California Condo & HOA Law

April 28, 2008

LEASE LIMITATION PROVISIONS – WHAT IS THE LEGISLATURE DOING IN CALIFORNIA?

AB 2259, introduced by Assembly Member Mullin, most recently amended the ASSEMBLY on MARCH 28, 2008, places limitations on enforcing lease limitation restrictions. The bill, if approved by the Assembly and Senate and signed into law, would amend Section 1368 of the Civil Code (which relates to disclosures upon sale) and would add Section 1360.2 to the Civil Code which would provide protection to owners who are in opposition to leasing restrictions by giving them vested rights (explained below) that except them from approval of rental limitation restrictions by the necessary percentage of members.

The legislature put this language right in the bill: “SECTION 1. The Legislature finds and declares that the rights of common interest development owners to rent or lease their properties, as the rights existed at the time they acquired them, should be protected by the State of California, and the rights of subsequent owners should be governed by the status of those rights at the time they acquire them.” Of course, they are talking about lease limitation restrictions in this bill, but this wording signifies many lawmakers’ mindset, i.e., that restrictions in the documents should be frozen in time for each owner, which is in direct opposition to a long string of appellate case findings that uphold amendments to the documents based on the premise that when an owner purchases in an HOA, they do so with the understanding that the documents can be revised and changed by a majority or supermajority of owners.

More specifically on the issue of each Owner’s rights, the bill says: The right of an owner in a common interest development to rent or lease his or her separate interest, as vested at the time the ownership began, shall not be restricted during the duration of ownership, except as provided in subdivision (b).” Do you see what this means? The word “vesting” means that each Owner would be protected as their rights to lease cannot be changed after purchase.

The only exception would be that an owner could waive their “vested right” described above, under Section (b) of the statute, which says: “(b) An owner of an interest in a common interest development may waive the right related to the renting or leasing of an ownership interest vested in the owner at the time ownership commenced, pursuant to procedures established by the common interest development to facilitate the a waiver.”

This means that the HOA could adopt procedures giving owners the option to waive their rights. Such a waiver could be written in as a “grandfathering” of all current owners which is sometimes done, though not all attorneys agree that it should be done. It would seem to resolve the issue of any owner who does not want to be subject to the restriction. Watch the bill, it may change. At this time it is not an outright prohibition on leasing restrictions but that could change. There are many that oppose the bill, including the CAI California Legislative Action Committee. Others are proposing amendments.

This is a controversial bill, on a controversial topic. Watch my website (http://www.californiacondoguru.com) for updates on the blog, and check out the current article about "Lease Limitatiion Amendments - Are They Legal In California?" Also, I will be doing an E-Newsletter on the subject so go to the website and sign up to receive it – its free! And it might be an indicator that if a Board is considering proposing such an amendment, now might be a good time. The bill if signed into law will change things.

Posted by Beth Grimm at 10:41 PM

August 13, 2007

LOW INCOME HOUSING PROTECTION BILL - IS IT A GOOD ANSWER?

AB 952 is currently before the California Legislature. It would essentially give unit owners of "affordable housing" (often called "BMR" or below market rate units) the power to veto any regular or special assessment that is proposed in an HOA in California. You may want to look into this and pose your views to your legislators, and the California Legislative Action Committee Arm of Community Associations Institute makes it easy for you to do this on its website at caicalif.org (navigate to "HOT BILLs").

Anyway, if you have not heard of this bill, here is my take on it, which has been shared with reporters, industry professionals and the legislators in my district.

_____________________

Letter to Legislators voting on AB952 August 20

I am an attorney in California that is active in all of the industry groups in the State and have some National affiliations as well. I have written two books, have ongoing publications, have written many, many articles, have spoken to many groups, and write an ongoing blog. I have addressed the question of "affordability" of common interest development housing therein. I have a website (www.californiacondoguru.com) that offers a wealth of education for homeowners, managers, board members, realtors and anyone interested in the subject matter. There are times I feel like I am doing more than the State of California to "enlighten" the general public about CID living and its pros and cons.

I have provided pro bono services for a person who lives in a BMR unit in the South San Francisco Bay Area - trying to work with his association and also with the City to find a resolution to the question as to how these people who are "lucky enough" be able to get into this housing are supposed to cope with rising assessments and special assessments. In his association, the members were facing an assessment to upgrade the garage doors, and it is something he would not be able to benefit from. The Association's response was, of course (and as expected) - a tough luck type of answer - we are sorry but we did not buy with the expectation of subsizing the BMR units and it is not our responsibility. The answer of the City was more or less a tough luck answer - we will let him get a roommate if he cannot afford to live there. It was a very frustrating experience trying to help him.

It is true that BMR unit owners do not reap the same benefits that non-BMR unit owners would reap by such an improvement. And since there are two BMR units in his complex, he and his other BMR neighbor could, if the passage of AB952 were to occur, essentially block this kind of thing in the future.

But - how fair is that to the owners that have a real estate investment and want to improve their property? How fair is that if his association needs an assessment to replace the roofs to supplement the reserves, and cannot get it approved? It is a real catch 22 and I find that articles written by reporters looking for the sensational story, and someone to blame, find it way too easy to point the finger at HOAs and tag them as - "the enemy".

I have written many articles about problems in HOAs and one appears on my website that explains what happens when a board pinches a penny too tightly. It's a serious problem in this state and a large percentage of the homeowner associations are seriously underfunded, hence, large special assessments are needed to make long overdue repairs. A very common problem HOAs face is preparing for a paint job or roofing job and finding out there is dry rot rampant underneath, because of years of deferred maintenance. Associations that look good on the outside aren't immune from the problems. Beauty is truly skin deep in many situations.

So why not be fair and real in your assessment of things, and recognize that hobbling boards of directors further is collecting money sufficient to pay the association expenses (as required by Civil Code Section 1366.1) is not the answer to the dilemma the BMR unit owners face.

Housing in California is not affordable! It will not ever be. Allowing lenders to squeeze owners in who cannot afford Condo Units and townhomes with subprime lending has caused disastrous results in assessment collections for HOAs - really disastrous. Increasing compliance costs fostered by more "consumer friendly" legislation has forced increases in assessments, and tougher laws on reserves has created funding efforts that are draining homeowners in many instances - but that are necessary to alleviate future suffering in the form of large special assessments. Creating "BMR" units has created a very difficult situation and the passage of AB 952 will exacerbate the problem in California with already underfunded associations. Someone has to get real about this situation, make an honest assessment of things, and look for a solution to the overall dilemma.

There are better solutions than giving the owners of BMR units the ability to veto assessments that are needed to maintain the HOA infrastructure in this state. Being honest about whether "affordable housing" is a reality - or not - is closer to the answer of what needs to be done. My suggestion is that if a City is going to require BMRs, that it force developers to write into the documents that owners understand that the assessments for the BMRs have more limitations on them, because their ability to withstand assessments is hampered, and their ability to capitalize on the improvements is hampered, and allow the general public to subsidize a few BMR units in each association by picking up the slack for the extra overage in special assessments. A fair and honest disclosure needs to be made to potential purchasers. Honestly, this might be less painful than picking up the slack for the foreclosed unit owner that could not pay the special assessment and was forced out of his or her opportunity for "home ownership." And it certainly is less painful than preventing HOA boards from being able to raise money sufficient to meet its legal obligations.

Hopefully, we are a society of people that would step up, if the burden is not too heavy (limited number of BMR units). And if not, maybe the myth of "affordable housing" should die. It is a term that should be reconsidered.

Sincerely,

BETH GRIMM

Posted by Beth Grimm at 10:22 PM

September 15, 2006

Are Proxies Overrated? More To Think About ...

SB 1560 is still as of today, to the best of my knowledge, sitting on the Governor of California's desk - waiting to be signed. Everyone worked on this clean up legislation diligently since it was discovered the new elections law was a disaster waiting to happen (last year sometime) and now we sit and wait for the Gov to come through.

Lots of people think this clean up legislation will be the saving grace for associations and end the proxy wars, because ...

The good news is that under SB 1560, if/when it is signed, the ballots returned to an association will count toward the quorum for any election and achieving quorum so as to hold the controlling votes has been the most widespread purpose of proxy wars in the past. Even without the interest needed to generate a "proxy war", many an association was saved by sending out yearly proxies, asking owners to sign in case they could not attend the annual meeting, and keeping them on file.

