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January 29, 2008

California HOA Elections - Is Small Claims the Right Venue?

I get several emails every week about elections issues. Many are generated simply because of the confusion in the law. Some are generated by sore losers. Some are generated by people who fail to pay assessments and complain alot about things, but still think they should be able to serve on the Board (withholding assessments is not the way to get there, folks). Some are really incredible stories about what their boards did during the elections process, to thwart the efforts of wannabe candidates.

My experience in following up with some of these is that some HOA Boards, and/or some attorneys that are advising them, are way, way out in left field in the way they conduct elections.

One particular area of concern is Boards that are, or are advised to, start suspending voter rights after ballots have been sent out to owners, and the buzz is that the election might not go the way the Board wants it too. Sometimes a Board will "revive" a voter suspension clause that has been sitting in the dust for years, just before an important election wherein some minority candidates have indicated an interest in running. Sometimes the revival comes through "alleged" violations that are not justified.

Now, no one out there has to get their shorts in a bind if they do things in a fair and above-board manner. Anyone reading this with a guilty conscience may well come back and blast me for saying this, but when a Board and/or its attorney does something like what is described above, the owners deserve a reasonable chance to challenge that election, and it should not cost them a fortune to do it.

To some degree, I am willing to backtrack from earlier communications I had with the author of the Elections legislation, at least on one point . (Note that there are still a bunch of issues created by the new laws that require a fair amount of creativity in reconciling practicalities, document provisions, the Corporations Code and the Davis Stirling Act, and that leave HOAs open to varying legal interpretations, don't get me wrong.) And what point is it that deserves this "backtracking"?

It's simple - abuses that I have seen. I now believe that many challenges should be able to be brought at the small claims court level. In some cases, the wrongdoing is so obvious that it begs attention.

True, small claims court hearing officers may not have the expertise to fully understand and interpret the HOA election laws, which are complicated (and which many an attorney - even HOA trained - have trouble agreeing on), but Defendants can appeal and get higher authority if they feel justified in doing so. And some of the scenarios that have been presented to me smell so bad that it would be obvious to any lawyer looking for elements of fairness that, as the old saying goes "something is rotten in the State of Denmark." [Not meant as a blow to Denmark, just making a point.]

The law on remedies for elections says this:

"1363.09. REMEDIES. (Operative July 1, 2006.)

(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.

(b) A member who prevails in a civil action to enforce his or her rights pursuant to this article shall be entitled to reasonable attorney's fees and court costs, and the court may impose a civil penalty of up to five hundred dollars ($500) for each violation, except that each identical violation shall be subject to only one penalty if the violation affects each member of the association equally. A prevailing association shall not recover any costs, unless the court finds the action to be frivolous, unreasonable, or without foundation.

(c) A cause of action under Section 1363.03 with respect to access to association resources by a candidate or member advocating a point of view, the receipt of a ballot by a member, or the counting, tabulation, or reporting of, or access to, ballots for inspection and review after tabulation may be brought in small claims court if the amount of the demand does not exceed the jurisdiction of that court."

I have commented in my book THE DAVIS STIRLING ACT IN PLAIN ENGLISH:

"Comment: The remedies are potentially quite severe for failure of an Association to comply with these new rules related to elections. Recovery of damages is available a well as court orders to void the election. And as you can see, owners will have access to resolve some of the issues in small claims court. The latitude and attitude of the small claims hearing officers is yet to be determined, and it is not crystal clear what remedies and what errors can be addressed there. It is more likely that an owner would be seeking a recount or new election than dollar damages, which is the remedy of small claims court. But what is clear is that there are new penalties that can be imposed on the Association by the court for failure to comply. This is a turn of events."

Now I have to say that it is my belief that most HOAs try to be fair in their elections and if they are, and they try in good faith to comply with the new law, it would be my hope that no small claims court officer would unravel their election or penalize the Board. The law is tough to understand. But I do believe that some situations deserve consideration. And some legal advisors are not acting in the best interests of the association. Attorneys are required by California ethical rules to take their direction from the Board, that is true, and that may lead them to think they should support the Board to the detriment of the members, but that is not true. Attorneys should be considering the entire HOA and should be acting in a manner that is in the best interests of the HOA, not of any individual board member. Zealousness in holding onto a client is no excuse or justification for innapropriate advice.

Posted by Beth Grimm at January 29, 2008 7:42 PM