HOA Law Blog

As you hopefully know by now, as of July 1, 2006, the way all California community associations conduct elections and membership votes was changed. Among the major changes is the requirement that all elections and certain other membership votes be held by secret ballot pursuant to operating rules. This includes votes for the selection and removal of members of the board, amendments to the governing documents, votes regarding assessments, and the grant of exclusive use common area. In addition, the role of the inspectors of election has grown significantly, and the use of proxies, while still permitted, may not be as prevalent as in the past. This new law affects all community associations, irrespective of their size. Failure to comply with the new law could subject an association to a challenge in small claims court. Because this new law is so complex, we are receiving a lot of questions. In response, we present the following frequently asked questions:

1. Our Association has always had secret ballots; can't we just keep on holding our annual elections as we have been doing for years?

The simple answer is no. The new election law was adopted because Senator Battin from the Coachella Valley somehow came to believe that fraud was rampant within association elections. This was news to us. If an association does not comply with the new law, which includes, among other things, the adoption of election rules and procedures, which specify procedures for voting by secret ballot, designating and detailing the responsibilities of the inspector(s) of election, the voting results can be challenged and a fine imposed on the association. We do not believe that the new election law is required as we certainly do not see rampant fraud at associations, but it is the law and if you do not fully comply, there are potential serious consequences.

2. What is required for the election rules and procedures - do they need to be approved by the members?

New Civil Code Section 1363.03 provides that the new election rules and procedures must provide, among other things, that the association allow for equal access for all candidates or members to advocate their point of view in all association media (via newsletter, websites, etc.); that the association provide access to common area meeting space at no cost to all candidates and members who advocate a point of view during a campaign; set forth the qualifications of candidates for the board; set procedures for the nomination of candidates; set qualifications for voting; establish a method for selecting the inpector(s) of election and who can serve as an inspector of election. This new law specifically provides that these rules must be treated like other "operating" rules and sent out to the members for their comment thirty (30) days before being adopted by the board of directors. However, regardless of member comment, it is the board's decision whether to adopt the rules; the members do not vote on them.

3. What happens if we don't have election rules and procedures?

The failure to adopt election rules and procedures means that actual results of the voting can be contested in small claims court.

4. Do these voting rules and procedures only apply to the election of board members or to voting on other matters as well?

The new law provides a list of different votes that are taken by the members in accordance with the election rules - the election or removal of the board members, voting regarding assessments, amendment of the governing documents, and the grant of exclusive use common area.

5. We are a small association of only 10 units. My board does not want to have to make rules or follow the new law regarding secret ballots. Can a majority of the homeowners decide that we don't want to follow this new law?

Unfortunately, Senator Battin (and the California legislature) did not believe that there was any need to differentiate between larger and smaller associations; all community associations subject to the Davis-Stirling Act must follow the new election law. Any homeowner that wants to challenge the results of an election may do so by going to small claims court, and a small claims judge not only has the power to invalidate the election results, but also has the power to impose a fine of up to $500 per violation. Although there may not be any homeowners today that even know about these new election laws, it only takes one disgruntled homeowner to file a small claims action involving the results of your election. This does not even take into consideration the question that if the results of the election are invalidated, is there a board of directors in place to make decisions, sign checks, etc.?

6. What exactly has to be provided in the upper left hand corner of the outer secret ballot envelope?

The following must appear in the upper-left hand corner of the outer secret ballot envelope:

• Written or pre-printed voter’s name
• Written or pre-printed voter’s address or separate interest identifier that entitles him or her to vote (such as parcel, unit or lot number - can simply be the voter's full address)
• Voter’s signature

7. What if a homeowner doesn't know their parcel or lot number?

By recent amendments to Civil Code Section 1363.03 (effective 7/1/06), it is no longer necessary that an owner place their parcel or lot number as long as the voter can be identified from the information provided (address and unit number may be sufficient).

8. Does everyone need to fill out a candidacy notice, including existing Board members who are running for reelection?

Some election rules provide for candidacy notices to be sent out to the membership, and the answer would depend on how your election rules are drafted since the code does not address candidacy notices. Candidacy notices are just one way to provide equal access for those persons running for election. It is a good idea to provide in your election rules that all candidates, regardless of whether they are running for reelection, must fill out a candidacy notice.