So now, can we rejoice that proxies will no longer be necessary to have an election, especially for the Board?

Don't jump up and down too fast.

If you eliminate proxies, what are you going to do if an owner wants to give the proxy to another to vote at a time when the ballot packages are not yet ready (such as leaving the country or state for a job or to take care of a sick relative). Some of us have been pushing retraining owners to hand over the ballot packages (after validating them, which includes signing the outer envelope) as a means of allowing owners to let someone else vote on their behalf if they do not want to lodge their own vote. That works, as long as their is a ballot package to hand over.

What if you are holding the election for directors without tying it to the annual meeting (because neither your documents nor the law says you have to have a meeting). Then, you may establish a quorum for the election (if you are lucky) but not for any separate annual meeting you still intended to have, and at which you intended to vote on the annual IRS election or approval of last year's meeting minutes.

What if you do combine the mail ballots with a meeting and there is a tie. In the past, the proxies generally enabled the Board to hold a runoff election right there and then. Not any more. Now, the Board will have to go back through the double envelope ballot system, I presume.

What if you are at a recall meeting and the entire board is recalled. In the past, the new board could be elected that same night because of attendance and proxies. What now - do you have to go back through sending out the double envelopes mail ballots for the new Board? Who will conduct that election - the old recently recalled Board?

What if you cannot get a quorum of returned ballots, can you send out followup packages and let the members know you need them to vote? If they send in a second package, can you count it? I am presuming the answer is no because ballots are not revocable once received by the Inspectors.

I have had dialogues with readers, other professionals, the aide to the author of the two elections bills, and many many people and like one of my readers said. "Every day its a new headache, isn't it?"

Lots of people are calling me because I write rules asking how to resolve these issues. All I can say is try to anticipate the issues BEFORE your first meeting under this new law, and get help from someone who knows. You can ask the author of this law or his aide, but remember the old adage, ... you get what you pay for. And also remember that this law was written because of what appears to be a presumption on the part of the author that HOAs needed major reform in elections - so don't expect any sympathy.

And I have news for you. New, complicated law is not going to solve elections abuses. I have already seen and heard of some in the making. And at the same time I have seen many, many service providers and boards trying to figure out how to have a [guaranteed] legal election under this new law, given many past experiences that do not fit into a neat little box of fixes under this new law. Folks, there ARE NO GUARANTEES.

Take an aspirin and call me in the morning! (Not really, if everyone who was baffled by this law called, my paying clients would never get through, and I - and they - might get testy).

You can check out my website. I am setting up affordable telephone conference and face to face learning seminars for this and other issues. 2 hours of brainstorming, $25 plus telephone service fees. Sound interesting? Go here:http://www.californiacondoguru.com and check out the learning opportunities. The more interest, the more classes.

Posted by Beth Grimm at 5:10 PM

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).
.
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 1:33 PM

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 10:09 AM

June 22, 2006

Update on Cleanup Legislation to Elections Reform Law

SB 1560 - This is the proposed cleanup legislation to the new elections reform law for HOAs in California. Finally I can say something nice. The bill has been massaged into something helpful. There are a number of concerns about the new elections law that are addressed in the proposed language changes. There are some that have not yet been addressed. However, I thought it about time to say something positive about the efforts of the legislator and his staff - they have been listening to those interested in improving this law. Kudos. And kudos also to the groups providing input to the legislator. This truly required a group effort because each different faction has its own interest and constituency to satisfy. And this set of laws affects everyone that works in this industry and lives in or owns property in an HOA in Caliornia. That includes millions of people.

Click on http://www.californiacondoguru.com/SB61.html to find the page with all the info. Look for a new link within the next few days containing a summary of the most recent proposed changes in SB 1560. That page will also direct you to other information about the new elections laws.

Posted by Beth Grimm at 10:54 AM

June 10, 2006

STATE OMBUDSMAN OR ENFORCER?

SB 551- Lowenthal - recently amended (see www.ca.sen.gov - put in the bill number and pull up the text) ... Watch it. Read it. Send your opinions on it - here are mine. This bill is going to be heard soon in Assembly Housing Committee. You are welcome to your opinion. The legislators need to hear it.

I am dismayed to see that the proposal for a state oversight agency in this bill is moving from an educational, data collection, and ombudsman program as recommended by the California Law Revision Commission after several hearings on the possibility of an oversight agency, to a bureau, including enforcement, citations and fines, before any viable effort has been made by the State of California to assist volunteer board members by providing educational resources, an internet resource and help line.

Education is the key to success in homeowner associations - whether voluntarily sought or imposed. The concept of enhancing educational opportunities and providing resources, and even initiating an ombudsman program, were and are laudable goals.

Here are some factors that have influenced my decision to write to the legislature opposing this bill, and to encourage others to do the same, much as I would prefer to show support for the educational, data collection, and dispute resolution components:

1. The legislature passed a bill that was signed into law more than 3 years ago that required HOAs to register and pay an annual fee.

“1363.6. ASSISTANCE WITH IDENTIFICATION OF COMMON INTEREST DEVELOPMENTS; SUBMISSION OF INFORMATION BY EACH ASSOCIATION; TIME; NOTICE OF CHANGE OF ADDRESS; PENALTY FOR VIOLATION OF FILING REQUIREMENTS; AVAILABILITY OF INFORMATION.

(a) To assist with the identification of common interest developments, each association, whether incorporated or unincorporated, shall submit to the Secretary of State, on a form and for a fee not to exceed thirty dollars ($30) that the Secretary of State shall prescribe, the following information concerning the association and the development that it manages: ... (e) The Secretary of State shall make the information submitted pursuant to paragraph (4) of subdivision (a) available only for governmental purposes and only to members of the Legislature and the Business, Transportation and Housing Agency, upon written request. All other information submitted pursuant to this section shall be subject to public inspection pursuant to the California Public Records Act, Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code. The information submitted pursuant to this section shall be made available for governmental or public inspection, as the case may be, on or before July 1, 2004, and thereafter.”

The “law” was sold as a process for identifying HOAs in the state so that they could be located ... and so that the state could reach the HOAs and send educational materials. The money was to be used for a database that would be public information. In speaking with persons that sought the database to reach associations and offer valuable services, I learned that the database has not been refined to incorporate the information provided by HOAs. Here is an example of money being collected that is not being used for the purpose intended. I believe this is quite telling about the State’s use of funds collected to assist HOAs.

2. Last year, a law was passed that suggested the State would move toward offering educational materials.
“1363.001. ON-LINE EDUCATION COURSE REGARDING ROLE, DUTIES, LAWS AND RESPONSIBILITIES OF BOARD MEMBERS AND PROSPECTIVE BOARD MEMBERS AND NONJUDICIAL FORECLOSURE PROCESS.

To the extent existing funds are available, the Department of Consumer Affairs and the Department of Real Estate shall develop an on-line education course for the board of directors of an association regarding the role, duties, laws, and responsibilities of board members and prospective board members, and the nonjudicial foreclosure process.”

To date, it appears that nothing has been done to find funds to follow through with this.

3. There is nothing in the proposed statute providing for mandatory educational or training programs or counseling such as are often ordered when a Department of Fair Housing complaint results in a finding of a violation. These training sessions are also often mandated as a part of conciliated agreements. Mandatory education is a better place to start than punishment.

4. The California legislature has passed bills that have been signed into law in the past two years requiring Boards to meet with owners in internal dispute resolution processes and alternative dispute resolution processes, payment plan meetings and duly noticed disciplinary meetings, setting forth detailed schemes for these and in all cases requiring Association participation if an Owner makes the request, and in most cases making the Association pay the costs or part of the costs. But it has not given these programs time to work.

5. The California legislature has passed bills that allow small claims court judges and referees to fine associations and board members for failure to satisfy complicated procedures relating to records inspection requests and elections processes, but has not given these statutes time to work.

6. The bill proposes collection of a fee that is and cannot be fully protected from usurpation of the legislative budget process - and that could at any time reach the level of $20 per household collected biennially.

Please be aware that there is a parallel bill - AB 770 - that still reflects an ombudsman program emphasizing the educational processes and the ombudsman program. However, there is ongoing pressure in Sacramento to satisfy influential groups that are demanding an enforcement arm and it is my belief that the provisions of AB 770 could be amended at any time to include enforcement aspects. Changes happen in committee meetings all the time. The truth is that at any time we could be focusing on one of these bills while the other slips through absorbing the provisions opposed in the other bill, or the less inocuous bill could be dropped.

