BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
                              Senator Jim Beall, Chair
                                2015 - 2016  Regular 

          Bill No:          AB 1799           Hearing Date:     6/14/2016
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          |Author:   |Mayes                                                 |
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          |Version:  |6/6/2016                                              |
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          |Urgency:  |No                     |Fiscal:      |No              |
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          |Consultant|Alison Dinmore                                        |
          |:         |                                                      |
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          SUBJECT:  Common interest developments:  association governance:  
           elections


            DIGEST:  This bill exempts homeowner associations (HOA) in a  
          common interest development (CID) from election procedure  
          requirements in uncontested elections.  

          ANALYSIS:
          
          Existing law:
          
          1)  Requires the election and removal of directors, amendments  
            to governing documents, or the grant of exclusive use of  
            common areas to be held by secret ballot.  

          2)  Provides that directors shall not be required to be elected  
            if the governing documents provide that one member from each  
            separate interest is a director. 

          3)  Requires the HOA to adopt election rules that do the  
            following:

             a)   Ensure that if any candidate or member advocating a  
               point of view is provided access to association media,  
               newsletters, or web site during a campaign, and that equal  
               access shall be provided to all candidates and members, for  
               purposes reasonably related to the election

             b)   Ensure access to common- area meeting space at no cost  







          AB 1799 (Mayes)                                    Page 2 of ?
          
          
               to all candidates

             c)   Specify the qualifications for candidates for the board  
               and any other elected position, and procedures for the  
               nomination of candidates, consistent with the governing  
               documents.  A nomination shall not be deemed reasonable if  
               it disallows any member from nominating himself or herself  
               for election to the board

             d)   Specify the qualifications for voting, the voting power  
               of each membership, the authenticity, validity, effect of  
               proxies, and the voting period for elections. This would  
               include the times at which polls will open and close,  
               consistent with the governing documents

             e)   Specify a method for selecting one or three independent  
               third parties as elections inspector or inspectors of  
               elections.  Inspectors may appoint or oversee additional  
               independent third-party persons to verify signatures and to  
               count and tabulate votes as the inspector or inspectors  
               deem appropriate

          4)  Requires the inspector of elections to be one or three  
            individuals who have the following duties:

             a)  Determine the number of memberships entitled to vote and  
               the voting power of each
             b)  Determine the authenticity, validity, and the effect of  
               proxies;
             c)  Receive votes and ballots and hear and determine all  
               challenges and questions
             d)  Count and tabulate all votes
             e)  Determine when polls close 
             f)  Determine the results of the election

          5)  Permits the nomination of candidates from the floor of  
            membership meetings or nomination by any other manner. 

          6)  Permits a member of an association to bring a cause of  
            action in small claims court against the HOA if the  
            association restricts access to association resources by a  
            candidate or member advocating a point of view; the receipt of  
            a ballot by a member, or the counting, tabulation, or  
            reporting of, access to, ballots for inspection and review  
            after the tabulation. 








          AB 1799 (Mayes)                                    Page 3 of ?
          
          

          This bill:

          1)  Provides that directors shall not be required to be elected  
            if the election is uncontested.  An election of directors is  
            uncontested if the number of candidates for election,  
            including write-in candidates if applicable, does not exceed  
            the number of directors to be elected at that election and the  
            HOA has declared the election uncontested.   

          2)  Permits an HOA to declare an election to be uncontested only  
            if all of the following procedures have been satisfied:

             a)  Required election rules have been adopted and complied  
               with for the election.
             b)  All declared candidates were nominated before the  
               deadline for nominations and in accordance with all lawful  
               provisions of the HOA's governing documents.
             c)  The inspector of elections has informed the board that  
               the number of candidates does not exceed the number of  
               directors to be elected at the election.
             d)  The board votes in open session to declare the election  
               is uncontested after a hearing during an open board meeting  
               where members are able to make objections to the board  
               making that declaration.  
             e)  At least 20 days before the board meeting for the vote to  
               declare the election is uncontested, the HOA provides  
               general notice to all members as set forth by the  
               following:

               i.   The intention of the board to vote at a regular board  
                 meeting to declare the election of directors is  
                 uncontested, and giving the date, time, and place of that  
                 board meeting
               ii. A disclosure to members of the names of all candidates,  
                 however nominated, including self-nomination, who will be  
                 declared if the board declares the election is  
                 uncontested
               iii. The right of any member to appear at the board meeting  
                 and make an objection to the board, declaring the  
                 election is uncontested before the board votes on the  
                 matter
             f)  The names of all candidates, however nominated, the  
               general notice required, any objection to the board making  
               the declaration that the election of directors is  








          AB 1799 (Mayes)                                    Page 4 of ?
          
