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March 9, 2006
Elections in California HOAs - The Trials and Tribulations Continue
I wish I could talk and think about something else each day when I get into the workflow of my practice, but so much of what I do involves taking about association elections, and the new law found in Civil Code Section 1363.03, .05, and .09. Why? I draft many restated and updated documents for associations and have at least 20 projects currently in the works at various stages. The conclusion I have reached on these projects is that putting minimal attempted interpretation in the actual documents, and attaching Exhibits that reflect the new laws that can be "changed out" by a Board when the statutes change on this topic (and some others) may be the best way to go. This is because I can write a paragraph today that must be changed tomorrow because of what is happening in Sacramento. And I have to suggest bylaw amendments to Associations that have to deal with the new law so that they can achieve a quorum if they want to contuinue to have meaningful meetings, and meet seemingly vanishing capability for minimal ballot return. Which means, of course (in order to get approval for the amendments), an election, possibly under the new standards. And every day I advise Associations and others on where we are right now, which is in a state of flux - meaning one elections format that stands today, and another if you are taking any action near or after July 1, 2006. And every day I am reminded, because of my involvement of legislative matters, that the current law may be amended in ways that encompass every election in an HOA instead of the BIG 4, and that may also make the statute effective IMMEDIATELY - making compliance impossible on the short term.
The California legislators do not know when to leave something alone. And so in some cases such as the new elections laws, it just goes from bad to worse!
I feel sorry for the proponents of the secret double envelope ballot legislation. They fight (and keep fighting) so hard for it. They think it is good. And there are some good conceptual ideas in it - for associations that get owner participation without begging for it. The new law has a feel-good sound to it. People can vote in the privacy of their own homes, without influence from any outside source, and everyone gets an equal shake in running for the Board, or so it seems. But what happens to those that cannot get anyone (or enough names for a contested election anyway) to voluntarily put their name on a ballot 30 days or more before an election or annual meeting - which is the more likely scenario. What then? Send out a double envelope secret mail ballot anyway? That would be an exercise in futility and a costly one at that. And what of the associations that have 10 or fewer owners and 3-5 serve on the board currently - will the other owners step in to help with the elections and volunteer to be inspectors so that association does not have to pay $500, $1000. $2000 (or more) for an inspector for each election? Not likely. My guess is the 3-5 serving have been trying for decades (a little bit of fecitiousness is needed to lighten things up) to get other owners involved without luck, so since no board member can be used in the ballot receiving or counting process, outside the association you go, to look for an inspector of elections.
The costs for associations (which means the per household cost - for all of you proponents out there) - on this one compliance issue are likely to be substantial. Why? Associations are going to need a very knowledgeable HOA attorney to advise them how not to end up violating something in their governing documents and other California laws. Ca' ching. And they are going to need inspectors of election that know what they are doing - ca' ching! ... And if they miss a step (which it is almost impossible not to do under the new law as it complicates elections) they are likely going to have to do it all over again! Double ca' ching!...
It may seem simple, but its just not! This new elections law is definitely not a “one size fits all!
This is the latest on the things to keep in mind about the new law that are important:
**If an Association Board adopts its Elections Rules, which are required by the new law before July 1, 2006, it probably does not need to circulate them to owners before adoption by the Board pursuant to the rules passage protocol required by Civil Code Section 1357.100 et seq. They probably are not subject to any owner petition to terminate the rules. However, there may be benefit to circulating the elections rules. Work with an attorney who can help you determine the differences.
**And if the Board takes a “minimalist” approach with its Election Rules and incorporates other pertinent information into its instructions to its Inspector of Election as an alternative, it may be able to avoid circulation and a chance of an owner petition to terminate any of the election rules. But again, less is not always more.
**After July 1, 2006, the requirements of Civil Code Section 1357.100 on passage of rules clearly apply because the new elections statutes say so. (Civil Code Section 1363.03) But some rules still will not require circulation even under the new law if they simply regurgitate the mandates of the statute itself and do not include discretionary provisions. Still, you will want to know the possible benefits of pre-adoption circulation. It may weigh favorably on the "good faith" component of trying to comply with a law that creates conflicts at every turn.
My web site has further information on the front page about adopting Elections Rules and what to watch out for. Neither the information in this blog nor the site constitutes legal advice but it is important for the general public which means board members, homeowners, managers and yes, those family law, trust and other attorneys who think they can step in here and help their associations to take a closer look on what can happen if things go wrong. As I heard an attorney say the other day (and this was a knowledgeable attorney in this area) - Associations are thrown into "Alice and Wonderland" with this new law and they don't have any way out but to try and comply.
And hopefully, a "good faith" showing will be worth some points if an election process or result is challenged.
and stay tuned! This roller coaster ride is not over yet.
Posted by Beth Grimm at March 9, 2006 12:11 PM