acclamation if both of the following are true:
   1. The HOA provided individual notice of the election and the nomination procedure at least 30 days prior to the close of nominations.
   2. The HOA allows all qualified candidates to run if nominated.
3. Requires an HOA to disqualify a person from nomination if either of the following applies:
   1. The person 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, as specified.
4. Allows an HOA, through its bylaws or election operating rules only, to disqualify a person from nomination based on any of the following:
   1. The nominee has failed to be current in the payment of regular assessments, as specified. An HOA may not disqualify a nominee if the nominee has paid the regular assessment under protest, has entered into a payment plan, or the has not been provided the opportunity to engage in internal dispute resolution, as specified.
   2. The nominees are two or more people with joint ownership interest in the same parcel, as specified.
   3. The nominee has been a member of the HOA for less than one year.

Background

A CID is a form of real estate in which each homeowner has an exclusive interest in a unit or lot and a shared or undivided interest in common-area property. Condominiums, planned unit developments, stock cooperatives, community apartments, and many resident-owned mobilehome parks all fall under the umbrella of CIDs. There are more than 50,000 CIDs in California comprising over 4.8 million housing units, or approximately one-quarter of the state’s housing stock. CIDs are governed by HOAs. 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 HOA, collectively referred to as the governing documents.

Comments

1. Purpose of the bill. The author states that elections are very expensive for large HOAs. Laguna Woods Village, the sponsor of this bill, serves more than 18,500 members, the vast majority of which are of modest means, living on fixed incomes. When an election is uncontested, it is a terrible and unnecessary drain on people with limited incomes. Laguna Woods Village has spent $60,000 on uncontested elections each year in the last two years alone. Most of Laguna Woods Village elections are uncontested, despite the best efforts of HOA leadership to recruit candidates. Yet the HOA board must hire elections officials, print and mail ballots, and conduct costly elections, shifting precious resources away from other important community needs. This bill seeks to remedy this situation by providing a process through which a board may initiate an election by acclamation when the number of candidates does not exceed the number of available seats on the board. This bill assures transparency, requiring that each individual voter receive notice of a pending election and be given the opportunity to nominate candidates no less than 30 days prior to the close of nominations.
2. Precedent for election by acclamation. Existing elections law for certain entities indicates precedent for making the election-by-acclamation change to CID law. For school districts, county boards of education, and special districts, if the number of candidates does not exceed the number of vacancies by the end of the nominating period, and no one has filed a petition signed by 10% of the voters of 50 voters (whichever is greater) requesting that an election be held, the nominees must be appointed and seated as if elected. Similarly, for municipal elections, if the number of candidates does not exceed the number of candidates by the end of the nominating period, the city elections official must inform the city’s governing body that it may adopt one of the following courses of action: appoint the nominee, appoint an eligible individual if no one has been nominated, or hold an election.

This bill is narrower than the above examples in that it does not allow for options such as a petition, an appointment of a non-nominee, or an election. A similar bill, AB 1799 (Mayes, 2016) would have required an HOA to provide notice to all its members at least 20 days before declaring an election uncontested; that provision, however, did not satisfy opposition concerns.

1. Opposition concerns. Opponents state that allowing election by acclamation would enable an HOA board to ignore or prevent nominations by non-incumbents, then determine that no election is required due to an insufficient number of candidates. To address these concerns, the May 7, 2019 amendments:
   1. Require HOAs that want to use seating by acclamation to limit the grounds on which candidates can be disqualified from running for the board.
   2. Require HOAs to conduct an election at the end of each director’s expiring term but in no event less often than once every four years.
2. Trying again. The provisions of this bill were included in similar form in last year’s SB 1128 (Roth), which was vetoed. Governor Brown stated that “This bill takes a one-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.”

Related/Prior Legislation

SB 323 (Wieckowski, 2019) enacts a series of reforms to the laws governing board of director elections in CIDs to increase the regularity, fairness, formality and transparency of HOA elections. This bill is on the Senate Floor.

SB 261 (Monning, Chapter 836, Statutes of 2018) authorized an HOA in a CID to provide a document by electronic means if the recipient has consented by email and reduces the notice requirement of a proposed rule change by the HOA board from 30 days to 28 days.

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

SB 1265 (Wieckowski, 2018) would have made several changes to the elections process held in CIDs, as well as making changes in the process for handling disputes between a member and an HOA. The bill was vetoed.