We have seen a similar occurrence with Elections Reform. And it is important to understand that bills like that one and this one relating to oversight, while touted as a consumer protection bills, can in fact end up costing the consumer a lot of money in compliance costs.

I have HOA and homeowner clients and I see the injustices flowing from each side of the table. I also see the daily struggles of HOA board members trying to absorb the complicated technical requirements for the various legally required processes. I am a trained mediator and mediate many disputes. I have a website that offers an abundance of free information geared to help board members, homeowners, realtors, managers and potential buyers in HOAs. I have written two books and provide a subscription newsletter on a bimonthly basis which serves as a Plain English explanation of the laws and practical problems (and solutions) for common HOA problems. I run a blog answering questions submitted through the website in an attempt to educate. In short, I do something the State should be doing to assist HOA Boards and Owners with their legal rights and requirements. I see the State’s failure to focus on education before enacting laws meting out punishment of board members as a disturbing threat to the HOA model which requires volunteer service.

Why? Soliciting candidates for Director positions in HOAs is a serious, growing problem. Given studies done by industry-involved information gatherers, and my own personal experience with hundreds of clients, I think it fair to opine that the vast majority of Associations in the state struggle to find willing volunteers to serve as things are now. The shift of focus from an “ombudsman program” to an enforcement bureau is disturbing, at best.

I have witnessed what I consider to be “rabid” dislike by some legislators for HOAs and feel that many harbor grudges for HOAs basing their concern on what have been presented to them as the worst examples if homeowner association leadership, without regard to the realities and the bigger picture, and without regard to the difficulties Boards face in trying to do a very difficult, technically legally complicated and thankless job.

And as happens, I sometimes end up eating my words - in more ways than one. For years, I opined that if there was a state agency to handle and investigate CID complaints, then maybe there would not be so much knee jerk legislation coming down. Legislators would have somewhere to send complainers and at least there would be a look at both sides of the issues complained of (or so I assumed), rather than the one-sided view given a legislator by a caller. I supported Attorney Jim LIngl's draft of a CID oversight bill (AB1250 I think, proposed some 10 or so years ago). In that day, though, I had more hope of a balanced agency and some state assistance, rather than envisioning Associations paying for their own demise.

I am all grown up now, having years and years of HOA and HO representation and assistance, hundreds of articles written and courses taught and learned, and work on probably 50-75 HOA bills under my belt. And the picture is changing. HOAs are blasted in the news. Board members are condemned in print and even sometimes in legislative history, and one time Associations even got dissed in a bill preamble. It seems like every coworker, sibling, friend or friend-of-a-friend has a complaint about their homeowners association. There are organized groups that condemn organized groups. There are groups that single out individuals solely based on their membership in industry groups. Negativity seems to be closing in on the model from the public's perspective.

The idea of oversight is a popular one, coming from the owner community, until they decide they might want to get involved in leadership in their association. If the job of board members gets any harder, which is certain to occur with each new piece of detailed, complicated legislation, the day will come when the norm is to ask the question: "Why the heck would anyone want to serve?"

Am I saying board members who do not follow the law do not need to be punished? No. What I am saying is that education needs to come first. Institution of processes such as dispute resolution and small claims remedies written into the law in recent years need to be given a chance to work. As homeowners and Board members learn of these (of course, through limited educational opportunities available at the time), that will provide "incentive" to learn more, to do the right thing instead of the wrong thing. Boards all over the state are inheriting problems that began to fester years prior, and having to deal with angry and frustrated homeowners who did not understand what they were buying into in a "CID".

The biggest problems in this state for HOAs are a lack of guidance for the volunteers who are willing to step up and serve and a shortage of willing volunteers. So I am concerned about the trends toward punishment of innocent volunteers who have been willing to step up to the plate. They could practice "preventive" law if there was somewhere to go - a hotline perhaps - to get answers to questions about how to do something. Should they be expected to read the Davis Stirling Act and understand it? I challenge anyone to try it. Should they be required to read 20 year old documents and rely on them in today's world? Again, I challenge anyone to read and interpret the documents with the law. It is clearly impossible for the average person to read association governing documents, and the law, and decide which controls in any given situation! Even the documents written in the past year or two cannot keep up with the changes in the law, and besides that, new laws on elections make it harder than ever to conduct a voting campaign to update governing documents to reflect new laws.

It is not even easy for knowledgeable HOA attorneys to read governing documents and come up with black and white standards of duty and responsibility in all aspects. The latest elections laws are again a perfect example illustrating the difficulty of deciding how to resolve conflicts. And an example of a law needing cleanup to make sense, and an example of how hard it is to update documents when the law is in a state of flux. Take a look at the issues surrounding the new elections laws on my website http://www.californiacondoguru.com (click on the link to SB 61 -Election materials and you can see for yourself).

State legislators hear only from owners who have a complaint with their board. Many of those calls likely reflect a lack of understanding of the limitations the extra layer of "rules and regulations" carried in HOAs, to protect property values and provide safeguards against unreasonable behaviors in close, densely populated housing developments. I believe the legislators and aides tend to by sympathetic, either because of a lack of understanding of the importance of protecting the integrity of the CC&Rs and rules, or else just because they are hearing from constituent.

The legislators need to hear from Board members that are frustrated about their roles and want meaningful guidance. They need to hear about how hard it is to be a board member (who wants to understand their legal obligations) and how hard it is to recruit board members. It's up to you to save yourselves, and this bill - SB 551 - is the place to start. Express your opposition. I can lead you to the well, but .......

And homeowners - be careful what you wish for. You will be the ones "taxed" to pay the costs for this new agency (or bureaucracy) if it comes to fruition. Don't be mislead when you see that a fee is to be paid by a homeowners' association; you are the association. By now, if your association is moving into the times and keeping up with the new laws, you are probably feeling the crunch of added compliance costs. If not yet, wait until you have a year of the new elections law under your belt.

The pendulum needs a push in the direction away from being forced to "walk the plank" without first offering a lifevest. And the benefits and drawbacks of a costly State oversight agency have to be examined very carefully.

Posted by Beth Grimm at 10:53 PM

June 6, 2006

THE NEW ELECTIONS LAW

SB 61 takes effect July 1, 2006. A surprising number of persons have remarked that luckily their annual meeting is in June and so they can wait a year to adopt election rules under the new law. It seems many think the new law relates only to Board elections. Not so. It also regulates elections on assessments, amendments to the governing documents, and transfer of common area for exclusive use to members. Of course, if there are no plans for any of these actions, an association can wait, but don't wait too long. And there is one more thing - SB 1560 as currently written extends the new election rules to all elections. It may or may not be signed into law, the point being, waiting is not a problem, unless it becomes a problem..

Posted by Beth Grimm at 11:16 PM

April 28, 2006

ELECTIONS RULES - IS A RUSH TO THE ALTER A GOOD IDEA?

Elections Reform - the bane of HOAs in California.
Many attorneys are telling associations that they need to approve Election Rules before July 1, 2006, or the process will be much more difficult. I felt there was some urgency myself, so associations could be prepared on time. Some people are getting the impression, justified or not, that if an association waits until after July 1 to approve its Election Rules, that it will require a vote of the owners. That is not true, unless the governing documents for the association require that the board get approval of the owners before imposing any rules.

The fact of the matter is that if an association Board of Directors approves the Rules prior to July 1, 2006, the rules do not technically, under the law, need to be circulated to the owners before approval. They may not anyway, if they are sufficiently reflective of the new law. As you may or may not know, current California law (Civil Code Section 1357.100 and following) requires an association that is making new operating Rules, or changing existing operating rules, (the subject matter is defined in the laws) to circulate the proposed rules to the membership prior to approval by the board, if they contain any provisions that are not provided elsewhere in California law or the governing documents of the Association. There is a 30-day comment period in this process, allowing the owners to provide feedback to the board about the proposed rules. The feedback does not prevent the board from approving the rules. The process also allows owners, through a petition process, to seek termination of any of the rules by asking the Board of Directors to put a particular rule to a vote (asking for termination of it) by the members. Some attorneys, and some board members and managers, believe that it is better for their association to get these rules approved before the July 1 day so that the process on rule approval found in Civil Code section 1357.100 does not apply.

