BILL ANALYSIS �
AB 1360
Page 1
Date of Hearing: May 1, 2013
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Norma Torres, Chair
AB 1360 (Torres) - As Amended: April 25, 2013
SUBJECT : Common interest development: electronic voting
SUMMARY : Allows a homeowners' association (HOA) in a common
interest development (CID) to conduct an election via electronic
voting. Specifically, this bill :
1)Makes legislative findings.
2)Requires an HOA to give a member an opportunity to indicate if
he or she wishes to vote electronically.
3)Requires an HOA to provide a ballot and any related material
to a member voting electronically at least 30 days prior to
the voting deadline by electronic transmission.
4)Requires the inspector of elections to receive the voting
results from an electronic balloting services provider and to
count and tabulate the electronic votes.
5)Requires an HOA to provide members who indicated that they
will not be voting electronically a paper ballot pursuant to
Civil Code Section 5115.
6)Defines an "electronic balloting service provider" as a
business that:
a) Is an independent third party that is not affiliated
with the HOA management or members;
b) Is insured for liability;
c) Protects the secrecy of the ballots;
d) Protects the anonymity of the voter by insuring that
when the votes are tallied and submitted to the HOA the
members names are not listed;
e) Produces a record verifying the dates and times that the
votes were cast; and
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f) Provides members a secure confirmation of their
electronically cast vote.
EXISTING LAW
1)Permits members of a corporation, unless prohibited by the
bylaws, to vote at a meeting held by electronic transmission
or by electronic video screen communication if members are
given a reasonable opportunity to participate in the meeting
in person and a record of the electronic vote is kept by the
corporation (Corporations Code Section 7510).
2)Requires an HOA to select an independent third party or
parties for an election in a CID to do all of the following:
a) Determine the number of memberships entitled to vote and
the voting power of each;
b) Determine the authenticity, validity, and effect of
proxies, if any;
c) Receive ballots;
d) Hear and determine all challenges and questions in any
way arising out of or in connection with the right to vote;
e) Count and tabulate all votes;
f) Determine when the polls close, consistent with the
governing documents;
g) Determine the tabulated results of the election; and
h) Perform any acts as may be proper to conduct the
election with fairness to all members in accordance with
the Davis Stirling Act (Act), the Corporations Code, and
all applicable rules of the HOA.
(Civil Code Section 5110)
1)Requires an HOA to provide each owner of a separate interest
with a ballot with two preaddressed envelopes and instructions
on how to return the ballot (Civil Code Section 5115).
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2)Requires ballots to be mailed by first-class mail or delivered
by the HOA to every member not less than 30 days prior to the
deadline for voting (Civil Code Section 5115).
3)Prohibits voters from being identified by name, address, lot,
parcel, or unit number on the ballot (Civil Code Section
5115).
4)Requires the ballot to be inserted into the first envelope,
which is then sealed. That envelope is inserted into a second
envelope, which is then sealed. Requires the voter to sign his
or her name and address in the upper left hand corner.
Requires the second envelope to be addressed to the inspector
or inspectors of elections who will be tallying the votes. The
envelope may be mailed or delivered by hand to a location
specified by the inspector or inspectors of elections. The
member may request a receipt for delivery. (Civil Code Section
5115)
5)Requires the ballots in an election to be counted in public at
a properly noticed meeting and allows any member or candidate
for election to witness the counting and tabulating of votes
(Civil Code Section 5120).
6)Prohibits any member of the association or employee of the
management company from opening the ballots prior to the
meeting at which they are counted (Civil Code Section 5120).
7)Makes a ballot irrevocable once it is received by the
inspector of elections (Civil Code Section 5120).
8)Requires the results of the election to be reported to the
board and recorded in the minutes of the next meeting of the
board and made available for review by the members of the HOA
(Civil Code Section 5120).
9)Requires the board to notify the members within 15 days of the
results of the election (Civil Code Section 5120).
10)Requires the sealed ballots to be in the custody of the
inspector of elections at all times or at a location
designated by the inspector until the time limit for
challenges for elections has expired (Civil Code Section
5125).
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11)Requires the inspector of elections to make the ballots
available upon written request if there is a request for a
recount or challenge to the election. Requires a recount to be
done in a manner that preserves the confidentiality of the
vote. (Civil Code Section 5125)
12)Requires a quorum in an election in a CID only if so stated
in the governing documents or other provisions of law. If a
quorum is required by the governing documents, each ballot
received by the inspector of elections shall be treated as a
member present at a meeting for purposes of establishing a
quorum. (Civil Code 5130)
FISCAL EFFECT : None.
COMMENTS :
There are over 49,000 CIDs in the state that comprise over 4.9
million housing units, or approximately one quarter of the
state's housing stock. CIDs include condominiums, community
apartment projects, housing cooperatives, and planned unit
developments. CIDs range in size from three to 27,000 individual
units. They are characterized by a separate ownership of
dwelling space coupled with an undivided interest in a common
property, restricted by covenants and conditions that limit the
use of common area and the separate ownership interests, and the
management of common property and enforcement of restrictions by
an HOA. CIDs are governed by the Act as well as the governing
documents of the association, including bylaws, declaration, and
operating rules. CIDs are run by volunteer boards of directors,
the members of which may have little or no experience managing
real property or governing a nonprofit association and who must
interpret the complex laws regulating CIDs. Boards must not only
interpret the law, but enforce the restrictions and rules
imposed by the governing documents and state law.