AB 1799 (Mayes, 2016) would have exempted HOAs in CIDs from election procedure requirements in uncontested elections. This bill passed out of the Senate Transportation and Housing Committee but died in the Senate Judiciary Committee.

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

SUPPORT: (Verified 5/7/19)

Laguna Woods Village (source)
California Association of Community Managers
Community Associations Institute - California Legislative Action Committee

OPPOSITION: (Verified 5/7/19)

California Alliance For Retired Americans
Center For California Homeowner Association Law
1 Individual

ARGUMENTS IN SUPPORT: Laguna Woods Village, sponsor of this bill, states that it will provide much-needed relief from expensive and unnecessary elections for HOAs. The sponsor states that it has spent $60,000 on uncontested elections each year in the last two years alone, despite outcomes predetermined by the fact that there were more board seats available than there were people willing to fill those seats. The cost of these elections directly impacts residents, as it increases monthly assessments.

ARGUMENTS IN OPPOSITION: Opponents state that allowing election by acclamation would enable an HOA board to ignore or prevent nominations by non-incumbents, then determine that no election is required due to an insufficient number of candidates. The Center for California Homeowner Association Law cites a number of reports from homeowners describing how they were either discouraged from running for a seat on an HOA board, or were prevented from running for a seat because they did not meet certain qualifications set by the board.

Prepared by: Erin Riches / HOUSING / (916) 651-4124

5/8/19 15:30:23

**** END ****

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2019-2020 Regular Session

Bill No: SB 754 (Author:Moorlach)

Version: March 27, 2019

Hearing Date: April 30, 2019

Fiscal: No

Urgency: No

Consultant: TSG

SUBJECT

Common interest developments: board members: election by acclamation

DIGEST

This bill permits candidates for the board of directors of a homeowners association (HOA) to be seated by acclamation in the event that there are no more candidates than vacant seats, provided specified preconditions have been met.

EXECUTIVE SUMMARY

Each HOA in California is governed by a board of directors. The membership of each HOA elects the board. Existing law sets forth the procedures for how HOA board elections must be conducted. It is a process quite similar to how public, vote-by-mail balloting works. While not tremendously expensive on a per-person basis, for larger HOAs the cost of running one of these board elections can reach into the tens of thousands of dollars. Meanwhile, interest in serving on HOA boards varies greatly. At some HOAs, board elections are hotly contested affairs with campaigns and debates. Other HOAs constantly struggle to drum up people willing to run. It is not uncommon for there to be fewer candidates than there are board vacancies to fill. In such a case, the outcome of the election is a foregone conclusion but, under existing law, balloting must be conducted anyway. This bill would, instead, allow HOAs to seat board members by acclamation anytime there are at least as many open seats on the board as there are candidates running. However, to ensure that the dearth of candidates is not due to lack of awareness about the election, HOAs would only be permitted to seat board members by acclamation if all HOA members were individually noticed, 30 days before the close of nominations, about the opportunity to run.

The bill is sponsored by Laguna Woods Village, one of the state’s largest HOAs. It has support from HOA managers and HOA trade associations. Opposition is from homeowner advocates, who contend that the bill will facilitate the ability of corrupt HOA boards to cling to power. The bill passed out of the Senate Housing Committee on a vote of 10-0.

PROPOSED CHANGES TO THE LAW

Existing state law:

1. Establishes rules and regulations, as part of the Davis-Stirling Common Interest Development Act, that govern the operation of a residential common interest developments (CIDs) and the respective rights and duties of an HOA and its members. (Civ. Code § 4000 et seq.)
2. Obligates HOAs to hold an election by secret ballot and according to specified procedures, for:
3. assessments legally requiring a vote;
4. election and removal of directors;
5. amendments to the governing documents; or
6. the grant of exclusive use of a common area.(Civ. Code § 5100(a).)
7. Authorizes HOAs 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 § 5105(a).)
8. Authorizes HOAs 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 § 5105(a).)
9. Requires HOAs to select an independent inspector or inspectors of elections to do the following:
10. determine the number of members entitled to vote and the voting power of each;
11. determine the authenticity, validity, and effect of proxies, if any;
12. receive ballots;
13. hear and determine all challenges and questions in any way arising out of, or in connection with, the right to vote;
14. count and tabulate all votes;
15. determine when the polls shall close, consistent with the governing documents;
16. determine the tabulated results of the election; and
17. 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 § 5110(c).)
18. Specifies the voting procedure for an HOA election as follows:
19. 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:
20. 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
21. 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 § 5115(a).)
22. 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 § 5115(b).)
23. 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. Once a secret ballot is received by the inspector of elections, it shall be irrevocable. (Civ. Code § 5120(a).)
24. Existing law permits a non-profit public benefit corporation to declare nominees for the board of directors elected without further action if, at the close of nominations, the number of people nominated for the board is not more than the number of directors to be elected. (Corp. Code § 7522(d).)