There is merit to this argument in some cases. If the Board of Directors has an election relating to assessments, directors for the board, amendments to governing documents, or transfer of common area property in July or August, this would be one reason to rush the Election Rules process. If an association believes that it may receive unreasonable resistance to the rules based on past experience with one or more owners, then this might be another case where the board would be justified in proceeding prior to July 1, 2006. Certainly, it simplifies things for a Board of Directors to approve rules without sending them out to the membership for the comment period, so this might be a reason to push for approval before July 1, 2006. And if the Association is very large, cost can be a concern. However, (see below), Boards may not be able to avoid this circulation process if they jump the gun and the law changes sufficiently to warrant circulation of modified rules and processes.

Keep in mind that there is some potential benefit to sending the rules to the membership prior to approval by the board and to allow the members to comment. This would be an opportunity for the board to initiate the process should open with a passage saying that California law requires associations to adopt Election Rules that will result in a secret ballot through the mail process, so owners will be aware that the new process is required by law. The rules should align closely enough to SB 61 that if any owner wishes to pull the statute, they will see that the board is making a good-faith effort to comply with California law. If in the course of the comment period owners come “unglued”, this will be up the opportunity to educate them further, before you get into the middle of a voting process and have to deal with criticism of the process. This should make the elections go more smoothly. If any owners petition the board to reverse a rule and that rule is required by the statute, that would be grounds to refuse to vote. The owners cannot change the law. Circulating the rules before approval may add another element to the “integrity” of the process if a Board is challenged in an election. The new law invites challenges because of its lack of clarity and failure to integrate the processes with most existing governing document provisions and other laws regulating corporations (which many associations are). Although it attempts to resolve conflicts with other laws (of which there are many) by its own terms, it does not do so seamlessly. Any hearing officer considering the challenges to an association's process may be swayed favorably by an Association that circulated the rules prior to adoption, and considered homeowner feedback important. If no owners comment, that bolsters the Association’s argument of satisfying all possible “due process” aspects. The same process could be accomplished by sending the rules to owners after approval by the board but that would be a “one step” initiation process. Some attorneys are not even recommending that. If the rules are sent out prior to adoption by the Board for the “comment” period and then again after they are approved by the board, this would be a “two-step” initiation process, and it may actually help with owner relations over these new processes. It may bolster trust and better prepare owners.

This is a major change for many associations. I think the “two-step” process is warranted. However, it is not required.

There is a very valid reason to defer the final draft of the Election Rules until after July 1, 2006. The cleanup legislation that is proposed has some substantial changes that could require any set of Election Rules that is approved before July 1, 2006, to have changes made. Practitioners who have already written and circulated rules to clients have already had to notify clients that changes will or may be needed. Any changes that come into play may have to be circulated to the members, and this will trigger a two-step initiation process anyway. SB 1560 is still unsettled. Various industry groups are vying for additional changes to the elections law. The legislator who authored the original elections reform law, and introduced the cleanup bill, has threatened to pull the bill if the industry groups cannot agree on changes. Thus, the final rendition of the elections reform law is as yet unsettled.

If you are an association that has a meeting in June, and it might be necessary to schedule an adjourned meeting in July because of a lowered quorum in the bylaws, you might consider providing notice both meetings at the same time, the first and the tentative second meeting, so that the scheduling of both well fall before July 1. If the board has a meeting in June and it is not possible to schedule a tentative second meeting in June, or has a voting measure on one of the qualifying elections, then those associations will require independent legal advice as to how to proceed since the voting period falls during the change in elections processes. In any case, you need to seek legal advice on this as this article does not constitute legal advice.

Right now, the four elections that are affected by the new law are elections on assessments (that exceed legal limit increases), amendment of governing documents, choosing board members, and transfer of common area property. If you do not have any of these elections falling until September or after, then my suggestion would be to wait until after July 1 or until SB 1560 is finalized one way or the other, to see if and what the final amendments that have been proposed for cleanup are signed into law. That way, you could have better chance of having Election Rules that do not require amendments because of changes in the law. However, waiting will require that the Board circulate the rules to the owners for the 30-day comment period before approving them. I do not think this is a disadvantage that is outweighed by the advantages to be gained, but you might.

SB 1560 is proposed as urgency legislation, so once a decision is made on it by the author, given the proposals for amendments, it should fly through the Legislature and be signed by the governor right away, giving it the possibility of being settled by July 1. Associations should know that they can choose to defer this process until the law is settled if they wish, unless they have a crossover election in June that might spill over into July, or have an election in July or August. I feel that the communications of attorneys in this state, frustrated with the elections reform problems, and anxious to provide “quick fix” solutions, coupled with manager and board misinterpretation of attorney comments, have created a “sky is falling in” misimpression of what will happen if boards wait until after July 1 to approve Election Rules. It is not the end of the world.

For more on the Elections Reform, check out earlier blogs, and also visit the Guru at http://www.californiacondoguru.com and click on the box on the first page on "Elections per SB 61".

Posted by Beth Grimm at 11:52 AM

March 27, 2006

Elections - What to Do Now - Especially in the Face of Apathy

Many Association representatives are contacting me and others asking for help with elections rules. I have a list, but for now have recommended waiting just a couple more weeks. Why? Because there is some really difficult law on the books, and a sorry attempt to correct the problems in the works, a cleanup bill (AB 1560) that after being massaged by all that have their hands on it, may fix some parts of the elections law, and complicate others. Once the amendments are back in the hands of the author, he may decide what he wants to pick and choose from the list and we could end up with a bigger mess.

The issue still is that no matter what a board does with the existing, or changed law, it will come into conflict with existing laws or governing document provisions and the new law is unclear on exactly what it overrides, and what it does not override. If you want to see a comprehensive list of all of the things that are wrong with the elections law, go to the Californiacondoguru website and take a look. Click on the Elections link or the What's New link and you will find a path to this list. I did not put this list together to be spiteful or insight (a freudian slip perhaps?) the author of the elections legislation. I put it together so that the public would be aware of the problems the industry is having coping with this legislation. And I think it is obvious that this elections reform law should be rolled back at least 6 months so that it can be fixed. According to my resources, that option has not been offered, but simply put, good sense dictates the need to take a closer look, and according to the most obvious problems, (see my memorandum listing the problems), more than 20 good reasons.

As for panic - do not do so. The law is in such a state of flux right now that if you get guidance from a knowledgeable resource and act in good faith in the coming elections, and attempt to do the voting by secret ballot as close as you can to the statutory requirements as they exist (remember, they could change any day), you should be able to have an election that will stand in court. Just make sure to document everything supporting the good faith part of it. And the reason I say do not panic, there is nothing you can do to change the current storm over this bill short of a plea to Senator Battin to amend his clean up bill to delay the implementation of Civil Code Sections 1363.03, .04, and .09 another 6 months.

And as for any association that has an apathy problem, how are you going to comply with the requirement to sent out a ballot to the members 30 days before the counting is done when you do not have sufficient candidates to require voting to fill the positions? I assume the same thing you have always done, do whatever is reasonable under the circumstances to get a board seated, whether the ultimate result is a legal election, or other means (acclamation or appointment) because you cannot get enough candidates or interest for a valid election.

Many associations have the first annual meeting, maybe an adjourned meeting (if the documents call for one), and if there is no contest for the director positions, announce the results by acclamation. Document the efforts to get members to run, the efforts to get people to the meeting (don't forego the proxies) and the efforts at the meeting to get volunteers to run. I do not see a barrier necessarily to doing as you always do by recruiting volunteers at the annual meeting to fill open spots.

There is nothing in the new law that will solve the problem of apathy and the difficulties in recruiting board members and in fact, I think it will make it a lot worse for associations that cut out the annual meeting and vote instead by mail for directors. If you can't get names on the ballot, why send it out? I think this will be the case in more than half to 90% of the association in this state. The public voting system does not have that problem because everyone and their brother want to run for President. In fact, they have to weed out the wanna-be "contestants". Not so in HOAs -people are not lining up to serve. Even the biggest complainers often just want to sit back and take potshots, rather than serving as a volunteer on the board.

Stay tuned. Those of you that have asked me to help with your elections rules, we will get there. Very soon I think. Those that have jumped the gun to adopt rules under Civil Code Section 1363.03 may well have to rethink their process and rules.

