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 ----------------------------------------------------------------- |Author: |Mayes | |----------+------------------------------------------------------| |Version: |6/6/2016 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |No | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Alison Dinmore | |: | | ----------------------------------------------------------------- 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. AB 1799 (Mayes) Page 6 of ? 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 -- END --