This bill:

1. Establishes that when, as of the close of nominations for the board of directors of an HOA, the number of director nominees is not more than the number of vacancies to be elected, as determined by the inspector of elections, the director nominees shall be considered elected by acclamation, provided that all HOA members were given individual notice of the call for nomination at least 30 days before the close of nominations.
2. Clarifies that the board of directors of a CID organized as a non-profit mutual benefit corporation shall also be considered elected by acclamation under identical circumstances.

COMMENTS

1. Background on HOAs and their governance

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. Units within common housing developments currently account for approximately a quarter of the state’s overall housing stock, meaning that the laws governing such developments have a large impact on the population. In California, CIDs are governed by the Davis-Stirling Act. (Civ. Code §§ 4000-6150.)

The Davis-Stirling Act sets forth a system for CID self-governance. The owners of the separate properties within the community are the members of the HOA. HOA members vote for the board of directors of the association that oversees operation of the community.

An HOA board has a number of duties and powers. The board manages the community, 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 as well as 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 and, if necessary, the power to foreclose upon the offending member’s property. This combination of responsibilities and authority has led multiple courts to observe that HOAs 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. Internal citations omitted.)

Much like municipal governments, HOAs also use elections to choose members to serve on the association’s board of directors. Under existing law, HOAs conduct these elections through a paper and mail-based balloting system that closely resembles California’s vote-by-mail process. (Civ. Code § 5115.)

2. Evolution of this bill’s predecessor

This bill represents the latest in a long line of bills that have attempted to enact seating by acclamation in the HOA context. The most recent prior iteration of this bill was SB 1128 by Senator Roth in 2018. Not surprisingly, the stakeholders took up positions on SB 1128 that were essentially identical to the ones they have on this bill now. Specifically, proponents of SB 1128 asserted that seating by acclamation is a matter of common sense and obvious efficiency when there are fewer candidates than seats to fill. Opponents of SB 1128 responded that seating board members by acclamation is undemocratic and would enable the consolidation of power in the hands of board incumbents.

SB 1128’s journey to the Governor’s desk reflected considerable negotiation and effort to achieve the efficiencies desired by the proponents while mitigating the risk of the anti-democratic pitfalls that worried the opposition. The first step came in this Committee. In order to ensure that seating by acclamation could only take place when there is a genuine shortage of candidates, and not because association members were simply unaware that they could nominate themselves or others to run, SB 1128’s author agreed to offer amendments in this Committee that conditioned the use of seating by acclamation. To use seating by acclamation, the HOA would have to give individual notice to all association members of the procedure for nominating candidates at least 30 days prior to the nomination deadline. That precondition on the use of seating by acclamation has been carried over into this bill.

Then, in the Assembly, the author further amended SB 1128 to provide a series of safeguards against the possibility that power-hungry HOA boards could invent reasons to disqualify potential challengers and then utilize seating by acclamation to keep themselves or their cronies in control. Unlike the final form of SB 1128, however, the current version of this bill does not currently incorporate any restrictions on candidate disqualification.

Although the changes made to SB 1128 over the course of its legislative journey were not sufficient to overcome all of the opposition’s concerns, and while then-Governor Brown ultimately vetoed the bill on other grounds,^[1] the evolution of SB 1128 arguably brought that bill closer to the policy ideal of capturing the beneficial efficiency which seating by acclamation offers while incorporating sufficient safeguards to protect against abuse. With that in mind, the author proposes to amend this bill to incorporate the same kind of restrictions on candidate disqualifications that the final form of SB 1128 contained.

