BILL ANALYSIS
AB 1726
Page 1
Date of Hearing: May 5, 2010
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
Norma Torres, Chair
AB 1726 (Swanson) - As Amended: May 3, 2010
SUBJECT : Common interest developments: ballots: quorums
SUMMARY : Provides that for elections of the board of directors
in common interest developments (CID) if a homeowners
association (HOA) can not achieve a quorum, the quorum required
in the subsequent meeting is 33% of the HOA membership entitled
to vote. Specifically, this bill :
1)Requires the HOA to disclose to the membership in the election
materials, that is if the quorum required is not achieved to
qualify the election, in the subsequent election the quorum
will be thirty-three percent.
2)Provides this provision does not apply to HOA's whose
governing documents require a quorum of less than 33% for a
subsequent election.
3)Makes technical changes.
EXISTING LAW :
1)Requires elections in CIDs to be conducted by secret, mailed
ballot. Requires two envelopes to be mailed to each owner who
fills out the ballot, and inserts it into an envelope that is
then inserted into another envelope and mailed back to the
HOA.
2)Provides if the governing documents of an HOA do not set a
quorum requirement, the quorum is automatically one-third for
incorporated HOAs.
3)Provides if a quorum is required in a CID election each
returned mailed ballot is treated as a member of the HOA
present at a meeting for the purposes of establishing a
quorum.
FISCAL EFFECT : None.
COMMENTS : There are over 41,000 CIDs in the state that range in
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size from three to 27,000 units. CIDs make up over four million
total housing units, which represents approximately one quarter
of the state's housing stock. In the 1990s, over 60% of all
residential construction starts in the state were CIDs. CIDs
include condominiums, community apartment projects, housing
cooperatives, and planned unit developments. 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 association.
CIDs are governed by the Davis-Stirling Act (Civil Code Section
1350 et al.), as well as the governing documents of the
association including the bylaws, declaration, and operating
rules. Except when CIDs are first developed, no state agency
provides ongoing oversight to these communities.
HOAs are run by volunteer board who are elected by the owners
within the CID. In some cases, CIDs have community managers
that run the day-to-day operations required to maintain the
community.
The governing documents in a CID generally include a quorum or
the minimum amount of voting power required for an election. If
the governing documents fail to set a quorum requirement, state
law requires, for incorporated CIDs, the quorum to be at least
one-third of the members.
SB 61 (Dutton) Chaptered 450, Statute of 2005, established
extensive standards for conducting elections in CIDs. Elections
are required to be conducted by secret mailed ballot. The
ballots must be counted by an inspector of election who cannot
be a HOA member or manager of the HOA.
Purpose of the bill : According to the sponsor, "garnering more
than half of all members' vote has proven to be extremely
difficult largely due to member apathy or inconvenience,
particularly in large vacation communities. In additional,
certain terminology and definitions in the law have lead to
confusion, invalid ballots, and inconclusive elections. HOAs
must then repeat the entire process unit the quorum of all
members is met, this includes mailing notices and ballots again,
attempting to convene a meeting with a majority of members
represented and also incurs extra cots to the zero based
budgets. This bill allows for a reduced quorum percentage in
order to conduct business, here the reduced quorum would only
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take effect when the initial meeting or vote failed to achieve a
majority quorum and would apply to the second attempts to
convene the election.
Arguments in support: According to the California Association
of Community Managers (CACM), "Homeowners in a CIDs have
numerous obligations that make it difficult for them to vote on
every issue. Because of this, an association is often crippled
by the inability to obtain a quorum to take care of necessary
association business. AB 1726 would alleviate this problem by
providing a safety net in the event the 51% vote requirement is
not met."
Arguments in opposition : The California Alliance for Retired
Americans (CARA) is opposed to this measure because they feel it
does not allow the members of the HOA to vote to reduce the
quorum if the required quorum cannot be met in an election.
REGISTERED SUPPORT / OPPOSITION :
Support
Community Associations Institute (CAI)
California Association of Community Managers (CACM)
Executive Council of Homeowners (ECHO) (support, if amended)
Opposition
California Alliance for Retired Americans (CARA)
Analysis Prepared by : Lisa Engel / H. & C.D. / (916) 319-2085