9. Should the inner envelope say only "SECRET BALLOT" or does it also need to include an address?

The inner envelope should say no more than: "Secret Ballot, to be opened by the Inspector of Election only." It should not be marked with any identifying information by anyone.

10. Do we need to send homeowners a proxy? How do we let homeowners know that they can give a proxy to someone and what needs to be on it?

If the governing documents don’t require the Association to send a proxy, you are not obligated to do so. The requirements for proxies are set forth in the Corporations Code and should be addressed in the election rules. The Inspector(s) of Election validates proxies. All proxies must be exchanged for Secret Ballots because the proxy itself can’t be voted.

11. Is it 1 Inspector under 100 units and 3 for 100 + units?

No, it's one or three at the Board’s discretion. If the Board fails to designate the Inspector(s), the members may vote on the appointment.

12. What if five members are up for election, all five want to run again and no candidacy notices are received by the deadline? What is the use of having nominations from the floor if a member can't change their vote once it has been mailed?

Recently amended Civil Code Section 1363.03 makes clear that nominations may be allowed from the floor if provided for in the rules and not prohibited by the governing documents. This helps in cases where nominations are not received in advance of the meeting. A member may wish to refrain from voting until the meeting itself in order to ensure the member knows all of the choices available. The member shouldn't mail their ballot unless they are sure of their vote. Another option is to write in a candidate that is not yet nominated, mail the ballot, and then nominate that candidate from the floor at the meeting. It is obviously an advantage for a candidate to return the candidacy notice within the time provided so that candidate is on the ballot. Also, elections by acclamation are no longer allowed (a vote must still be taken where the number of candidates is equal to the number of open board positions).

13. Do only members not planning on attending the meeting need to mail in their secret ballots? The members attending can bring them in but they must be in the 2 sealed envelopes...correct?

Yes. But mailing in your ballot does not mean you cannot attend the meeting. Members can complete their secret ballots and seal them at the meeting. We recommend the board, manager or Inspector(s) bring extra blank secret ballots and envelopes to the meeting in case someone lost their voting materials, etc. and needs a replacement.

14. What if quorum is not achieved?

Remember that even secret ballots received by mail count as members present at the meeting for quorum purposes, so be sure to count them towards quorum. Also, the Inspector(s) should not open any envelopes until quorum is satisfied (if quorum is not satisfied, move to adjourn the meeting and check to see if your governing documents have a provision for reduced quorum at an adjourned meeting).



We encourage all associations to comply with the new law. If you would like more information, there are additional articles on this blog and our website, or you may e-mail our office and we will be glad to forward you additional documents.

Please do not shoot the messenger as we are only reporting the news. On September 18, 2006, the Governor signed S.B. 1560 (the “Amendment”), which modifies recently enacted Civil Code Section 1363.03. This “cleanup bill” clarifies some troublesome issues, which will hopefully allow associations to get through the election process more efficiently.

• §1363.03(e)(1)

One of the provisions in 1363.03 required homeowners, when voting by secret ballot, to write his or her name in their own hand on the exterior envelope sent to the inspector(s) of election and state their unit, lot or tract number. The Amendment allows an owner to sign the exterior envelope and indicate the owner’s name or address or separate interest identifier that entitles that owner to vote. Therefore, the homeowner will no longer have to print their name, unit, lot and tract number in their own hand but may instead utilize a label. However, the member is still required to sign his or her name.

• §1363.03(f)

The changes to Civil Code Section 1363.03 now confirm what we already knew to be the case, that once the inspector receives the ballot, it is not revocable. This change can be found at 1363.03(f). An additional change to 1363.03(f) allows the inspector or the inspector’s third party designee to verify members’ information and signature on the outer envelope of the secret ballot prior to the meeting at which the ballots are tabulated. We had been very concerned that only the inspector(s) of election could perform this job and only perform it at the meeting. Now, the inspector(s) can designate third parties to help perform some of the work and allows for the signature on the outer envelope to be verified (this will help with reaching quorum) prior to the meeting.