3. Does seating by acclamation undermine the democratic process?

Even with restrictions on an HOA’s ability to disqualify potential challengers, the opponents of this bill are unlikely to be satisfied. From their point of view, seating board members by acclamation is not just bad policy. They suggest it may be unconstitutional. The opponents advance a number of related theories for this proposition, all proceeding from the basic premise that the democratic rights of members within an HOA are the same as, or at least quite similar to, those of a voter in relation to a local public election. As noted earlier in these Comments, even though HOAs are technically private, non-governmental actors, there is case law suggesting that the quasi-governmental powers exercised by HOAs mean that members have certain constitutional – or at least quasi-constitutional – rights in relation to the HOA. Even granting this equivalency, however, it is not necessarily apparent that seating association board members by acclamation, alone, violates those rights.

1. Some municipal elections laws authorize seating by acclamation

As an initial matter, it appears that seating candidates by acclamation is allowed in some local public elections. In a municipal election, for example, if fewer candidates emerge than there are corresponding offices to fill, the governing body of the city is authorized to appoint the candidate to the office or, if there are no candidates at all, to appoint an eligible elector. (Elec. Code §10229.) The appointed person shall then “qualify and take office and serve exactly as if elected at a municipal election for the office.” (Elec. Code § 10229(a)(3). Emphasis added.)

There are similar provisions for special district elections (Elec. Code § 10515) and for elections to the local school board (Elec. Code §§ 5326, 5328, and 5328.5.) All of these provisions have been on the books for many years and there are no reported cases challenging them.

Writing in opposition to SB 754, the Center for California Homeowner Association Law (CCHOAL) strongly rejects any equivalency between these provisions and the HOA context, calling it a “deeply flawed analogy.” Among other things, CCHOAL points out that filling seats by acclamation can be halted through a petition process under the California Elections Code, while SB 754 has no similar provision. Moreover, CCHOAL argues, in the HOA context the incumbent board itself sets the rules and runs the election, not a neutral third party bound by elections laws. Finally, CCHOAL asserts that seating by acclamation cuts off the possibility of nominations from the floor or write-in votes.

1. Write-in candidacies not constitutionally required

Write-in candidates are the only evident way that voting a ballot with fewer nominees than vacant seats could lead to a different result than seating by acclamation. In that regard, it is noteworthy that allowing people to run as write-in candidates is discretionary under the Davis-Stirling Act. (Civ. Code §5105(b).) In other words, an incumbent board bent on suppressing insurgent candidates could prevent write-in candidates by disallowing them altogether, though there might be some constitutional limitation on such a move. The U.S. Supreme Court has ruled that the federal constitution does not require the possibility of write-in candidates (Burdick v. Takushi (1992) 504 U.S. 428), but the question is closer under the California Constitution. The California Supreme Court upheld a prohibition on write-in candidates in a municipal election run-off, but left open the question of whether a complete ban on write-in candidates might violate the state constitution. (Edelstein v. City and County of San Francisco (2002) 29 Cal.4th 164.) If there is indeed some equivalency between municipal elections and HOA elections, it may also be noteworthy that California elections law prohibits write-in candidates in a municipal election once a candidate has been appointed through the acclamation process. (Elec. Code §10229(c).)

4. Proposed amendments

In order to address the issues set forth in the Comments, above, the author proposes to incorporate amendments into the bill that would:

• require HOAs that want to use seating by acclamation to limit the grounds on which candidates can be disqualified from running for the board; and
• require HOAs to conduct an election at the end of each director’s expiring term but in no event less often than once every four years.

The specific amendments are as follows:

Amendment 1

On page 2, in line 3, after “(a)” insert:

“(1)”

Amendment 2

On page 2, after line 8, insert:

(2) An association shall hold an election for a seat on the board of directors in accordance with the procedures set forth in this article at the expiration of the corresponding director’s term and at least once every four years.

Amendment 3

On page 3, in line 4, strike out “When” and insert:

Notwithstanding the secret balloting requirement in subdivision (a), when

Amendment 4

On page 3, in line 8, strike out “the association provided”, strike out lines 9 and 10, and insert:

both of the following are true:

(1) The association provided individual notice of the election and the procedure for nominating candidates at least 30 days before the close of nominations.

(2) The association permits all qualified candidates to run if nominated.

(h) An association shall not disqualify a person from being a candidate for the board of directors except as follows:

(1) An association shall disqualify a person from nomination as a candidate if either of the following applies:

(A) The person is not a member of the association at the time of the nomination.

