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September 11, 2006
Holding Onto Election Materials in HOAs - Challenges to Elections - What's the Limit?
SB 1560 - SB 61 - In California, the law on elections has been written, rewritten, praised, condemned, twisted, turned and warped out of control. SB 61 was the 2005 version of the law which became effective January 1, 2006 but not operative until July 1, 2006. SB 1560 is the clean up bill which is not yet signed by the Governor but which will take effect immediately when it is signed and becomes "operative" on July 1, 2006, which would make it retroactive when it is signed. What we are in now is "limbo" - nothing new. We have been in "limbo" all year because of this urgency legislation that could change things any day. Associations that hurried to comply with SB 61 had rules written prior to July 1 yet if their election is held after July 1 and after SB 1560 is passed, they may be out of compliance with the law because the way SB 1560 is written (as operative July 1) any rules written under SB 61 could be, in part, wrong. If they have election rules written today (September 11) to encompass SB 1560 but the bill is not signed into law before an election takes place or at all, then they will be out of compliance with the rules written that take into account SB 1560 - confused enough yet? Check out my website for a continuing diatribe on the changes and quandries California HOAs have faced and are facing because of SB 61 and SB 1560 - see the guru at http://www.californiacondoguru.com.
I have a reader who thought they had figured out one aspect of the new elections law. This is her question and her own answer and it is a good example of the problems one can encounter if one does not have intimate knowledge and understanding about these bills, the process, and the conflicts and challenges they present to the public:
Question From Reader: "Is there a law which states how long you have to hold ballots after an
election if the inspector of elections has verified the count?"
Her Own Answer After She Proudly Thought She Had Figured It Out On Her Own: "I found the answer to my question by way of SB1560. CC 7527 says 9 months, so I guess the answer is 9 months. But as far as I can tell, SB1560 has not been signed by the governor. Regardless, 7527 has been around "forever" so of course it prevails."
My answer to all of this: NOT EXACTLY!!!!!
Here's why:
SB 61, the original bill, said this about holding the ballots:
"(h) The sealed ballots at all times shall be in the custody of the inspector or inspectors of election or at a location designated by the inspector or inspectors until after the tabulation of the vote, at which time custody shall be transferred to the association.
(i) After tabulation, election ballots shall be stored by the association in a secure place for no less than one year after the date of the election. In the event of a recount or other challenge to the election process, the association shall, upon written request, make the ballots available for inspection and review by association members or their authorized representatives. Any recount shall be conducted in a manner that shall preserve the confidentiality of the vote."
BUT SB 1560 SAYS THIS ABOUT HOLDING THE BALLOT MATERIALS:
"(h) The sealed ballots at all times shall be in the custody of the inspector or inspectors of election or at a location designated by the inspector or inspectors until after the tabulation of the vote, and until the time allowed by Section 7527 of the Corporations Code for challenging the election has expired, at which time custody shall be transferred to the association. If there is a recount or other challenge to the election process, the inspector or inspectors of election shall, upon written request, make the ballots available for inspection and review by an association member or his or her authorized representative. Any recount shall be conducted in a manner that preserves the confidentiality of the vote.
(i) After the transfer of the ballots to the association, the ballots shall be stored by the association in a secure place for no less than one year after the date of the election."
So now, if SB 1560 is signed, the intent seems to be that the Inspectors will hold the ballots until the time for challenge has passed, rather than after the votes have been counted. Someone could argue that the Association has to hold the materials for a whole year once received. However, I verified with the legislator's office staff that the intent is still, although the language is rough, that records shall be retained for the year after the election, and the time the Association holds the materials combined with the time the Inspectors hold the ballot materials is a year together, not counted separately.
For every crazy glitch provided by the new Elections Reform Law, there has to be a practical solution. I suggest (but YOU CANNOT CONSIDER THIS LEGAL ADVICE) that the Inspectors DESIGNATE (as they have the option to designate "or at a location designated by the inspector or inspectors until after the tabulation of the vote,...") that the Association keep the ballot materials in a sealed box that says the Inspector(s) must be contacted before opening the box of materials. Otherwise, for an association that uses members for the inspectors or an inspector that does not have storage capability, there is another conundrum created by this new law. So this may help with the "storage " issue, but not the "challenge" issue.