• §1363.03(m)

1363.03(m) has been added to confirm that the secret ballot procedure is not required for votes cast by delegates or other elected representatives, but only for votes cast directly by members of the association.

• §1363.03(d)(1)(A)

Another important change defines a proxy (this is a new definition for the code) as “a written authorization signed by a member or the authorized representative of the member that gives another member or members the power to vote on behalf of that member.” (Emphasis added.) In the past, a proxy could be given to any third party whether they were the member, the member’s attorney or a family member unrelated to the association. Now, a proxy can only be given to a member.

• §1363.03(d)(1)(B)

The word “signed” is now defined as “the placing of the member’s name on the proxy, whether by manual signature, typewriting, telegraphic transmission or otherwise by the member or authorized representative of the member.” This is important because it clarifies whether faxed signatures count; they do.

• §1363.03(d)(2)

The cleanup legislation clarifies that proxies may not be construed or used in lieu of a ballot. The modifications to the Civil Code provide that if proxies are permitted or required by an association’s bylaws, and if the proxy meets the statutory requirements, they shall be used. However, associations are not required to prepare or distribute proxies pursuant to Section 1363.03. A member may revoke his or her proxy prior to the receipt of the secret ballot by the inspector(s) of election pursuant to Section 1363.03(d)(3).

• §1363.03(b)

An important concern has been the quorum requirement. The Amendment provides that if quorum is required for elections in the governing documents or other provisions of law, each secret ballot received by the inspector(s) shall be treated as a member present at a meeting for purposes of establishing a quorum (1363.03(b)). We believe that since the ballot is contained within the first and second envelope referenced above, when the envelope is received, it can be used for establishing quorum. Since quorum is determined by ballots, if an envelope is received without a ballot enclosed, then the empty envelope would not count toward quorum.

Additionally, this same subparagraph adds to the already designated four issues for which secret ballots must be utilized to include the removal (recall) of directors.

Unfortunately, these changes did not go as far as we would have liked. However, the changes are significant and clarify many unanswered questions that followed the enactment of Civil Code Section 1363.03.

On July 1st, 2006, the way community associations have traditionally conducted annual meetings and/or taken votes will be history. This new law, set out in new Civil Code Section 1363.03, will affect how all homeowners associations in California will conduct most of their voting and elections, including the election of directors, a vote by the membership for assessment increases, amendments to the governing documents, and grant of exclusive use common area (subject to the limitations of Civil Code Section 1363.07). This new law was premised on what we believe is the mistaken opinion that association elections and balloting are “fraught with fraud.” The big change is that all voting will be by secret ballot. There is cleanup legislation that has been proposed, which expands the secret ballot process to all association votes. Failure to comply with these new rules could, by court order, set aside the results of an election or vote taken by an association and/or could subject an association to a penalty of five hundred dollars ($500.00) for each violation.

The newly required Election Rules and Regulations (Rules) are considered “operating” rules under the Civil Code, which will require that they first be sent out to the owners for comment. The Rules should set forth the process by which membership meetings are to be conducted, how voting is to occur and who is in charge. No longer may the association’s managing agent (unless your Rules provide otherwise) be in charge of the registration process nor may they assist the inspector(s) of election (“inspector(s)”) with the vote tally. While the number of inspector(s) has not changed (either one (1) or three (3)), the new law requires associations to specify how they are going to select the inspector(s), requires the inspector(s) to be independent third parties which include, but are not limited to, volunteer poll workers with the county registrar of voters, a licensed CPA, or a notary public. Although inspector(s) may be a member of the association, that member cannot be related to a board member, nor a candidate for election to the board of directors, a member related to the candidate, or be a person that is currently employed by or under contract to the association unless expressly authorized by the Rules. The inspector(s) must be selected prior to the vote or election as the inspector(s)’ role and responsibilities have been expanded.