Posted by Beth Grimm at 9:59 AM

March 9, 2006

Elections in California HOAs - The Trials and Tribulations Continue

I wish I could talk and think about something else each day when I get into the workflow of my practice, but so much of what I do involves taking about association elections, and the new law found in Civil Code Section 1363.03, .05, and .09. Why? I draft many restated and updated documents for associations and have at least 20 projects currently in the works at various stages. The conclusion I have reached on these projects is that putting minimal attempted interpretation in the actual documents, and attaching Exhibits that reflect the new laws that can be "changed out" by a Board when the statutes change on this topic (and some others) may be the best way to go. This is because I can write a paragraph today that must be changed tomorrow because of what is happening in Sacramento. And I have to suggest bylaw amendments to Associations that have to deal with the new law so that they can achieve a quorum if they want to contuinue to have meaningful meetings, and meet seemingly vanishing capability for minimal ballot return. Which means, of course (in order to get approval for the amendments), an election, possibly under the new standards. And every day I advise Associations and others on where we are right now, which is in a state of flux - meaning one elections format that stands today, and another if you are taking any action near or after July 1, 2006. And every day I am reminded, because of my involvement of legislative matters, that the current law may be amended in ways that encompass every election in an HOA instead of the BIG 4, and that may also make the statute effective IMMEDIATELY - making compliance impossible on the short term.

The California legislators do not know when to leave something alone. And so in some cases such as the new elections laws, it just goes from bad to worse!

I feel sorry for the proponents of the secret double envelope ballot legislation. They fight (and keep fighting) so hard for it. They think it is good. And there are some good conceptual ideas in it - for associations that get owner participation without begging for it. The new law has a feel-good sound to it. People can vote in the privacy of their own homes, without influence from any outside source, and everyone gets an equal shake in running for the Board, or so it seems. But what happens to those that cannot get anyone (or enough names for a contested election anyway) to voluntarily put their name on a ballot 30 days or more before an election or annual meeting - which is the more likely scenario. What then? Send out a double envelope secret mail ballot anyway? That would be an exercise in futility and a costly one at that. And what of the associations that have 10 or fewer owners and 3-5 serve on the board currently - will the other owners step in to help with the elections and volunteer to be inspectors so that association does not have to pay $500, $1000. $2000 (or more) for an inspector for each election? Not likely. My guess is the 3-5 serving have been trying for decades (a little bit of fecitiousness is needed to lighten things up) to get other owners involved without luck, so since no board member can be used in the ballot receiving or counting process, outside the association you go, to look for an inspector of elections.

The costs for associations (which means the per household cost - for all of you proponents out there) - on this one compliance issue are likely to be substantial. Why? Associations are going to need a very knowledgeable HOA attorney to advise them how not to end up violating something in their governing documents and other California laws. Ca' ching. And they are going to need inspectors of election that know what they are doing - ca' ching! ... And if they miss a step (which it is almost impossible not to do under the new law as it complicates elections) they are likely going to have to do it all over again! Double ca' ching!...

It may seem simple, but its just not! This new elections law is definitely not a “one size fits all!

This is the latest on the things to keep in mind about the new law that are important:

**If an Association Board adopts its Elections Rules, which are required by the new law before July 1, 2006, it probably does not need to circulate them to owners before adoption by the Board pursuant to the rules passage protocol required by Civil Code Section 1357.100 et seq. They probably are not subject to any owner petition to terminate the rules. However, there may be benefit to circulating the elections rules. Work with an attorney who can help you determine the differences.

**And if the Board takes a “minimalist” approach with its Election Rules and incorporates other pertinent information into its instructions to its Inspector of Election as an alternative, it may be able to avoid circulation and a chance of an owner petition to terminate any of the election rules. But again, less is not always more.

**After July 1, 2006, the requirements of Civil Code Section 1357.100 on passage of rules clearly apply because the new elections statutes say so. (Civil Code Section 1363.03) But some rules still will not require circulation even under the new law if they simply regurgitate the mandates of the statute itself and do not include discretionary provisions. Still, you will want to know the possible benefits of pre-adoption circulation. It may weigh favorably on the "good faith" component of trying to comply with a law that creates conflicts at every turn.

My web site has further information on the front page about adopting Elections Rules and what to watch out for. Neither the information in this blog nor the site constitutes legal advice but it is important for the general public which means board members, homeowners, managers and yes, those family law, trust and other attorneys who think they can step in here and help their associations to take a closer look on what can happen if things go wrong. As I heard an attorney say the other day (and this was a knowledgeable attorney in this area) - Associations are thrown into "Alice and Wonderland" with this new law and they don't have any way out but to try and comply.

And hopefully, a "good faith" showing will be worth some points if an election process or result is challenged.

and stay tuned! This roller coaster ride is not over yet.

Posted by Beth Grimm at 12:11 PM

February 18, 2006

Elections Law - Make It Fair At Least

The saga continues. Groups are vying for changes in the new California elections laws and the legislator is getting frustrated, or so it appears, with the lack of consensus on proposed amendments. Lets face it, this is what happens with a new law that does not take into consideration all aspects of its subject matter. Do corporate and public elections systems work together? They could, with some comprehension of what needs to be done.

The rest of this blog consists of a plea to whomever decides to clean up SB 61 - be it the current author or someone else - and to you out there - to see there is light at the end of the tunnel, even if left with difficult legislation. The communication was sent to Senator Battin's office already. It is a heartfelt explanation of how the new law could be cleaned up to eliminate one of the biggest problems. I am "republishing" it because I believe it provides some guidance to associations all over the state that will have to deal with even more complicated quorum issues (with regard to board elections) under the new Civil Code Section 1363.03. Your comments are invited. Like many, I want to get it right.
____

To: [the office of Senator Battin]
I assume that by now you have proposed amendments to Civil Code Section 1363.03 and related statutes from many groups and sources, and may be making some very important decisions on these very soon. As one last plea I want to give you some examples and request specifically one more chance to be explain why quorum needs special attention. I do not believe it is your goal to stifle the ability of homeowner associations in California to have a legal election for new board members. The new law has a strong likelihood of complicating all elections to which it applies. However, for votes that require a certain percentage of the membership to approve without regard to quorum - such as amending governing documents or transfer of common area for exclusive use, or assessments (which voting requirement is dictated by the governing documents and statutes such as CC 1355, 1366 and 1358, respectively), the quorum issue becomes insignificant. Not so for elections of directors. I assume your intention with the new law was to make homeowner associations elections more private, fair, and simpler, without the complications that come with proxy wars, etc. But the law of unintended consequences will reek havoc with elections for directors. Why is that?

If you are familiar with HOA documents, you know that a quorum requirement is always stated in the Bylaws. If there is none stated, it is hard to determine what it might be and the corporations code sections fill in the blanks about what constitutes "membership approval". (Corp Codes 5033 and 5034). But electing directors is not like getting membership approval. Correct me if I am wrong, but I believe that when you crafted the double envelope system that is like the public system, allowing owners to vote from home and in secret by sending the information to an independent, or dropping the envelope in a ballot box, you assumed that the Inspector could open and count the ballots in a membership meeting, before the "crowd" of attendees, or at a Board meeting, without regard to whether there were enough ballots to constitute a quorum. I would imagine it might not have occurred to you that apathy could stifle your process. Trying to effectively combine a proxy with your process, which is generally the way Associations are able ultimately to achieve a quorum, could also stifle your process (see why below), but it may well become a necessary "evil". Turning to proxy use as the only means of establishing a quorum will not eliminate the very problems you are trying to resolve unless for this one purpose you deal with the quorum requirement separately. Unless you fix this aspect of the statute, this counting of the secret ballots sent by mail may never happen, because to have a valid election, the vast majority of associations have to establish a quorum. While this process could conceivably take place at a board meeting (as you suggest is a possibility), assuming everything was done by mail, there still remains the question of what to do about the quorum requirements. The more likely scenario is counting at a membership meeting, also requiring a quorum. A more logical line of thinking is needed to deal with the model you used for this new law, fashioned after the public system. If there were a 51% quorum requirement for public elections, would any public officials ever be elected? To that end, I offer you a clause that I intend to recommend to Associations that I represent (as a proposal for an amendment to their bylaws) relating to quorum. It resolves this problem I am describing, I believe, but it does not resolve the problem for all of the 40,000 associations in California that do not have the benefit of a knowledgeable help or the expertise to think this through and do something about it for themselves. I get the calls consistently from clients - "We have had [1, 2, or 3] meetings and still cannot get people in the Association to come to the meeting or give proxies."