(B) Within the past 20 years, the person has been convicted of a felony involving accepting, giving, or offering to give, a bribe, the embezzlement of money, the extortion or theft of money, perjury, or conspiracy to commit any of those crimes. For purposes of this subparagraph, “conviction of a felony” includes a conviction of a felony in this state and a conviction under the laws of any other state, the United States, or any foreign government or country of a crime that, if committed in this state, would be a felony, and for which the person has not received a pardon from a person or entity authorized to grant the pardon.

(2) Through its by-laws or election operating rules adopted pursuant to subdivision (a) of section 5101 only, an association may disqualify a person from nomination as a candidate based on any of the following:

(A) Failure 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 a director to be current in the payment of regular assessments. An association may not disqualify a nominee for nonpayment of fines, fines renamed as assessments, collection charges, late charges, or costs levied by a third party. The association shall not disqualify a nominee for failure to be current in payment of regular assessments if any of the following circumstances is true:

(i) The nominee has paid the regular assessment under protest pursuant to Section 5658.

(ii) The nominee has entered into a payment plan pursuant to Section 5665.

(iii) The nominee has not been provided the opportunity to engage in internal dispute resolution pursuant to Article 2 (commencing with Section 5900) of Chapter 10.

(B) An association may prohibit more than one person with joint ownership interests in the same separate interest parcel from serving as directors at the same time, subject to the following:

(i) The board may disqualify a person from nomination as a candidate pursuant to this paragraph only in cases where that person, if elected, could not serve on the board without violating the above prohibition.

(ii) Notwithstanding clause (i), the board may disqualify from nomination as a candidate a person who is a joint owner of a parcel if one of the other joint owners is already properly nominated for the current election, and none of the joint owners is an incumbent board director.

(C) An association may disqualify a nominee if that person has been a member of the association for less than one year.

5. Arguments in support of the bill

According to the author:

This measure seeks to address financial inefficiencies that result when there are uncontested elections for homeowner association boards.

Elections are very expensive for large associations, costing Laguna Woods Village as much as $30,000 per election. When an election is uncontested, it is a terrible and unnecessary drain on people with limited incomes. Laguna Woods Village, for example, has spent $60,000 on uncontested elections each year in the last two years alone, despite an outcome predetermined by the fact that there are more board seats available than there are people willing to fill those seats. There are at least three elections held annually at Laguna Woods Village. Most are uncontested, despite the best efforts of HOA leadership to recruit candidates. Nevertheless, the HOA must hire election officials, print and mail ballots and conduct costly elections, shifting precious resources away from other important community needs.

This measure seeks to remedy this situation by providing a process through which a board may initiate an election by acclamation when the number of candidates does not exceed the number of available seats on the board. The bill assures transparency, requiring that each individual voter receive notice of a pending election and be given the opportunity to nominate candidates no less than 30 days prior to the close of nominations.

As sponsor of the bill, Laguna Woods Village writes:

The cost of these elections directly affects all Residents as it increases monthly assessments. We are highly dependent upon members willing to volunteer their time serving on the various boards that conduct the affairs of the three developments within our Association. But, unfortunately, there are many occasions when there are simply not enough members who have the time or inclination to fill the available board seats.

In support, the California Association of Community Managers writes:

Homeowner associations operate on zero-based budgets and the homeowners ultimately pay for all association expenses. In the instance where an election is uncontested, homeowners should not be forced to pay for a costly election process that is unnecessary.

6. Arguments in opposition to the bill

In opposition to the bill, the Center for California Homeowner Association Law writes:

California law grants homeowners who sit on association boards broad legal authority over the behavior and property of the other homeowners in the community and broad authority to write rules that govern it. Incumbent boards also control the HOA’s financial resources - association bank accounts - enabling them to hire attorneys to enforce the rules and policies they adopt. The primary and most readily available tool for checking this power and calling the board to account is the right of the governed to vote and the right to run for a board seat. SB 754 damages – if not eliminates - both these rights.

In further opposition to the bill, the California Alliance for Retired Americans writes:

The plan to cancel “unnecessary” elections and to save money has its fiscal appeal. But there is more at stake here than just money: the key point is that HOAs are supposed to be SELF-GOVERNING communities where THE GOVERNED participate in its democratic processes; and a key decision they make is choosing their leaders through ELECTIONS. SB 754 would have the incumbent GOVERNORS choose the leaders – and not the voters who live there.

