MEMBER VOTING RIGHTS
Classes of Membership
"Except as provided in a corporation’s articles or bylaws or Section 7615 [cumulative voting], each member shall be entitled to one vote on each matter submitted to a vote of the members." (Corp. Code § 7610) Boards can set a record date for determining voting rights. Voting rights are not determined by residency in the association. Members retain their voting rights whether or not they reside in the development. Member voting rights may not be suspended for any reason. (Civ. Code § 5015(h)(1))
Class A Membership. Class A members are designated as owners of units and have one vote for each unit/lot owned. One vote per unit (not per person) is normal and legal. Although each person on title has a right to cast that one vote as a member of the association, whoever casts the vote, by ballot or otherwise, is presumed to be voting for all his/her co-owners. (Corp. Code § 7612) If each person on the title casts a ballot, the first envelope received and registered is counted. All others from that property are marked "Invalid" and set aside. Even if one of the owners objects and wants the person's ballot withdrawn (because they disagree with the other owner's vote), the ballot is not withdrawn. Once received by the Inspector, the ballot is irrevocable. (Civ. Code § 5120(a))
Class B Membership. Class B membership is reserved for the developer, who is given three votes for each unit/lot held by the developer. Class B membership is tied to the developer's ownership of separate interests that are subject to assessments. Class B votes may be used on any issue presented to the membership for a vote. As provided for in 10 Cal Code Regs § 2792.32(c), Class B membership automatically converts to Class A when one of the following occurs (i) when 75% of the authorized residential interests transfer to homebuyers; (ii) on the 5th anniversary of the most recent conveyance of a residential interest to a homebuyer. This deadline can be extended indefinitely as long as a residential unit is transferred once every 5 years, or (iii) on the 25th anniversary of the first conveyance of a residential separate interest in a master planned community.
Class C Membership. Class C membership may only be used in master planned communities. It allows the master developer to extend control over the board of directors by giving it the right to elect directors. 10 Cal. Code Regs. § 2792.32(f). Class C votes are limited to the election of directors only. These extended rights automatically terminate when any of the following occur (10 Cal. Code Regs. § 2792.32(f)(1)) (i) 75% of the residential interests have been conveyed to homebuyers; (ii) on the 5th anniversary of the first conveyance of a residential interest to a homebuyer; or (iii) on the 25th anniversary of the first conveyance of a residential interest in a master-planned community.
No Removal of Class Voting Rights. Section 7813 of the Corporations Code states that documents cannot be amended to adversely affect the voting rights of a class without their permission, nor can a new class be created without their consent. Removing the voting rights of members who own multiple units would create a new class of members, and doing so would require their permission.
No Suspension of Voting Rights
Beginning on January 1, 2020, a member's voting rights cannot be suspended. (Civ. Code § 5105(h)(1)) A ballot cannot be denied to a member for any reason other than not being a member at the time when ballots are distributed.
Voting Rights Issues
- Fractional Voting. The CC&Rs of some associations provide for a system of variable assessments and unequal voting rights tied to the member's ownership interest. For example, the CC&Rs may link each person's assessment and voting power to the square footage of his/her unit. Corporations Code § 5330 states, "A corporation may issue memberships having different rights, privileges, preferences, restrictions or conditions, as authorized by its articles or bylaws." Such arrangements are legal. (Cebular v. Cooper Arms HOA)
- Multiple Memberships. The Corporations Code provides that no person may hold more than one membership. However, a specific exception applies to associations, so owners of more than one lot or unit may hold multiple memberships (Corp. Code § 7312). Each membership attaches voting rights.
- Corporations & LLCs. Corporations and companies can own property and be members of a community association. A corporation is defined in the law as a "legal person" with all the rights of a natural person in an association. As such, a corporation, whether for-profit or charitable, may appoint a representative to attend meetings, vote, and serve on the board of directors.
- Family Trusts. Unlike a corporation, a trust is not a legal entity. A trust is simply a collection of assets and liabilities. Because it is not a legal entity, a trust cannot hold title to property. It must be in the name of a trustee who holds legal title on behalf of the trust. Accordingly, the person on title is deemed a member of an association. As a member, a trustee can vote in membership elections and serve on the board.
- Spouse Not On Title (Community Property). A spouse not on title has no right to vote in elections.
- Power of Attorney. See Power of Attorney.
- Voting Rights in Bankruptcy. If an owner files for Chapter 7 bankruptcy protection, the owner loses his/her voting rights. Immediately upon filing, the owner's unit and voting rights transfer to the federal court. The court then appoints a trustee to prioritize and pay debts. Accordingly, the trustee, not the debtor, would have the right to vote in any membership election.
- Bank-Owned Property. Lending institutions that foreclose on units or lots become members of the association and have the right to vote in elections.