What will these associations do? Send out 1, 2 or 3 mail double envelope ballot packets? Invite the Inspector back two or three times (and be hit with a really big bill)? Turn back to and emphasize use of proxies to solve the problem? I urge you to consider the number one major problem for Associations in this state - apathy. It is a much bigger problem than disagreements over whether people can vote in secret. The new system will probably engender more "hiding at home", but if it is required, those who are willing to vote should have their votes count. I will share with you what I have written as a proposed quorum requirement to deal with the issues I raise. I feel that under the new system associations will have to have the help of something like this. Of course, the first complication for them is that they will have to get 51%-75% membership approval (depending on the documentary requirements) to incorporate it into their documents, using your newly passed double envelope ballot system (if they wait until after July 1st to consider this "fix"). So what I am saying is that you could fix this problem by using the following model in your cleanup language (the second paragraph is what I would suggest focussing on, but the first is given for example and explanation, setting the stage so to speak for the corporate side of things, which cannot be ignored). Note that the first paragraph is a commonly recommended one because of the very fact that Associations have major apathy problems. I recommend they strive to get the 51% of course, but if they cannot, they have a fall back position with a lower quorum so they can get to a legally valid meeting and election. I am not alone in this recommendation. I believe it is common among practictioners. But note the exception language. It is perhaps the most important part.

" Quorum. The presence at the meeting of the Members including proxies entitled to cast fifty-one percent (51%) of the votes of the membership shall constitute a quorum for any action. If, however, such quorum shall not be present or represented at any meeting, the Members entitled to vote shall have power to adjourn the meeting to a time later that same day/evening or not more than thirty (30) days away, without notice other than announcement at the meeting. The quorum requirement for the second (adjourned) membership meeting is twenty-five percent (25%). Proxies provided at the first-called meeting may be used at any adjourned annual meeting. The only matters that may be addressed at the adjourned meeting are those matters that are described in the notice of the original meeting.

There is one exception to the above-stated quorum requirement. So long as the requirements of Civil Code Section 1363.03 (attached as Exhibit A) are met using the double envelope secret ballot process and Inspector(s) of Election as set forth therein, for elections for director positions only, the Board is entitled to have the ballots that are cast by mail along with any ballots cast at a membership meeting tied to the election counted and tabulated, notwithstanding the quorum requirements. The Inspector(s) of Election(s) may deem the qualified candidates receiving the most votes to fill the vacant Board positions. Additionally, the ballots returned to the Inspector(s) and those cast at the meeting shall count toward the quorum requirement stated above if the election for directors is held in conjunction with a membership meeting. This does not change any approval requirements stated specifically in the governing documents or by law for elections on matters other than the election of directors, but it will validate the election of directors even if no quorum is achieved. The annual IRS Resolution, and a vote taken on any other measures that require a quorum of 51% of the members to respond for a valid election or meeting, may be accomplished at a meeting with a valid quorum, or by mail as set forth in Section ___. "

______________

If Boards cannot achieve a quorum in electing directors after reasonable attempts, they will be left to their own devices, and appoint people to fill the positions. It may not be proper, but it will likely happen because of the frustration in bearing the expense of a statutory election process that does not resolve problems with apathy.

There is one other thing to make note of - Making all elections subject to the double envelope ballot system is not feasible. I can give you an example. At the annual membership meeting, it is common practice and in fact required that the members are given the opportunity to approve the meeting minutes from the last annual meeting. These generally are handed out and read at the annual meeting. They certainly can be provided by mail ahead of time, and could be provided with your double envelope secret ballot to approve the bylaws, but one would expect that people would simply not vote if they can't remember what happened last year - and who can? Granted, this approval is a formality but conducting the vote in an open meeting where people can ask questions and talk about last year, and propose amendments if they remember something differently, is the right process for this - the same people often come to meetings and help each other remember. This process is the only effective way to get approval of the minutes of the last meeting.

I hope you are willing to consider these comments. I invite you to send them to anyone that responded with proposed amendments. Those persons and groups that have tried to assist associations with doing things properly certainly want to, but there are some very big hurdles to get over with the new elections processes and bringing them down to a manageable level would serve the industry well.

Respectfully submitted,
Beth Grimm"

_______________________________________

Now I ask you readers - do you have a better solution? I would love to hear it!

Posted by Beth Grimm at 3:05 PM

January 27, 2006

Elections in HOAs in California

Still concerned about SB 61 and elections in the coming year? So am I. I was at a national common interest development law conference this week and one of the sessions was on membership meetings, elections, proxies and the conduct of the "players". Attorneys from all over the country who practice law relating to deed restrictions and CC&Rs and homeowner associations were interacting with 4 attorney panelists ("experts" in CID law). Some interesting things were discussed. While discussing what happens at meetings, nominations from the floor, use of proxies, cumulative voting and other corporate voting matters, one comment that was made by an Arizona attorney was: "In our state, a law was passed last year that requires the absentee type of voting by mail ballot which creates all kinds of problems for associations whose documents allow for proxies and nominations from the floor. Associations are calling our office and asking what they need to do." Sound familiar?

California legislators are quite known for approving legislation for HOAs that puts associations in a position of needing legal help to figure out how to comply. The latest award for this goes to Senator Battin of the Coachella Valley area, for SB 61. An HOA will have great difficulty understanding how to resolve differences between the law and its governing documents. And elections may unravel before your very eyes as owners challenge processes in small claims court claiming a board's failure to successfully integrate the docs provisions with other laws they have heard about and with the new elections requirements. I am an attorney. I should be cheering - more work for me - eh? But what I am doing is sending suggested changes to the law that would better explain what is required. That is what I would like to see - although I do not hold out much hope that it will happen.

Secret and above-board voting processes, protecting owners' privacy, and on the other side achieving important ballot measures that are much needed by HOAs are what is at stake here. The public is sold on one side of the issue - HOAs need to treat owners equally and be fair and evenhanded in treatment of members. I agree. However, it is difficult to legislate that with detailed, complicated laws. And there is a need for volunteer board members and the "job" is getting harder and harder. Boards need to seek out professional help and that costs money and owners complain about the costs. As more and more board members get threatened with lawsuits, which problem seems to escalate as more and more practices are legislated, the available board member "pool" diminishes. Then what happens? The consumer suffers. Keep an eye on my website (www.californiacondoguru.com) for changes and updates on new laws, and how to cope. Hopefully, you can get enough insight from the site that you will know what is the best course of action to go forward, and meet the legislative requirements for your HOA. I do not give legal advice on the site itself, but I do post a lot of information on what is happening and because of certain realities, caution HOAs that are self-managed that failure to seek out the right kind of help can result in disastrous conseqences. Everything is OK as long as it is OK - right?

Posted by Beth Grimm at 11:22 PM

November 18, 2005

SB 61 - Making it Work for Elections in HOAs

Thanks to the numerous comments and suggestions I received relating to SB 61 - California legislation directing specific processes for certain HOA elections - I can offer what I hope is some guidance and insight. Remember that the statute does not become operative until July 1, 2006, so HOAs with elections before that date need not heed the changes. However, attorneys like myself that try to be forward thinking and are in the processes of amending documents, writing articles, and posting helpful information need to sort out the requirements now, and conform our writings to systems that will satisfy the law after that point. Although the author of this bill seems willing to entertain some cleanup measures to eliminate some of the confusion about the combined processes (public voting system and corporate voting system), the basics will not likely change. All if not most HOAs will have to incorporate the double envelope voting system (geared toward absentee voting and voting at polling places) with the corporate system (use of proxies and cumulative voting when the governing documents allow for these things). Why I say some but not all is because the process does not make sense in Associations that are very small and do not need the added expense. These associations can certainly use the secret ballot system at a meeting without having to do the recruiting for board members months prior to the election. A request will be made that smaller associations be excluded from the requirements so long as they adopt a system that allows for secret ballots.

I received many comments stating that the proxy systems and cumulative voting processes are a very important part of the processes for many associations. Minority interests are not served very well without cumulative voting. On the other hand, it tends to complicate the process of elections (and is not allowed in the public voting processes) and most practitioners for that reason advise eliminating it as the Association matures and the documents are amended to be more useful and user friendly.