If an association’s governing documents require an annual meeting to elect the board of directors (“board”), you will still be required to follow the Civil Code-mandated process. Cumulative voting and quorum requirements set forth in the governing documents remain controlling. The association or its managing agent will be obligated to provide information to the inspector(s) so that the inspector(s) can determine which members are in good standing and have a right to vote, notify members that they have a right to run for the board, the right to submit a candidacy statement, the right to utilize the association’s media in the same manner that any other candidate is utilizing an association’s media, which includes (by way of example) the association’s website or newsletter, if applicable. The board must be consistent with the procedures as they are to be applied to all members. Further, associations must provide access for all members to the association’s common area meeting space (or spaces) so that the member/candidate can have a forum to discuss their candidacy or anything reasonably related to the election.

The code provides a comprehensive list of inspectors' obligations, which include the designation of a location for the homeowners to mail their secret ballots, determination of the good standing status of the member as referenced above, the counting of the secret ballots (more on that in a moment), the designation of mailing address (referenced above), notification to the homeowners of when the voting will commence and when it will conclude (referred in the code as a polling place, which would make that consistent with municipal elections), request for candidacy statements, etc. Because the legislature apparently believed that community associations were not allowing for secret voting, the underlying process is to secure confidentiality in all votes by homeowners for the elections referenced above.

The Rules must provide procedures that the inspector(s) can utilize at the annual meeting, if applicable. This is important because the association’s managing agent (unless authorized in the Rules) will not be able to provide information and direction to the inspector(s) as to how they should handle any issues or problems that arise.

The secret ballot referenced above requires that associations send to the homeowners (and for the homeowner to return) two (2) envelopes, one that will fit inside the other. The “secret” ballot will go inside the smaller inner envelope. The secret ballot, which requires the homeowner’s vote, may not be signed by the homeowner or have any other documentation on the ballot that would identify the homeowner. That ballot will be placed into the inner envelope, which will be, on its face, designated as the envelope for the secret ballot. That envelope will be placed into another envelope that will be pre-addressed to a location specified by the inspector(s). On the exterior envelope the homeowner, must in their own hand, print and sign his or her name, address, and lot or parcel or unit number that entitles him or her to vote. Owners will likely need some help with this as they likely will not know their parcel number. The homeowner is required to, where referenced, sign their name on that envelope. Although the cleanup legislation referenced above would allow for that information, other than the signature, to be provided not in the homeowner’s own hand, currently that is not the law. Managing agents and boards of directors are rightfully concerned that homeowners will have difficulty understanding that if they do not fill out all of the information, the ballot inside the envelopes will not count towards the election. Not only is the board obligated to prepare the Rules, they should carefully set forth instructions to the homeowner as to how to fill out the envelope.

Counting of the ballots is also going to be an issue. How long will it take to register the members and then count the secret ballots? Will this interfere with the inspector(s) noticing when the polls will close? Members of the association are entitled to watch the counting of the votes. However, no one except the inspector(s), including members of the association, the board of directors or the association’s managing agent, may review or open any secret ballot prior to the time and place where the secret ballots are counted and tabulated. When completed, the inspector(s) are required to provide the board with the results of the election and the association is required to advise the homeowners, in writing, within fifteen (15) days of the election by publicizing the results.

If a member requests a recount and challenges the election results, the association shall make the ballots available for inspection and review by the members or their representatives. The association has an ongoing obligation to preserve the confidentiality of the vote and that includes the recount. Any member may bring a lawsuit against the association in small claims court (within a one-year period from the date of the election or vote) contesting the results. The small claims judge now has the power to void the results of the election upon finding that the election procedures required by law or the rules were not followed. If the member prevails in a lawsuit contesting the vote, under the new law they will be entitled to reasonable attorneys’ fees and costs and the Court may impose a penalty of up to $500 for each violation. On the other hand, if the association prevails in that lawsuit, assuming the small claims court judge’s decision to void the results of an election or vote has been appealed to the Superior Court, it shall not be entitled to its attorneys’ fees and costs unless the Court finds that the homeowner’s action was frivolous, unreasonable, or without foundation.

While the voting and elections procedures have changed, boards of directors still have an obligation to enforce the governing documents while complying with civil code obligations. The State Legislature has enacted a very complicated new law designed to ensure elections and voting are secret. It remains to be seen how well this new law will work. Good Luck! And if you need help, contact our office!

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