In addition to interpreting an HOA's individual governing
documents, boards and homeowners must also follow the state law
governing CIDs. The governing law has two main sources, the
Corporations Code and the Act. If an HOA is incorporated it is
typically governed by the Nonprofit Mutual Benefit Corporation
Law. An unincorporated HOA is subject to both the general law on
unincorporated associations and specific provisions of the
Nonprofit Mutual Benefit Corporations Code. Although the
Department of Real Estate oversees the early stages of the
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development of a CID, once a majority of the units are sold
there is no entity that oversees HOA governance. To enforce
state law governing CIDs and the governing documents, members
must pursue remedies in the courts.
Election procedures in CIDs : The existing CID election
procedure is intended to provide secrecy to members and involves
an extensive process, including the provision of double stuffed
ballots. HOAs are required to secure an inspector of elections
to open and tally all ballots received in an election. A problem
reported by CIDs, regardless of size, is the challenge of
getting enough members of the HOA to participate in an election
to achieve a quorum. For an election to be valid, the governing
documents of an HOA generally require that a quorum of the
members vote. In some cases HOAs are not able to achieve a
quorum in the first election and must conduct subsequent
elections, which they report is a costly endeavor. Ultimately
this cost, like all costs to operate the CID, is borne by the
members through their assessments.
Purpose of this bill : This bill would allow members of an HOA to
opt in to electronic voting as an alternative to voting by paper
ballot. According to the author, AB 1360 seeks to increase voter
participation in HOA elections while contributing to reductions
in the use of paper and providing cost-saving opportunities for
HOAs in the administration of elections.
Electronic balloting companies : It is unclear how many companies
are available to provide electronic balloting to CIDs. A Google
search generated a list of over twenty companies that appear to
provide online voting for corporations. It is unclear if
electronic balloting providers that are currently operating in
the market are regulated or must comply with best practices or
licensing. This bill provides a list of the qualifications an
electronic balloting provider must comply with, including
maintaining liability insurance, protecting the secrecy of
ballots, and providing members a confirmation of their vote. It
is unclear if this list is exhaustive or should be expanded to
include other requirements that would further preserve the
integrity of the voting process in CIDs.
Secrecy of ballots : One of the main goals of the existing
election procedure for CIDs is to maintain secrecy. The double
stuffed ballots and independent third party inspector of
elections are intended to insure that members are confident that
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they can freely vote without reprisal. At the same time, some
HOAs contend that the existing process is cumbersome and costly
and that apathetic members do not vote in elections, both of
which mean HOAs incur extra costs for multiple elections. The
challenge to shifting to allowing electronic balloting is
balancing the desire for secrecy with the goal of greater voter
participation.
Role of inspector of elections : This bill still maintains a role
for the inspector of elections to receive, count, and tabulate
the voting results from the electronic balloting service
provider. In the case of paper ballots this role is clear. With
electronic voting, it is not entirely clear what type of record
the electronic voting service provider would provide of the
votes or how the inspector of elections would count and certify
them. The author may wish to examine how this process can be
addressed in the bill.
Arguments in support : The board of directors of Laguna Woods
Village supports this bill. Laguna Woods Village is made up of
18,000 senior citizens residing in 12,736 homes in three housing
non-profit mutual benefit corporations, two condominium
associations, and one cooperative housing corporation. The board
of directors of Laguna Woods Village writes, "This bill would
provide an option for an association such as ours to offer an
opt-in electronic voting option that would afford an opportunity
for increased convenience thereby increasing voter participation
as well as reducing the cost of conducting elections which cost
approximately $15,000 annually."
Arguments in opposition: The Center for California Homeowner
Association Law (CCHAL) opposes this bill and raises concerns
that the bill could jeopardize the secrecy of the ballots.
CCHAL contends the bill does not address several key questions,
including how secrecy of the ballots will be maintained, how
electronic ballots can be audited, and what the chain of custody
is for ballots in electronic balloting. CCHAL maintains that the
rationale for the bill is that electronic balloting increases
voter participation, but that no research from a neutral third
party establishes that this outcome will be achieved.
Committee amendments:
On page 2, restore lines 27 -29 and line 1 on page 3.
On page 3, line 2 delete "shall" and replace with "may"
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On page 3, line 4 delete "shall" and replace with "may"
On page 4, line 1 delete "an independent third party that is"
On page 4, delete lines 13 through 15
On page 4, line 17 delete "subdivision (a) of"
REGISTERED SUPPORT / OPPOSITION :
Support
Community Associations Institute (sponsor)
California Association of Realtors
Executive Council of Homeowners
Laguna Woods Village
Opposition
Center for California Homeowner Association Law
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085