SUPPORT

Laguna Woods Village (sponsor)
California Association of Community Mangers

Community Associations Institute – California Legislative Action Committee

OPPOSITION

California Alliance for Retired Americans

California Center for Homeowner Association Law

Greater Sacramento Urban League

Schiffer & Buus, APC

One individual

RELATED LEGISLATION

Pending Legislation: SB 323 (Wieckowski, 2019) reforms several aspects of the common interest development elections process in an effort to ensure greater accessibility, accountability, and transparency. Among other things, the bill would require common interest development associations to let any member run for the board of directors and limit the ability of associations to disenfranchise association members. SB 323 currently pending consideration before the Senate Housing Committee.

Prior Legislation:

SB 1128 (Roth, 2018) was substantially similar to this bill. In his message vetoing SB 1128, then-Governor Brown wrote, among other things: “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.”

SB 1265 (Wieckowski, 2018) would have reformed several aspects of the HOA elections process in an effort to ensure greater accessibility, accountability, and transparency. Among other things, the bill would have required HOAs to let any member run for the board of directors and it would have limited the ability of associations to disenfranchise association members. In his message vetoing SB 1265, then-Governor Brown wrote, among other things: “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.”

AB 1426 (Irwin, 2017) would have allowed the board of directors of an HOA 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 Housing and Community Development Committee.

AB 1799 (Mayes, 2016) would have allowed the board of directors of an HOA 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 Judiciary Committee.

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

PRIOR VOTES:

Senate Housing Committee (Ayes 10, Noes 0)

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

1. Governor Brown disliked what he viewed as SB 1128’s one-size-fits-all approach to HOA elections. He vetoed SB 1265 for the same reason. See Prior Related Legislation for addition detail. ↑

SENATE COMMITTEE ON HOUSING

Senator Scott Wiener, Chair

2019 - 2020 Regular

Bill No: SB 754 Hearing Date: 4/22/2019

SUBJECT: Common interest developments: board members: election by acclamation

DIGEST: This bill provides that if nominees to a homeowner association (HOA) board in a common interest development (CID) shall be considered elected by acclamation if the number of nominees does not exceed the number of vacancies on the board.

ANALYSIS:

Existing law governing CIDs:

1. Requires the election and removal of directors, amendments to governing documents, or the grant of exclusive use of common areas, to be held by secret ballot.
2. Provides that directors shall not be required to be elected if the governing documents provide that one member from each separate interest (e.g., unit or lot) is a director.
3. Requires the HOA to adopt election rules that do the following:
   1. Ensure that if any candidate or member advocating a point of view is provided access to association media, newsletters, or websites during a campaign, and that equal access shall be provided to all candidates and members, for purposes reasonably related to the election.
   2. Ensure access to common-area meeting space at no cost to all candidates.
   3. Specify the qualifications for candidates for the board and any other elected position, and procedures for the nomination of candidates, consistent with the governing documents. A rule shall not be deemed reasonable if it disallows any member from nominating himself or herself for election to the board.
   4. Specifies the qualifications for voting; the voting power of each membership; the authenticity, validity, effect of proxies; and the voting period for elections. This includes the times at which polls will open and close, consistent with the governing documents.
   5. Specifies a method for selecting one or three independent third parties as inspector or inspectors of elections. Inspectors may appoint or oversee additional independent third-party persons to verify signatures and to count and tabulate votes as the inspector or inspectors deem appropriate.
4. Requires the inspector of elections to be one or three individuals who have the following duties:
   1. Determine the number of memberships entitled to vote and the voting power of each.
   2. Determine the authenticity, validity, and effect of proxies.
   3. Receive votes and ballots and hear and determine all challenges and questions.
   4. Count and tabulate all votes.
   5. Determine when the polls will close.
   6. Determine the results of the election.
5. Permits the nomination of candidates from the floor of membership meetings or nomination by any other manner.
6. Permits a member of an HOA to bring a cause of action in small claims court against the HOA if the HOA restricts access to HOA resources by a candidate or member advocating a point of view; the receipt of the ballot by a member; or the counting, tabulation, or reporting of, or access to, ballots for inspection and review after the tabulation.
7. Requires the HOA board to provide notice of a proposed rule change, as specified, at least 30 days prior to making the rule change.

This bill provides that if, at the close of the nomination period, the inspector or inspectors of elections determines that the number of nominees is not more than the number of vacancies on the board, the nominees shall be considered elected by acclamation if the HOA provided individual notice of both the election and nominating procedure at least 30 days prior to the close of the nomination period.