          
               uncontested, and the board vote declaring the election of  
               the directors is uncontested shall be recorded in the  
               meeting minutes

          3)  If the HOA governing documents provide for write-in votes on  
            the ballot, the HOA shall allow 15 days after the board  
            meeting declaring an uncontested election for a write-in  
            candidate to submit his or her name to the inspector of  
            elections. 

             a)  In the event one or more write-in candidates are timely  
               submitted and additional candidates result in the total  
               number of candidates exceeding the number of directors to  
               be elected at that election, an election shall be held  
               pursuant to general election rules.  If after the 15-day  
               period the total number of candidates, including the number  
               of write-in candidates, does not exceed the number of  
               directors to be elected at that election, the uncontested  
               election results shall be sealed and become effective  
               immediately, with any write-in candidates added as members.  
                The new board shall take place immediately following the  
               seal of the election. 
             b)  If an HOA's governing documents do not provide for  
               write-in votes on the ballot, the HOA must provide at least  
               15 days' general notice of a self-nomination process  
               following the board determination of an uncontested  
               election. 

          4) Requires the HOA to adopt rules that:
               
             a)  Ensure that an announcement of an election and  
               notification of nomination procedures, including  
               self-nomination, shall be provided to all members by  
               general notice at least 60 days before an election for  
               directors.
             b)  Ensure a member who satisfies the lawful qualifications  
               specified by the association's rules specifying the  
               qualifications for candidates for the board and any other  
               elected position, and the association's governing  
               documents, shall not be denied the right to be a candidate  
               for director.  
             c)  Ensure a member who satisfies all lawful qualifications  
               specified by rules adopted by the association, which  
               specify the qualifications for voting, and the  
               association's governing documents, shall not be denied the  








          AB 1799 (Mayes)                                    Page 5 of ?
          
          
               right to vote. 

          5) Provides that a member may bring a cause of action in small  
            claims court for a violation of this act. 

          COMMENTS:

          1)  Purpose of this bill.  According to the author, CID board  
            elections are often uncontested, with the number of candidates  
            not exceeding the number of vacant seats.  Current law  
            requires such uncontested elections to follow the same  
            election procedures as contested elections, including  
            minimum-vote thresholds and costly third-party verification of  
            results.  In one example from the Laguna Woods HOA, a board  
            election cost as much as $20,000, including ballot printing,  
            mailing, and inspector of election services.  In uncontested  
            elections, this expense is wholly unnecessary and  
            unnecessarily burdens CID budgets.  This bill exempts HOAs  
            from the costly election procedure requirements in current law  
            when the number of candidates does not exceed the number of  
            open seats.  It includes a structured process, notice  
            requirements, and other safeguards. 

          2)  CIDs background.  A CID is a form of real estate in which  
            each homeowner has an exclusive interest in a unit or lot and  
            a shared or undivided interest in common-area property.   
            Condominiums, planned unit developments, stock cooperatives,  
            community apartments, and many resident-owned mobilehome parks  
            all fall under the umbrella of common interest developments.   
            There are over 50,220 CIDs in California that comprise over  
            4.8 million housing units, or approximately one-quarter of the  
            state's housing stock.  CIDs are governed by an HOA.  The  
            Davis-Stirling Common Interest Development Act provides the  
            legal framework under which CIDs are established and operate.   
            In addition to the requirements of the act, each CID is  
            governed according to the recorded declarations, bylaws, and  
            operating rules of the association, collectively referred to  
            as the governing documents.

