BILL ANALYSIS Ó
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: ab 968
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: gordon
VERSION: 5/2/13
Analysis by: Mark Stivers FISCAL: no
Hearing date: July 2, 2013
SUBJECT:
Common interest development elections
DESCRIPTION:
This bill allows a common interest development with 15 or fewer
interests to exempt itself from the election provisions of the
Davis-Stirling Act and follow minimal procedures.
ANALYSIS:
A common interest development (CID) is a real property
development that includes all of the following: (1) separate
ownership of a lot or unit coupled with an undivided interest in
common property, (2) covenants, conditions, and restrictions
that limit use of both the common area and separate ownership
interests, and (3) management of common property and enforcement
of restrictions by a community association, which is generally
governed by an elected board of directors. Condominiums,
planned unit developments, stock cooperatives, community
apartments, and many resident-owned mobilehome parks all fall
under the CID umbrella.
The Davis-Stirling Common Interest Development Act is the main
body of statutory law that governs CIDs in California. The act
lays out various requirements for how a CID is to conduct an
election regarding assessments, the election and removal of
directors, amendments to the governing documents, or the grant
of exclusive use of common area, including:
The CID must mail by first-class mail or deliver ballots to
every member not less than 30 days prior to the deadline for
voting.
Members must submit secret ballots using "double-stuffed"
envelopes, in which the voter inserts the unsigned ballot into
the first envelope and seals it. The voter then inserts that
envelope into a second envelope onto which the voter signs his
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or her name and writes his or her address. Voters may not be
identified by name, address, lot, parcel, or unit number on
the ballot.
The board must appoint one or three independent inspector(s)
of elections. An inspector may be a member who is not a
director or a candidate or related to a director or to a
candidate for director or may be an outside person or entity
who is not currently employed or under contract to the
association unless expressly authorized by rules of the
association.
The inspector of elections must:
Determine the number of memberships entitled to vote and
the voting power of each.
Determine the authenticity, validity, and effect of
proxies, if any.
Receive ballots.
Hear and determine all challenges and questions in any
way arising out of or in connection with the right to vote.
Count and tabulate all votes.
Determine when the polls close, consistent with the
governing documents.
Determine the tabulated results of the election.
Perform any acts as may be proper to conduct the
election with fairness to all members in accordance with
the law and applicable rules of the CID.
Once the inspector of elections receives a ballot, that ballot
is irrevocable.
The inspector of elections must open and count the ballots in
public at a properly noticed meeting and allow any member or
candidate for election to witness the counting and tabulating
of votes.
If the governing documents require a quorum, the inspector
shall treat each ballot received as a member present for
purposes of establishing a quorum.
The board must notify the members within 15 days of the
results of the election and record the results in the minutes
of the next meeting of the board.
The inspector of elections must maintain custody of the sealed
ballots from receipt until the time limit for challenges for
elections has expired.
If there is a recount or other challenge to the election, the
inspector of elections, upon written request, must make the
ballots available for inspection and review by an association
member or the member's authorized representative and conduct
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the recount in a manner that preserves the confidentiality of
the vote.
An association must allow for cumulative voting using these
secret ballot procedures if cumulative voting is provided for
in the governing documents.
In an election to approve an amendment of the governing
documents, the board shall deliver the text of the proposed
amendment to the members with the ballot.
This bill allows a CID with 15 or fewer interests to exempt
itself from all of the election provisions described above for a
single election of directors, and for all subsequent elections
of directors if a majority of the members approves through an
election conducted pursuant to the election provisions described
above. If a CID exempts itself, the bill requires the CID to
conduct elections of directors according to the following:
The board must provide notice of the election to each member
at least 30 days before the meeting at which the election is
held. The notice must provide the time and place of the
meeting and a description of the subject of the election.
The CID shall hold the election at a meeting of the members at
which a quorum is present, including proxies if allowed by the
governing documents.
Members may nominate candidates prior to the election or at
the meeting.
Members must cast votes by secret written ballot, except as
may be necessary to cast a ballot pursuant to a proxy.
The ballot must allow for write-in candidates.
The CID shall count the ballots openly and announce the
results at the meeting at which they were cast.
If a vote to elect a director results in a tie and a quorum is
still present when the tie is announced, the members may
immediately conduct a runoff election between the tied
candidates unless the governing documents provide another
method.