COMMENTS

1. Purpose of the bill. The author states that elections are very expensive for large HOAs. Laguna Woods Village, the sponsor of this bill, serves more than 18,500 members, the vast majority of which are of modest means, living on fixed incomes. When an election is uncontested, it is a terrible and unnecessary drain on people with limited incomes. Laguna Woods Village has spent $60,000 on uncontested elections each year in the last two years alone. Most of Laguna Woods Village elections are uncontested, despite the best efforts of HOA leadership to recruit candidates. Yet the HOA board must hire elections officials, print and mail ballots, and conduct costly elections, shifting precious resources away from other important community needs. This bill seeks to remedy this situation by providing a process through which a board may initiate an election by acclamation when the number of candidates does not exceed the number of available seats on the board. This bill assures transparency, requiring that each individual voter receive notice of a pending election and be given the opportunity to nominate candidates no less than 30 days prior to the close of nominations.
2. CID background. A CID is a form of real estate in which each homeowner has an exclusive interest in a unit or lot and a shared or undivided interest in common-area property. Condominiums, planned unit developments, stock cooperatives, community apartments, and many resident-owned mobilehome parks all fall under the umbrella of CIDs. There are more than 50,000 CIDs in California comprising over 4.8 million housing units, or approximately one-quarter of the state’s housing stock. CIDs are governed by HOAs. 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 HOA, collectively referred to as the governing documents.
3. Precedent for election by acclamation. Existing elections law for certain entities indicates precedent for making the election-by-acclamation change to CID law. For school districts, county boards of education, and special districts, if the number of candidates does not exceed the number of vacancies by the end of the nominating period, and no one has filed a petition signed by 10% of the voters of 50 voters (whichever is greater) requesting that an election be held, the nominees must be appointed and seated as if elected. Similarly, for municipal elections, if the number of candidates does not exceed the number of candidates by the end of the nominating period, the city elections official must inform the city’s governing body that it may adopt one of the following courses of action: appoint the nominee, appoint an eligible individual if no one has been nominated, or hold an election.

This bill is narrower than the above examples in that it does not allow for options such as a petition, an appointment of a non-nominee, or an election. A similar bill, AB 1799 (Mayes, 2016) would have required an HOA to provide notice to all its members at least 20 days before declaring an election uncontested; that provision, however, did not satisfy opposition concerns.

1. Opposition concerns. Opponents state that allowing election by acclamation would enable an HOA board to ignore or prevent nominations by non-incumbents, then determine that no election is required due to an insufficient number of candidates. The Center for California Homeowner Association Law (Center) cites a number of reports from homeowners describing how they were either discouraged from running for a seat on an HOA board, or were prevented from running for a seat because they did not meet certain qualifications set by the board. SB 323 (Wieckowski), which is sponsored by the Center and will be heard by this committee next week, aims to address such concerns by enacting a series of reforms to CID election laws.
2. Trying again. The provisions of this bill were included in similar form in last year’s SB 1128 (Roth), which was vetoed. Governor Brown stated that “This bill takes a one-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.”
3. Double referral. This bill has also been referred to the Judiciary Committee.

Related Legislation:

SB 323 (Wieckowski, 2019) — enacts a series of reforms to the laws governing board of director elections in CIDs to increase the regularity, fairness, formality and transparency of HOA elections. This bill was approved by the Judiciary Committee on a 7-0 vote on April 2nd and will be heard in this committee on April 30th.

SB 261 (Monning, Chapter 836, Statutes of 2018) — authorized an HOA in a CID to provide a document by electronic means if the recipient has consented by email and reduces the notice requirement of a proposed rule change by the HOA board from 30 days to 28 days.

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

SB 1265 (Wieckowski, 2018) — would have made several changes to the elections process held in CIDs, as well as making changes in the process for handling disputes between a member and an HOA. This bill was vetoed.

AB 1799 (Mayes, 2016) — would have exempted HOAs in CIDs from election procedure requirements in uncontested elections. This bill passed out of the Senate Transportation and Housing Committee but died in the Senate Judiciary Committee.

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

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

April 17, 2019.)

SUPPORT:

Laguna Woods Village (Sponsor)

California Association of Community Managers
Community Associations Institute - California Legislative Action Committee

OPPOSITION:

California Alliance For Retired Americans
Center For California Homeowner Association Law

1 individual

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