A question came up on the discussion forum of hoaleader.com, and my friends over there asked me to respond. A homeowner was concerned that his Association had improperly set the record date for an upcoming director election. The question was:
Can anyone confirm that in California, regarding a CID director election via an absentee ballot, that the Davis-Stirling Act requires the board to set a “record date for good standing” which is between 60 days in advance of the election and the mailing date of absentee ballots? I am concerned that our board has declared that ballots are to be mailed to association members in good standing on May 31, 2010, but they have declared a “record date for good standing” for June 15, 2010, two weeks after mailing, an obvious conflict which I believe is a D-S violation. This may deprive some members of their vote, even after receiving ballots, and open a door to election fraud. Am I correct in my legal understanding and concern? We have an election on July 3, 2010, and time is short to correct this error.
In any HOA election there are two record dates that need to be identified: The Record Date for determining the members entitled to notice, and the Record Date for determining members entitled to vote. The Davis-Stirling act does not have any requirements for determination of a record date. The record date is determined by the Association’s bylaws and by California Corporations Code section 7611. If the bylaws are silent, the Board may set a record date consistent with section 7611.
Section 7611(a) provides the time frame for the Record Date to receive notice of a meeting of members, which “shall not be more than 90 nor less than 10 days before the date of the meeting.” In the absence of a record date defined in the bylaws or by the Board, members at the close of business on the business day preceding the day on which notice is given are entitled to receive notice of a members meeting. For the purpose of determining a record date for members entitled to vote at a meeting of members, the record date shall not be more than 60 days before the day of the meeting. If no record date is fixed by either the bylaws or the Board, members on the day of the meeting who are otherwise eligible to vote are entitled to vote.
In responding to the question above, we do not know if the Association’s bylaws contain any instructions for establishing the relevant “record dates” for the upcoming election. However, it appears that May 31 was selected as the record date for notice of the meeting, and June 15 was selected as the record date for determination of voter eligibility. Assuming the bylaws are silent on the issue, the dates selected by the Board comply with the requirements of section 7611 for a July 3rd election date. In addition, by mailing out ballots on May 31st, the Association complies with the Davis-Stirling Act, which requires that written ballots be mailed out at least 30 days prior to the election (Civil Code section 1363.03).
While the owner raising the question is concerned that some owners may lose their right to vote after receiving their ballots, it is just as likely that owners who are not in good standing will have the opportunity to rectify the situation between the time they receive their ballots and the later date being used to determine voter eligibility. In addition, in order to deem an owner not to be in good standing, the Association will have had to call the owner in for a hearing. Given the time frame identified, it is likely that any owner who loses their right to vote between the time the ballots are mailed and the record date for voter eligibility will have been in violation of the CC&Rs prior to the ballots having been mailed.
I have noticed a troubling trend lately. Perhaps its a sign of the serious problems in the economy throughout the country today, but I am reading more and more news articles about the embezzlement of HOA funds.
I received a call today from a manager of an HOA telling me she had just gotten off the phone with a homeowner who was refusing to pay his assessments because he felt the association was not properly maintaining the common area in front of his residence. He stated until the HOA did its “job,” he would not be paying assessments. The manager asked, “Can he do that?” The answer, I told her, was “No!”
With the end of year upon us, I thought it would be a good time to post a summary some of the laws enacted in California during 2009 that impact our local homeowners associations. This is not a complete list of all new legislation, but rather brief summaries of the statutes I believe will have the biggest impact on California HOAs. The full impact of 2009 California legislation on an HOA will require a more detailed analysis. Any HOA that has questions on the impact of a new law should consult with their corporate counsel.
Gov. Schwarzenegger recently vetoed California’s AB 1328. AB 1328 would have provided that a homeowners association could enter into a contract for a water or energy efficiency program, for a term of up to five years without owner approval, if the board of directors reasonably anticipated that the contract would result in verifiable savings to the association. This would have allowed HOAs to take advantage of long term savings and actively engage in energy conversation which is essentially mandated by California’s AB 32. However, the Governator vetoed the bill claiming that it was unnecessary and would override the requirement that most contracts which are longer than one year obtain homeowner approval.
