On July 1st, 2006, the way community associations have traditionally conducted annual meetings and/or taken votes will be history. This new law, set out in new Civil Code Section 1363.03, will affect how all homeowners associations in California will conduct most of their voting and elections, including the election of directors, a vote by the membership for assessment increases, amendments to the governing documents, and grant of exclusive use common area (subject to the limitations of Civil Code Section 1363.07). This new law was premised on what we believe is the mistaken opinion that association elections and balloting are “fraught with fraud.” The big change is that all voting will be by secret ballot. There is cleanup legislation that has been proposed, which expands the secret ballot process to all association votes. Failure to comply with these new rules could, by court order, set aside the results of an election or vote taken by an association and/or could subject an association to a penalty of five hundred dollars ($500.00) for each violation.
The newly required Election Rules and Regulations (Rules) are considered “operating” rules under the Civil Code, which will require that they first be sent out to the owners for comment. The Rules should set forth the process by which membership meetings are to be conducted, how voting is to occur and who is in charge. No longer may the association’s managing agent (unless your Rules provide otherwise) be in charge of the registration process nor may they assist the inspector(s) of election (“inspector(s)”) with the vote tally. While the number of inspector(s) has not changed (either one (1) or three (3)), the new law requires associations to specify how they are going to select the inspector(s), requires the inspector(s) to be independent third parties which include, but are not limited to, volunteer poll workers with the county registrar of voters, a licensed CPA, or a notary public. Although inspector(s) may be a member of the association, that member cannot be related to a board member, nor a candidate for election to the board of directors, a member related to the candidate, or be a person that is currently employed by or under contract to the association unless expressly authorized by the Rules. The inspector(s) must be selected prior to the vote or election as the inspector(s)’ role and responsibilities have been expanded.
If an association’s governing documents require an annual meeting to elect the board of directors (“board”), you will still be required to follow the Civil Code-mandated process. Cumulative voting and quorum requirements set forth in the governing documents remain controlling. The association or its managing agent will be obligated to provide information to the inspector(s) so that the inspector(s) can determine which members are in good standing and have a right to vote, notify members that they have a right to run for the board, the right to submit a candidacy statement, the right to utilize the association’s media in the same manner that any other candidate is utilizing an association’s media, which includes (by way of example) the association’s website or newsletter, if applicable. The board must be consistent with the procedures as they are to be applied to all members. Further, associations must provide access for all members to the association’s common area meeting space (or spaces) so that the member/candidate can have a forum to discuss their candidacy or anything reasonably related to the election.