I have spoken with some association representatives and practictoners who use a combined voting system already. They send each owner a package containing these things

(1) a ballot with choices that also explains how to note votes if there is cumulative voting allowed (which would only be appropriate if the governing documents allow for it), but which does not require nor encourage a signature;

(2) a No. 9 or 10 size envelope with a control number or code, but no name, address or information identifying a particular property, to be used for insertion and sealing of the ballot;

(3) a slightly larger envelope (perhaps 6x9 or so) that has the address for return of the ballot on the front and a printed proxy on the back of it providing general language of a proxy, but no specified choices. This form contains a blank for assigning someone's name to the proxy but says that if there is no name, the proxy is assigned to the Board (or some say Secretary or President of the Association) and the other smaller envelope would be put into this envelope with the proxy on it, the owner would seal the envelope and sign and date the proxy. The proxy would state that it will be counted toward the quorum for the meeting or the balloting process (the election at hand);

(4) The meeting notice if there is a membership meeting scheduled, instructions on using the ballot process, and instructions indicating, if the case, that the ballot must be received before the meeting date or, as some allow, it can be brought to the meeting and dropped in a ballot box or turned in. Owners should be told in this case that if they attend the meeting, they can ask to have the package back, or leave it to be voted as is, when they check in.

This process requires active solicitation of candidates ahead of time, a write in blank or two or more in the ballot (depending on the # of vacant positions), and an announcement ahead of time as to whether owners can send give proxies to others to take to the meeting and get the owners package back. Normally, a later proxy controls. However, if the Association plans to "close the polls" prior to check in at the meeting, this process would not allow for proxies to be brought to the meeting and used to get back the written mailed ballots.

This process seems a very good one to me. It leaves open the question as to whether someone has a legal right to nominate themselves from the floor if the documents allow it. And some of the comments I received from Associations (smaller ones especially) is that they cannot get anyone to submit their name for candidacy prior to the meeting; lamenting that they need to "recruit" from attendees to even fill the positions. I can believe this, and for this type of situation, the mailed double envelope system seems quite excessive and futile.

Stay tuned for more on cleanup that may be requested, but for now, just note that the suggestion that proxy voting and cumulative voting should be eliminated is not the popular view according to comments I received.
(And thanks for those comments!)

Posted by Beth Grimm at 11:14 AM

November 2, 2005

SB 61 - Association Elections - Can it Be Fixed?

If you do not know it, SB 61 was signed into law on October 4 and will become the law of the land (California land anyway) next July. I have identified some problems with it in trying to explain it to Boards, homeowners and others. The question that keeps coming up - at least with regard to election of directors - what does it do to proxy and cumulative voting, and what about quorum requirements? Right now, as I see it, it does not override either, it just complicates them. I have been speaking with a representative of the author's office about the difficulty I am having explaining how it might work within a system that also allows for proxies and cumulative voting, and nominations from the floor in Association elections. The real question is how much explanation of the two systems needs to be addressed at the time the Board sends notice to Owners of an upcoming annual meeting and election (for directors). It obviously needs to include the ballot and double envelope system that allows for secret voting from your home, or hand carrying the ballot to the meeting. Does it need to also explain that you may use a proxy instead? Most Boards have been sending out proxies with the meeting notice for years because that was the way many people exercised their right to vote (through a proxy holder) and that was the only way to reasonably expect and achieve a quorum. If a Board refrains from sending out proxies, does that mean they can refuse to count them if an owner brings some to the meeting. Not as currently written. Does it mean that no one can cumulate their votes at a meeting. Not as currently written. So the dilemma for the Board is how much to explain in the meeting notice - that owners can vote through the "absentee" system or bring the ballot to the meeting, or that they can give a proxy to another to take to the meeting, or that someone may want to cumulate their votes and if that happens, that the owner may be at a disadvantage if he or she sends in the absentee ballot and then others that attend the meeting are able to cumulate their votes? Or does the Association try to conduct an election via cumulative voting through the absentee voting system. That is the dilemma. Does this newly proposed system, that is really intended to simplify association elections and guarantee secrecy work within the corporate voting process, allowing for cumulative voting, proxy gathering, and quorum requirements?

I think the answer is that it creates more problems than it resolves, unless proxy use and cumulative voting are eliminated. So that idea has been floated and I would like feedback from readers. What if the author of the bill cleaned it up to override provisions in governing documents that allowed for cumulative voting and proxy use in elections that are subject to the secret voting requirements (board member elections, special assessments, governing document amendments and transfer of common area for exclusive use).

I think that all I have said about the complicated nature of elections under the bill (as it resides within the corporate structure) would be simplified if the bill stated that the absentee ballot system (which by the way also allows for ballots to be taken to the meeting or given to another to be taken to a meeting and filled out there) controls and overrides use of proxies and cumulative voting. Now I know that there are opinions on these subjects and I would like to hear them. Is simpler better? Should the new law be amended to eliminate proxy voting and cumulative voting for these specific elections? Should the bill be amended to eliminate quorum requirements for the election of directors? (The public system has no quorum requirements and this system was structured with it in mind.)

I would like to hear from you, either with comments through the blog or emails through my condoguru website. My goal - to get to a place where I can help associations set up a proper election where no one will be at a disadvantage by using one system or another, and to get the cleanup necessary with this new law to eliminate the probable complications, and simplify the job of election inspectors. If their role is based on determining eligibility to vote and vote counting and matters related to that, and not resolving complicated legal issues and the heirarchy between the Corporations Code, the Davis Stirling Act, and the Rules of the Association, boards can go within the development and appoint unbiased association members to do the job, without having to pay an outsider with legal expertise.

I would like to hear from you.

Posted by Beth Grimm at 10:55 AM

October 9, 2005

A Recipe for Disaster? What Will Happen to HOA Elections in California?

Leaving legislation to legislators - sounds reasonable, but it can be a problem sometimes. Legislators often do not have to survive in the real worlds that they create. I have served on a legislative action committee in California for more than 15 years that monitors and proposes legislation, but the last 5 years have been about defensive measures rather than proactive work - involving educating (or trying to) Legislators in California about real world practical issues that come up when the lawmakers try to micromanage from the halls of Sacramento. The group I serve with finds itself continually battling legislators over poorly drafted legislation, proposing cleanup legislation following each legislative session, providing educational information and provocative questions to legislators every single legislative session to help them understand the negative ramifications of bills that ignore practical everyday application problems. And as for those bills that are workable, touted to be "pro-consumer legislation" - the costs to consumers in this state are dear. If you live in a homeowners association, I do not have to tell you this. The costs are ever rising with new legislative requirements added every year. The law governing homeowner associations has become so complicated that every Board needs professional help to get through the annual disclosure requirements unscathed, and now I could say the same about elections. The latest? SB 61. If you want to see this bill, go to the California State web site, Senate area, at http:://www.sen.ca.gov. Click on legislation, put in the bill number, and click on the bill that deals with common interest developments. At first glance, this bill appears simply to provide a laundry list of elections requirements. It proposes a means of dealing with proxies and a means for secret ballot elections via a double-envelope secret balloting system. One can read the statute and completely miss the true impact. What appears to have happened that with this bill is that the legislator who proposed it, and each and every legislator in California who approved it (which is most of them), and the Governor who signed it, could not perceive the various practical problems it presents for homeowner associations in this state, in spite of many communications from the legislative group I work with, and others who understand how HOAs operate.

The bill attempts to combine the secret balloting system for public elections that involves a polling place, an unsigned or absentee ballot, independent accounting of ballots, and an election announcement in a public forum with a corporate election process calling for an annual meeting, proxies, voting at a meeting by members present in person or by proxy, quorum requirement for a valid meeting, cumulative voting, nominations from the floor, counting of ballots at a meeting, and announcement at the meeting. Sounds good -- but mixing up the two raises some difficult hurdles. SB 61 requires that proxies that are prepared must contain a separate page for the proxy giver to indicate to the proxy holder instructions on how to vote at the meeting at which the proxy would be used. By the way, a proxy is a legal document that allows one person to go to a meeting and exercise a member's vote because that other person is not able to attend. Use of proxies is a way to give homeowners in a homeowner association a “presence” at a meeting and help establish a legal “quorum” which is the minimum number of owners that must be "rep-”presented” in person or by proxy for the meeting to be a legally valid meeting.

