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February 8, 2007
IS DECLARING A BOARD TO BE ELECTED BY ACCLAMATION LEGAL?
Many people, both on boards and owners who live in HOAs want to know the ins and outs of the legality of declaring directors to be seated by acclamation, rather than requiring an actual election. Acclamation is a process whereby the candidates are declared board members without counting votes. It has been used for years by many associations, simply because finding enough volunteers to fill a board is often a challenge in itself, let alone hoping for a contested election. Yes, its true, in many more cases than not, there are not enough volunteers to fill the seats of the vacating board members. The Boards have to scrounge for volunteers to find enough, and often a full slate of candidates is not even enrolled until the annual meeting.
Now, with the new elections laws in California, the question arises at what point in the new procedures is acclamation an acceptable approach? The new law says nothing about this process. After SB 61 became law, and before SB 1560 (the cleanup bill) was signed into law (Sept 22, 2006), it appeared that meetings could be avoided and the intent was that voting would be done completely by mail ballot, and the only need for the meeting would be to count ballots. However, after SB 1560, the law changed such that it appears the annual meeting has regained importance, and it appears that if the documents call for nominations from the floor, not allowing them may lead to successful challenges to elections. After, SB 1560, the governing documents become important. It seems to me that If the association finds itself without enough candidates after the nominations are closed to warrant a "contested election" (meaning more candidates than open board positions), that declaring the positions filled by acclamation should be acceptable. What would seem important though, is whether the Board has conducted the nominations procedures such that members were given a fair opportunity to be nominated. Whoever wants to challenge any electiion that was completed by acclamation will have to explain why they did not come forward to nominate himself or herself when given the opportunity.
Some owners are complaining that they did not get a fair opportunity to run for the Board. In some cases the nominations are closed before the annual meeting, even when the association documents provide that nominations shall be taken from the floor at the annual meeting. There are no cases under the new law that I know of yet that set any legal precedent and there are not likely to be any anytime soon simply because the legal processes move slow, and also because it is possible that these kind of challenges may be resolved in small claims court, where there are no precedent setting decisions.
If the Association documents allow for nominations from the floor at the annual meeting, there are a couple of ways to proceed. As long as the Board gives reasonable notice of the opportunity to be nominated, gives reasonable notice of timelines, and waits to make the decision about acclamation until after the nominations at a meeting have been closed (in cases where the bylaws allow nominations from the floor), there will be little room for challenge. In a case where an association has decided to adopt a process whereby elections ballots are to be mailed out after the annual meeting, and uses that meeting to take and finalize nominations, declaring the electiion by acclamation when there are not more candidates than positions would seem to be reasonable.
Corporations 7522 does address acclamation but it only applies to a corporation with 5,000 or more members. It provides these guidelines for the larger associations with regard to acclamation: "(d) If after the close of nominations the number of people nominated for the board is not more than the number of directors to be elected, the corporation may without further action declare that those nominated and qualified to be elected have been elected."
This statute provides guidance and might be helpful if a board gets to the point of having to declare an election based on the number of candidates being less than the number of positions open. The new elections law for HOAs does not make any provision for this, and in fact, states that it controls over any other codes that are in conflict with it. The question is whether 7522 conflicts with it - the new law requires boards to conduct elections via the double envelope balloting procedures and does not leave open the option to forego the election by its terms.
In any case, if the courts are going to be reasonable in interpretation of the new elections law, it seems that raising Corporations Code Section 7522(d) as guidance in the situation where apathy leads to declaring an election by acclamation, may be helpful. There is no assurance of this and the new laws are very challenging, and there are lots of questions. The most important thing is to make the best attempt possible to follow the law and the association documents and to make sure all processes are fair and above board. That is probably the best defense if your election is challenged.
Posted by Beth Grimm at February 8, 2007 8:56 PM