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September 7, 2006
More on the New Elections Law - What Issues Does SB1560 Solve? Present?
I have had a little more time to digest what matters SB 1560 addresses and what issues it raises and I am answering some of the individual questions I have received in this blog. Much of it will also be incorporated into a communication that will be directed to all managers and board members that have received rules from me. I am always open to questions and try to answer them here and on my website, a location where you will find much more about the new elections reform law (http://www.californiacondoguru.com. Just click on the link to SB 61 information on the first page.
All of this presumes that SB 1560 will be signed into law sometime between now and the end of September. I am informed it is on the Governor’s desk and has gone to his office without opposition. However, be advised that things can change. I will keep web visitors informed with any news to the contrary indicating a problem. Timing under this new law is all but impossible because we were dealt a reform law that was extremely difficult to analyze and apply, given the constant flux of pending cleanup legislation, and now are looking forward to clean up legislation that will fix some things, and cause problems in other areas. Well, nothing is perfect. Worst of all though, it all comes with a price tag.
ACHIEVING QUORUM: SB 1560 adds a component that makes it clear that association documents and/or California law dictate the quorum that is required for an election. For Board elections, the quorum is generally listed in the section discussing the annual meeting, but may be a subject in and of itself. In any event, the annual meeting generally has a quorum requirement tied to it. Some documents allow for a certain specified quorum for the first meeting and lowered quorum for an adjourned (second and subsequent) meeting, called for lack of a quorum at the first meeting. Although you will see below that meetings may or may not be required, holding all of the elections that take place on an annual basis in conjunction with a meeting could be helpful if you have a problem generally getting a quorum for elections. The quorum and voting requirements for other elections covered by the new law for the most part will be different than the annual meeting quorum - as it is dictated either by another clause in the documents or the Davis Stirling Act. (See Civil Codes 1355, 1366, and 1363.07, the amendment section of the governing documents, and Corporations Code Section 7222 and other sections related to recall elections..)
PROXIES - DO YOU NEED THEM? SB 1560 says that ballots that are returned to the Inspectors can be counted toward the quorum requirements of the Association. Thus, proxies may no longer be necessary for your association. However, beware: If your documents do not require a meeting for elections of directors, but you do need to pass the annual IRS election (check with your CPA), or want to make sure you have the best chance at a quorum for approving minutes from the previous annual meeting, then you either need to hold the IRS election vote on the same ballot as the written ballot for directors’ election, at the membership (not board) meeting where the ballots are being counted, or with a quorum otherwise established (via a valid proxy for example).
Visit the website for much more on proxies. Click on the link to the September 9 posting there. See if you think you should do away with proxies altogether. There are ramifications to that. What if an owner is leaving the country and wants to give his or her right to another to vote? If no ballot package is ready, you will need a process to make that happen. Thanks to readers raising these questions, I can help you think about them ahead of time and integrate practices into your rules and guidelines that address these questions that may also come up for your association.
ABOUT MEETINGS - HAVE EM OR NOT? SB 1560 says that there is no requirement to have a meeting with an election under the new processes, unless the governing documents provide otherwise. Most governing documents call for an annual meeting, at least, but are not so “dictatorial” on nominations from the floor or use of proxies. In other words, sometimes the language is mandatory and sometimes it is discretionary. So these are things that you need to pay attention to in setting up your processes for the annual elections. Most governing documents do not require meetings for other subject matter elections and some allow written ballots for all elections. Some limit this option to all elections other than the board elections, sending a clear intent that the annual elections for board members should be done at a meeting. In these cases, I believe the Board can either send out the ballot ahead of time whether or not there are enough candidates for an election, or seek nominations at the meeting and send out the ballot afterward, but there is no way other than use of proxies to establish the meeting quorum if you sent out the ballot after the meeting.
I hope this helps. You need to consider these things in setting your own association rules. Help is available (see proposal for writing rules and guidelines on my website). And please keep in mind that we as attorneys cannot do this work for free. It is complicated and sometimes mind boggling to write processes and procedures that anticipate all of the possible problems you can run into in applying this new law. Remember that it is the legislators in Caliornia that are causing the stress and need for paying to have rules written and then revising rules that are already in place, and not the lawyers. Please do not “shoot the messenger!”
Beth
Posted by Beth Grimm at September 7, 2006 10:09 AM