New Legislation for 2007
By Scott A. Hunter, J.D.
Ringing In the New Year with New Laws
California Legislators have been hard at work this past year, doing what we pay them to do – create new laws.
Although there were many bills introduced in 2006, only a few passed and were signed into law.
In this issue, we will discuss the winners, which are now law.
SB 1560: Elections and Voting.
This bill revised the election and voting laws governing community associations. It clarifies and revises the new election law. SB1560 amends Civil Code section 1363.03 and takes effect immediately as urgent legislation. The following clarifications and revisions were made by this new bill:
Quorum. If your bylaws require a quorum for a meeting of the election of directors (as most bylaws do) then a quorum is still required.
Note: If your association is amending its bylaws, it should consider dropping the quorum requirement for the election of directors. This type of amendment would more closely follow a municipal election, where no quorum is required.
Ballots. Ballots which are voted by the members are counted toward a quorum. This reduces the need for proxies.
Proxies. Associations need not distribute written proxies unless required to do so by their bylaws or CC&Rs. Generally, a proxy cannot be used as a ballot.
Note: When a proxy-holder presents a valid proxy to the association, he or she is given a ballot to vote. The use of written proxies is of little help in obtaining a quorum, because ballots now count toward a quorum.
Inspector of Elections. The inspector(s) of election may verify the validity of a member's signature and address on the ballot envelope prior to the meeting at which the ballots are tabulated.
Note: The inspector(s) may help determine whether enough ballots are being returned to make a quorum. If not enough ballots are returned, it may be possible to resend ballots to those who have not returned their ballot.
The inspector(s) can appoint others to verify signatures, and to count and tabulate the votes. In the case of an election challenge, the inspector(s), not the Board, will make the ballots available to the disputing member.
Nominations from the Floor. Nominations from the floor at the election meeting can be allowed in the rules.
Note: Many bylaws permit nominations made from the floor at the meeting. However, because the ballots are mailed to the members at least 30 days before the election, nominations from the floor have little value unless there are more open positions on the board than there are candidates for the board on the ballot. By the time nominations from the floor are made, most members have already voted. Your election rules should clearly state your association’s nomination procedures.
Write-in Candidates. Your election rules may be written so as to allow write-in candidates on the ballot. This may be helpful if there are fewer candidates than open positions on the board.
Recall of the Board. In any election to recall or remove members of the board, voting must be done by secret written ballot under the same secret ballot procedures that apply to an election of members to the board.
Cumulative Voting. Cumulative voting is allowed if your association’s bylaws or CC&Rs allow for cumulative voting.
Note: Cumulative voting is designed to help those whose views are in the minority get a seat on the board.
AB 2100: Reserve Disclosures.
This law, effective January 1, 2007, requires that your association take a closer look at its reserves.
Reserve Funding Plan. AB 2100 requires that your association establish a “Reserve Funding Plan.” This plan must state how your association plans to fund the reserve account to meet its obligations for repair and replacement of the major components of the common area. This plan must also include a schedule of the dates and amounts of any changes in the regular or special assessments that would be needed to sufficiently fund the Reserve Funding Plan. The Reserve Funding Plan must be adopted by the board at an open meeting of the board.
Operating Budget. The annual operating budget given to the members must also state whether or not the board of directors, consistent with the Reserve Funding Plan, anticipates any special assessments to provide for adequate reserves, including the estimated dates and amounts of any anticipated special assessment.
New Reserve Funding Form. The Reserve Funding Form that must be sent to the owners has been revised by AB2100. For a copy of this new form, please email us at email@example.com.
Distribution of Plan. Starting January 1, 2009, a summary of the Reserve Funding Plan must be distributed to the members of your association. The summary must state that the full Reserve Funding Plan is available upon request.
Financially Interested Directors. Associations which are corporations are already subject to the requirements of Corporations Code section 310. Now, AB 2100 requires that homeowners associations which are not corporations must also follow the requirements of Corporations Code section 310. Corporations Code section 310 requires that any member of the board who has a financial interest in a transaction involving the association must fully disclose his or her financial interest. After the disclosure by the board member, the transaction must also be approved or ratified by the board. The vote of the board member with the financial interest in not counted in the approval or ratification of the transaction. If these requirements are not satisfied, then the transaction is void or voidable, meaning the transaction can be undone.
Most of the laws in this newsletter apply only to common interest developments (“CID”). If your association is not a CID, then the laws discussed herein may not apply to your association. For specific legal issues, please seek legal advice.
(inspecting HOA documents, towing, etc.)