California Condo & HOA Law

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October 9, 2006

Should HOAs Eliminate Quorum Requirements Because of the New Elections Law?

It's beginning to sound like a broken record to me. Free flowing advice is being provided via letters, speakers at seminars, and web message to HOAs to "eliminate the quorum requirements from their governing documents" so that lack of a quorum at an election does not become an unsolvable problem. It is true that the new HOA Elections law does not provide a solution when an HOA receives a ballot return of less than a quorum of ballots. It is true that the old elections law did not solve the problem either, but since there is much more heightened awareness of possible election "gaffs" nowadays, it is important to try and solve whatever problems are solvable at the outset.

That said (and with due respect to all professionals out there trying to help associations cope with the new elections laws), ...

"Eliminate the quorum requirements" is painting with too broad a brush. First of all, HOAs cannot eliminate voting requirements for measures that involve assessments, amendment of documents and transfer of common area. Second of all, many people confuse the "quorum" with the actual vote that is required to pass something and could cause other problems if they amend with that in mind and they do not know what they are doing (in fact, many will not even know they need owner approval to amend the documents AND they need to do the voting by the new double envelope secret ballot system to do it). And of course, since members have to approve an amendment to the bylaws that eliminates the quorum requirements altogether, a board proposal to eliminate quorum may receive considerable resistance since the change would essentially mean that "if 2 people only vote in favor, measure passed!" While they may be thinking: "It is not fair that 2 or 3 people could pass a special assessment" .... You may be thinking - like I often do - "if the Board makes a reasonable effort to solicit candidates and get people to vote, why not allow those members who are interested enough to actually vote to choose the board members?"

Besides that, if you review the California Corporations Code you would find that if there is no quorum requirement in an incorporated HOA bylaws, then the Code would supply the quorum to be 1/3 of the "voting power" (usually means the Lots or Units but could be based on square footage, etc.) This means that if an association with a 25% quorum successfully votes to eliminate the quorum requirements (to where there are none remaining), the quorum requirements will actually be higher as provided by the blank filled in by the Corporations Code. At least this is the way I read it. See for yourself, Section 7512 below, pulled from the California Government website at www.ca.gov (navigation=Government-29 California Codes, Corporations Code Section 7512).

That means, in case you are having a hard time following this, if you amend to eliminate the quorum requirement, you will have it filled in by the Code. If you amend to state that "no quorum is required" , it would not matter if only 2 or 3 or 10 people were involved, they essentially could make many decisions that would otherwise require sustantial member feedback on a measure. But if you amend to say: "For the election of directors only, the quorum is the number of ballots that are returned to the Inspectors of Election," you have solved the problem. In fact, it is that exact language that I provided to legislator who did the cleanup on the elections bill just so that there would be no confusion with existing laws and statutes. That language does not interfere with the other types of election subjects, the California Codes, or amendment of document requirements, and it does not leave associations with a higher quorum than before.

This language about quorum for board elections was proposed along with my specific request that all ballots that were returned should be counted toward the quorum requirements. That concept was adopted (thankfully).

The proposed cleanup language that would solve the quorum problem without imposing any changes relating to the membership requirements for special assessments and the like was not picked up. It should have been.

Before SB 1560, we were discussing quorum/proxy issues. Today we are still discussing and trying to solve quorum/proxy issues, just from a different angle.

Don't get caught in a trap without a full understanding of what you would propose as an amendment to the bylaws. Think it through.

THE STATUTE: Corporations Code Section says:
"7512. (a) One-third of the voting power, represented in person or by proxy, shall constitute a quorum at a meeting of members, but, subject to subdivisions (b) and (c), a bylaw may set a different quorum. Any bylaw amendment to increase the quorum may be adopted only by approval of the members (Section 5034). If a quorum is present, the affirmative vote of the majority of the voting power represented at the meeting, entitled to vote, and voting on any matter shall be the act of the members unless the vote of a greater number or voting by classes is required by this part or the articles or bylaws.
(b) Where a bylaw authorizes a corporation to conduct a meeting with a quorum of less than one-third of the voting power, then the only matters that may be voted upon at any regular meeting actually attended, in person or by proxy, by less than one-third of the voting power are matters notice of the general nature of which was given,
pursuant to the first sentence of subdivision (a) of Section 7511.
(c) Subject to subdivision (b), the members present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment notwithstanding the withdrawal of enough members to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the
members required to constitute a quorum or, if required by this division, or by the articles or the bylaws, the vote of the greater number or voting by classes.
(d) In the absence of a quorum, any meeting of members may be adjourned from time to time by the vote of a majority of the votes represented either in person or by proxy, but no other business may
be transacted, except as provided in subdivision (c)."

Hope this helps!

Posted by Beth Grimm at October 9, 2006 2:19 PM