          3)  Current CID elections procedures.  Under current law, CID  
            elections must be held by secret ballot and, among other  
            things, an association must adopt rules around campaigning,  
            specifying the qualifications for candidates for the board,  
            specifying the qualifications for voting, and specifying the  
            method for selecting independent third-party inspectors.   








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            Ballots and two preaddressed envelopes with instructions for  
            returning the ballot are mailed to every member not less than  
            30 days prior to the deadline for voting.  The ballot is  
            inserted into an envelope, which is placed in a second  
            envelope and mailed to the inspectors.  The votes are  
            tabulated by the inspectors in public at a properly noticed  
            open meeting of the board or members.  The tabulated results  
            shall be promptly reported to the board and shall be recorded  
            in the minutes of the next meeting.  Additionally, within 15  
            days of the election, the board shall give general notice to  
            all members of the results of the election.  

          4)  Uncontested elections.  This bill would allow the board of  
            directors of an HOA to declare an election uncontested if the  
            number of candidates running for election does not exceed the  
            number of directors to be elected at the election.  In other  
            words, the HOA would not have to send out paper ballots  
            pursuant to comment 3 above.  In order to qualify, the  
            election would have to comply with all property adopted  
            election rules, all candidates must be nominated before the  
            deadline and be in compliance with the governing documents,  
            and the inspector of elections would have to declare that the  
            number of candidates does not exceed the number of directors  
            to be elected.  Twenty days before declaring the election  
            uncontested, the HOA would be required to notify the members  
            that the board is planning to vote on an uncontested election  
            and the right of the members to object to the board declaring  
            the election uncontested.

            Following an HOA's declaration of an uncontested election at a  
            board meeting, this bill would permit members 15 days to  
            write-in a candidate for election.  If one or more write in  
            candidate are received and the number of candidates exceeds  
            the number of directors to be elected, this bill requires an  
            election to be held.  If after 15 days the number of write-in  
            candidates and the number of candidates does not exceed the  
            number of open positions on the board, the election results  
            will be sealed and the write-in members will be added as  
            members.  It is possible that there will not be enough members  
            running for the open positions on the board; if additional  
            candidates' write-in their names, this bill would add them to  
            the board automatically.  If an HOA does not provide a  
            write-in process, this bill would require an HOA to provide a  
            process for self-nomination 15 days after declaring an  
            uncontested election.  








          AB 1799 (Mayes)                                    Page 7 of ?
          
          

          4)  Opposition.  According to the Center for California  
            Homeowner Association Law, which represents the rights of  
            homeowners living in California, AB 1799 would void the  
            essential voting rights of association owners.  The  
            homeowner's right to vote is conferred by ownership in  
            association property, just as the right to vote in public  
            elections is conferred by citizenship.  This bill would return  
            legal and political control of elections to incumbent boards  
            by giving them new powers to decide who is qualified to vote  
            and run for a board seat.  They also challenge the alleged  
            costs of HOA board elections, stating that current law permits  
            "volunteer poll workers" to serve as independent inspectors.   
            Given that more than 50% of HOAs have fewer than 25 units,  
            it's unclear why some HOAs have elected to hire and pay for  
            independent inspectors.  According to the Educational  
            Community for Homeowners, the current version of the bill  
            contains lengthy and complicated procedures to designate an  
            election as "uncontested," turning the proposed cure into a  
            real problem.  

          5)  Double-referral. This bill has been double-referred to this  
            committee and Senate Judiciary Committee.   

          Assembly Votes:

               Floor:    71-4
               H&CD:     7-0
          
          FISCAL EFFECT:  Appropriation:  No    Fiscal Com.:  No    Local:  
           No


            POSITIONS:  (Communicated to the committee before noon on  
          Wednesday,
                          June 8, 2016.)
          
            SUPPORT:  

          California Association of Community Managers
          Community Association Institute



          OPPOSITION:








          AB 1799 (Mayes)                                    Page 8 of ?
          
          

          California Alliance for Retired Americans
          Center for California Homeowner Association Law
          Educational Community for Homeowners 
          Rutgers Law School, Constitutional Rights Clinic
          3 individuals

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