COMMENTS:
1.Purpose of the bill . According to the author, existing
elections requirements for CIDs can be costly, time-consuming,
and difficult for smaller associations to effectively
complete. In these cases, CIDs often disregard the existing
law because it is overly-burdensome. The existing regulations
include preparing and mailing ballots to each member complete
with two preaddressed returned envelopes and selecting an
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independent, third-party "elections inspector" to hold the
election and tabulate the results. A cottage industry of
inspectors of elections has emerged, charging associations a
good deal of money to run their elections. Further, when a
quorum is not achieved through mail-in ballots after the
30-day period required, the entire election process must start
over once again. This contributes to increasing costs and
even more time spent on elections. CIDs with 15 units or less
make up approximately one-third of the roughly 49,000 CIDs in
California. These smaller associations would benefit greatly
from a simplified procedure for electing directors, enabling
them to run smoothly and efficiently.
2.Director elections only . This bill applies only to the
election of directors, not to the elections regarding
assessments, the removal of directors, amendments to the
governing documents, or the grant of exclusive use of common
area.
3.What is the benefit ? There are two main differences between
the election procedures proposed by this bill for smaller
associations and the current procedures applicable to all
CIDs. First, the bill replaces "double-stuffed" envelopes
with an undefined "secret written ballot." Second, the bill
exempts smaller CIDs from the requirement to appoint an
inspector of elections. Given that an inspector may be a
member who is not related to a director or a candidate or any
other outside person or entity who is not under contract to
the CID, it is not clear how current law is either costly or
overly-burdensome to smaller CIDs. Admittedly, the CID must
buy up to 15 extra envelopes, but there is no need to spend
money to hire an inspector of elections. Moreover, current
law even allows the appointment of an inspector of elections
who is related to a director or candidate or under contract to
the association if the CID's own rules expressly authorize it.
On the other hand, the bill's election rule changes may have
negative consequences. First, eliminating the inspector of
elections allows parties with an interest in the election to
run the election. This is an obvious conflict of interest,
and history is full of examples of election abuse generally.
Second, the bill exempts smaller CIDs from the requirement to
maintain the ballots and make them available for an inspection
or recount. If there is a disputed election, this exemption
may make it impossible for members to verify or challenge the
results. Third, the double-stuffed envelope requirement
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emulates public elections and ensures a secret ballot. It is
not exactly clear that other types of ballots will in fact
allow for both the ability to verify eligible votes and to
ensure the secrecy of the ballot. Fourth, the bill removes a
number of smaller provisions without justification, such as
the requirement that CIDs provide the text of amendments to
the governing documents, the provision that ballots are
irrevocable once received, and the requirement that CID's must
permit cumulative voting if allowed in the governing
documents. The committee may wish to consider whether the
bill provides any benefit, especially considering the possible
negative impacts.
4.Post-facto permission . This bill allows for smaller CIDs to
hold one election of directors under its rules without
permission of the general membership. The bill only requires
member approval for subsequent elections. The committee may
wish to consider requiring member permission before using the
bill's provisions at all.
5.Arguments in opposition . Opponents argue that all the major
CID stakeholders negotiated the Davis-Stirling Act's current
election provisions, which the Legislature enacted unanimously
with SB 61 (Battin), Chapter 450, Statutes of 2005, and that
there is no evidence that smaller CIDs have difficulties
complying with current law. More importantly, they believe
the bill undoes critical consumer safeguards, including taking
elections out of the hands of incumbents and specifying how
ballots are to remain secret while ensuring a voter's
eligibility. The Center for California Homeowner Association
Law states that is has found that the smaller the CID, the
greater the likelihood for contention among the members, and
the greater the likelihood that individual members will be
pressured or intimidated to vote a certain way. As a result,
smaller associations are equally in need of election
procedures that requirs a third party to manage the election.
Assembly Votes:
Floor: 73-1
H&CD: 7-0
POSITIONS: (Communicated to the committee before noon on
Wednesday, June 26,
2013.)
SUPPORT: Associa
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California Association of Community Managers
Community Associations Institute
Congress of California Seniors
Executive Council of Homeowners
OPPOSED: California Alliance for Retired Americans
California Consumer Affairs Association
Center for California Homeowner Association Law
Public Interest Law Project