No Renter Voting Rights
Because they are not members of an association, renters do not have voting rights. In an unpublished decision, a tenant sued an HOA in Federal court, alleging that his rights under Title I of the Civil Rights Act were violated because he was not allowed to vote in the association’s election. The tenant asserted that it constituted socioeconomic discrimination. Even though Title I of the Civil Rights Act bars the unequal application of voter registration requirements, the court found that it does not apply to elections in private organizations. The court dismissed the case. (Daniels v. Oakmont Village Ass’n)
FORMULAS FOR CALCULATING VOTES
Conventional Voting in Director Elections
In a contested election with conventional voting, i.e., no more than one vote is cast per candidate (like municipal, state, and federal elections), the formula for the number of votes needed to guarantee the election of a director is as follows:
| |
V = |
M |
+ 1 |
(Truncate if the result is fractional, i.e., do not round up or down--simply eliminate the fraction) |
| (D + 1) |
V = VOTES (number of votes needed to elect a director to the board)
D = DIRECTORS (number of directors to be elected, i.e., open seats at the time of the election)
M = MEMBERS (number of members eligible to vote)
Example. Assume a 5-member board serving 1-year terms, a membership of 100, and a contested election (more than 5 candidates running for 5 open seats on the board). The formula produces the following result:
| Votes to guarantee the election of one director = |
100 |
+ 1 = 17.7 |
When truncated, the number 17 |
| (5 + 1) |
Based on the above results, any attempt to block one candidate from being elected would require 17 votes each for five other candidates. 5 x 17 = 85, leaving only 15 votes for the remaining candidate. If the minority candidate receives at least 17 votes, it will be impossible to block this candidate since 18 votes must be cast for the 5 other candidates. Because 5 x 18 = 90, but only 83 votes remain, there are not enough remaining votes to block this candidate.
Cumulative Voting
Cumulative voting is different. If you have 5 open seats and more than 5 candidates, members can cumulate (or stack) their votes for candidates. It means votes may be distributed in any manner they choose (so long as no more than 5 votes are cast). For example, members can cast:
5 votes for one candidate, or
4 votes for one candidate and 1 for another, or
3 votes for one candidate and 2 for another, or
2 votes for one candidate, with one each for 3 other candidates, or
1 vote each for 5 candidates
A voter can also choose to discard votes. For example, a voter might cast 2 votes for one candidate and no votes for any of the remaining candidates. Voters can also turn in a blank ballot, thereby discarding all their votes but allowing their ballot to count toward quorum.
a. When Cumulative Voting is Required. Cumulative voting is required under the following conditions:
- They are governing Documents. Although optional under Corporations Code § 7615(a), the Davis-Stirling Act requires the inclusion of cumulative voting on ballots if permitted in an association's governing documents. (Civ. Code § 5115(e)) That means notice must be given to the membership of their right to cumulate their votes, so all members can exercise that right. (Corp. Code § 7615(b)) To satisfy the requirement, notice to cumulate votes should be given in the voting instructions when ballots are mailed to the membership.
- Director Elections. If cumulative voting is required (as described above), it only applies to director elections and only when more than one director is elected to the board. Sometimes, however, bylaws may require that more than two seats be open for cumulative voting to take effect. Accordingly, associations must review their documents when adopting election procedures. If an association is under developer control, more than two positions must be open before cumulative voting applies. (Calif. Code of Regulations § 2792.19(b)(1))
- Director Recalls. If cumulative voting is used to elect directors, it will apply to removing directors.
b. Formula For Cumulative Voting. The formula to calculate the number of votes needed to guarantee a candidate's election is as follows:
| |
V = |
M x D |
+ 1 |
(Truncate if the result is fractional, i.e., do not round up or down--simply eliminate the fraction.) |
| (D + 1) |
V = VOTES (number of votes needed to elect a director)
D = DIRECTORS (total number of open seats at the time of the election)
M = MEMBERS (total number of members eligible to vote)
Example. Assume 5 open seats in a contested election in a 100-member association. The formula produces the following result:
| Votes to guarantee the election of one director = |
100 x 5 |
+ 1 = 84.3 |
When truncated, the number 84 |
| (5 + 1) |
Based on the above, any attempt to block one candidate from being elected would require 84 votes each for the five other candidates. 5 x 84 = 420, leaving only 80 votes for the remaining candidate. If the minority candidate receives 84 votes, it would be impossible to block this candidate since 85 votes must be cast for five other candidates. Because 5 x 85 = 425, but only 420 votes remain, there are not enough votes to block this candidate.
c. Staggered Terms. For staggered terms, use the number of open seats rather than the number of authorized directors. The following examples illustrate the number of votes needed to guarantee the election of a director using cumulative voting.
| |
Example #1
(2 open seats) |
Votes to guarantee the election of one director = |
100 x 2 |
+ 1 = 67.7 |
When truncated = 67 |
| (2 + 1) |
Based on the above results, any attempt to block one candidate from being elected would require 67 votes each for two other candidates. 2 x 67 = 134, leaving only 66 votes for the remaining candidate. If the minority candidate receives at least 67 votes, it would be impossible to block this candidate since 68 votes must be cast for 2 other candidates. Because 5 x 68 = 136, but only 133 votes remain, there are not enough remaining votes to block this candidate.
| |
Example #2
(3 open seats) |
Votes = |
100 x 3 |
+ 1 = 76 |
| (3 + 1) |
d. Write-In Candidates. Cumulative voting is not allowed for write-in candidates. It can only be used for candidates whose names were placed in nomination before the voting began.
e. Why Cumulative Voting? Cumulative voting is confusing and unnecessary. It is intended for use by stock corporations so that small shareholders can have a voice. Otherwise, companies would be dominated by large shareholders. Cumulative voting is included in the bylaws of new community associations to give owners a stronger voice when the developer controls the association. Once the developer is out of the picture, there is no need for cumulative voting. "[T]his method of voting, which permits a member to cast multiple votes for a single candidate, must be viewed with reservation since it violates the fundamental principle of parliamentary law that each member is entitled to one and only one vote on a question." (RONR (12th ed.) 46:43)
How to Simplify Elections
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