A double envelope voting system involves sending out two envelopes and ballot, and requires a member voting by this method to place an unsigned ballot in one of the envelopes with a control numbering or other system -- and placing that envelope inside the second envelope which is addressed to an inspector of election or dropped in a ballot box. This allows an owner to vote secretly. The ballot box could be in an inspector's office, in the office of the association, and/or brought to a meeting.

Sounds simple enough. But trying to use both methods in the same election can be quite confusing. For certain subjects, the double envelope voting system is required. If the Board sends out the ballot and two envelopes and the proxy with the page attached that allows the member to note how he or she wants a proxy holder to vote, the Board will of course have to explain the two different methods of voting. If it proceeds without sending a proxy along with the ballot and envelopes to avoid confusion, it could backfire. Any association member that wants to exercise the right to cumulative voting, and/or brings a bunch of legally valid proxies to a meeting to be counted (assuming the governing documents allow for cumulative voting and allow proxies) has legal standing to ask that the proxies be validated. This raises a dilemma. If an owner sent in a ballot and then gave a proxy to someone to vote it, a potential legal issue arises as to whether the proxy can be used. Under California law, a person can revoke a proxy by appearing at a meeting, but can they revoke the ballot that was sent to the Inspector? Under current corporate law, a written mailed ballot cannot be revoked. However, what if the member is holding many proxies and wants to cumulate their votes? Unless the cumulative voting process is explained in the package of voting materials, (which would be appropriate only in an instance where the governing documents for the Association provided for it), then those who have already voted for candidates on the ballot by sending in the unsigned ballot have no way to go back and cumulate their votes. (This would normally resolve itself if the member gave a proxy because the proxyholder could have the opportunity to cumulate votes at the meeting after it was announced.)

This is a big deal. SB 61 requires secret ballots in any election in an HOA for board members, special assessments, amendments to the governing documents, or transfer of common area. This encompasses most of the elections in an HOA. The secret voting process requires the mail ballot double envelope balloting system which is the type used for absentee balloting and voting at polls in a public election.

And try to picture a recall election which can involve two elections on the same night - one to see if a board or board member is recalled, and the other to elect successor(s) if a board or board member is recalled. These are already complicated enough but the proxy system at least allows the attendee put in charge of voting to vote at both elections (if there are in fact two). The double envelope system would not work in a recall election, as it would leave any Association whose board was voted out of office without a viable way to proceed to the next election - unless the Inspector(s) of Election were appointed to conduct the second election as well.

The system proposed by SB 61 does not appropriately address cumulative voting and for all intents and purposes it complicates the use of proxies .... Thoughtful practitioners have for years explained to Boards why they do not want to try and combine a written ballot and voting at a meeting using proxies, and the confusion that would result. Now, it looks like it may be what is required, rather than what is to be avoided.

The real question is when and where will this be sorted out – at a meeting? or in the courts? And who will decide – an Inspector of Election? Or a Judge? I don't think any of the proponents thought this far ahead, but arguments about the practical problems encompassed in the processes legislated went unheeded the entire legislative session. Once this bill kicks in as law (after July 1, 2006) all a dissatisfied owner must do to challenge an election is file court petition for immediate relief. An owner who does not seek legal counsel and tries this process on their own will only complicate the court proceedings and draw things out to the point where an Association will have to pay considerable attorneys fees, and although the owner can recover legal fees if they prevail (if they use an attorney), the Association cannot recover legal fees unless the court finds the action to be frivolous. I believe this is a finding that will be the exception, rather than the norm, having (in my court days) experienced that judges often bend over backwards to help a pro per party (one that is representing himself or herself).

And what about costs. Costs for a complicated mailing, costs for an Inspector or Inspectors of election, costs for a redo when something in the process gets challenged.

It's an important issue - stay tuned.

Posted by Beth Grimm at 8:48 PM

May 17, 2005

Can the Davis Stirling Act be Simplified?

The California Law Revision Commission has taken on a big job. It will concentrate once again on trying to simplify the Davis Stirling Common Interest Development Act. This may take years. The CLRC started this process in 2002-2003 but found it to be a daunting task, and decided that focussing on nonjudicial resolution of various matters was a more reasonable approach. As a result, bills relating to ADR (alternative dispute resolution), IDR (Internal Dispute Resolution) and reasonable architectural policies were recommended, authored and passed into law. These all focus on "fair and reasonable" procedures and "prompt" timelines for resolving disputes and for resolving architectural control processes and issues. It also worked on oversight and as a result two "ombudsperson" bills were introduced, that are being handled as "two-year" bills. They are discussed in an earlier post. Now for them it is time to consider rewriting and reorganizing the entire Act, and incorporating pertinent provisions of the California NonProfit Mutual Benefit Corporation Laws that affect most of the HOAs in California. Their process is much more reasoned, deliberative and sound than knee-jerk reactionary legislation that comes from constituent pressure and bad press. Check out the agendas, reports, and comments found at the state's website at http://www.clrc.ca.gov.

Posted by Beth Grimm at 11:04 PM

May 3, 2005

AB 9

Take a look at AB 9, the Governor's new plan to fund education in California. The bill proposes to add various "specialized" services to items that are taxed to the consumer, such as accounting fees, attorney fees, management fees, architect and surveyor costs, and even membership fees. It's hard to condemn any plan to raise money for education. Many people backed the lottery, after all believing that would be the ultimate answer. (And many still wonder "what happened" there.) But consumers might have something to say about more taxes. Homeowners in homeowner associations will pay double. They will be burdened with all of the usual personal costs for the services they need individually, and their associations will be hit with rising accounting, management, legal and construction costs, if this bill passes. It's a little scary as costs are already rising each year for associations in insurance, utilities and managment. Keep your eye on this one.

Posted by Beth Grimm at 11:09 PM

April 28, 2005

General Legislation Information

Here is the scoop on some California Legislation. Did you know that you can follow California legislation by going to www.sen.ca.gov where you can plug in a bill number and subject/author and pull up any bill from the current or prior session. You can find out what the legislative analysts say, and sign up for updated versions of the bill. And you can find out what various interest groups are saying by the bills by visiting sites such as California Legislative Action Committee, Responsible Neighbors, and California Association of Community Managers.

Collections Issues – Foreclosure Restrictions: There has been bad press in the past few years about foreclosures of CID property for small assessments. The Associations claim that the owners ignored notices and the Boards were fulfilling their fiduciary duty to collect assessments. The press stories claim that Associations are abusing privileges granted by statute and documents by using nonjudicial foreclosure as a means of collection. SB 137 would seriously curtail collections processes of any debt under $2500 by eliminating the ability to move toward foreclosure. The clear intent of the bill is to stifle foreclosures as a means of collection of delinquent assessments that do not add up to $2500. The bill has a strong and determined author, and is co-authored by leaders in both houses of the California government. Some effort is being made to soften its effect by seeking amendments to the bill. Last year, a similar bill (AB 2598) was defeated after an all out effort by industry groups that try to help associations cope with difficult issues was made. The PR effort lead to a veto by the Governor, who requested that rather than a drastic changes, incremental changes to the foreclosure laws should be considered. SB 619 is a bill that proposes some lesser changes to the foreclosure laws relating to notice and other topics. CACM (manager’s group) is the sponsor of this bill. Stay tuned – these are hot topics in California.

Election Bills:. SB 61 calls for secret balloting processes; however the means of implementation have been criticized by some as difficult. SB 186 curtails amendment campaign processes by limiting communications that can be sent to owners. Both bills cover elections including for the Board and for other subjects such as special assessments and updating/amendment of document projects. The bills presume that association elections are problematic but ignore that fact that apathy is a rampant problem in CIDs.

Records Inspection and Contractual Matters: AB 1098-David Jones, is a bill proposing considerable reform in records inspection matters and elections. It would allow inspection of all association records, even those that are privileged via executive sessions and attorney-client communications. It would eliminate bidding and contracts from subjects that may be considered in executive sessions (closed meetings). It ignores the fact that the Corporations Code has some language that if incorporated into the Davis Stirling Act, would satisfy some of the concerns obvious in the bill.

You can be informed and read the bills by searching for them at the site noted above. I will continue to provide periodic updates on these bills. ...

And other topics. Come back for a visit.

Posted by Beth Grimm at 9:28 PM