About possible challenges, it looks like the intent is that the Inspectors are expected to hold the ballots during the times of possible challenge (which per Civil Code Section 1363.03 would be 9 months) and then Association is expected to hold the ballot materials for the rest of the year (which would be for 3 more months after the 9 months the inspectors are expected to hold them). Why am I saying this? Because Corporations Code Section 7527, identified in 1363.03 allows members of a corporation 9 months to challenge an election.
And, there is still a conflict, Civil Code Section 1363.09 which was part of SB 61 and remains unchanged by SB 1560 says: 1363.09. (a) A member of an association may bring a civil action for declaratory or equitable relief for a violation of this article by an association of which he or she is a member, including, but not limited to, injunctive relief, restitution, or a combination thereof, within one year of the date the cause of action accrues. Upon a finding that the election procedures of this article, or the adoption of and adherence to rules provided by Article 4 commencing with Section 1357.100) of Chapter 2, were not followed, a court may void any results of the election."
1363.09 presents the remedies for violation of the new elections statutes! It provides a one year statute of limitations for actions related to elections, which is (when SB 1560 is signed into law) presents a direct conflct with 1363.03 which incorporates Corporations Code Section 7527. Are you dizzy yet? I am not done.
Now, for this part of my reader's [law-challenged] assumption: "Regardless, 7527 has been around "forever" so of course it prevails."
Once again, I have to say "NOT EXACTLY".
The Corporations Code Sections that govern elections do not "of course prevail." Many practitioners (including this one) wish they did, because the Nonprofit Mutual Benefit Corporations Code was well thought out and contains few inconsistencies and no conflicts that I can find within its own pages. I cannot say the same for the new Elections Reform Laws and the Davis Stirling Act. If you have not yet read anything that points out the many confusing crossover issues as to how this new law integrates with the Corporations Code, and how it conflicts with the existing provisions of the Davis Stirling Act, I suggest you visit the guru (my website at http://www.californiacondoguru.com), click on the link to the information about SB 61 and the new elections law, and click again on the choice to see everything that is wrong with SB 61. I have yet to figure out everything that is wrong with SB 1560 - as I am still receiving questions leading to new ways of thinking about application of it. But I suggest you read these passages from the bills SB 61 and SB 1560 and determine whether anyone who can figure out what controls - and when - deserves a big prize!
SB 61
"(b) Notwithstanding any other law or provision of the governing documents, an election within a common interest development regarding assessments, selection of members of the association board of directors, amendments to the governing documents, or the grant of exclusive use of common area property pursuant to subdivision (d) of Section 1363.07 shall be held by secret ballot in accordance with the procedures set forth in this section. ...
(j) The provisions of this section apply to both incorporated and unincorporated associations, notwithstanding any contrary provision of the governing documents."
SB 1560
" (l) The provisions of this section apply to both incorporated and unincorporated associations, notwithstanding any contrary provision of the governing documents. ...
(m) The procedures set forth in this section shall apply to votes cast directly by the membership, but do not apply to votes cast by delegates or other elected representatives. ...
(n) In the event of a conflict between this section and the provisions of the Nonprofit Mutual Benefit Corporation Law (Part 3 (commencing with Section 7110) of Division 2 of Title 1 of the Corporations Code) relating to elections, the provisions of this section shall prevail."
So I think what this all means about challenges to elections is that whether or not your association is incorporated, there is a one year statute of limitations on challenging elections in effect that will remain in effect, even after the [seemingly botched] attempt to conform the statutue of limitations to 9 months so it would be consistent with the Corporations Code Section 7527. Furthermore, I believe HOAs have to hold on to the ballot materials for at least a year. The change of language to include reference to 9 months for anything seems to be of no effect. And if you have delegate voting, the new balloting procedures do not apply to the delegates votes so the Corporations Code and documents would still control as to the delegate voting (but may apply to the election of the delegates).
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But the bottom line is that you need to ask your own attorney about this if you want a legal opinion because, once again, I remind you that I am only here to inform! And to make you think before you leap.
Regards ........................
Posted by Beth Grimm at September 11, 2006 1:33 PM