WHO PAYS FOR
QUESTION: During the election, if a candidate wants the ballots recounted because two candidates have the exact same votes, who bears the cost of the recount?
ANSWER: Neither the Davis-Stirling Act nor the Corporations Code addresses recounts. Although not binding on homeowner association elections, California's Elections Code sometimes provides useful guidelines on voting issues.
No Automatic Recount. As a rule, the person asking for a recount bears the cost. Until last year, not even the State of California had a policy for state-funded recounts. In October 2016, Gov. Brown signed Assembly Bill 44 which requires the state to pay for certain recounts. The bill allows the Governor to order a recount if the number of votes separating two candidates is razor thin.
HOA Elections. In an HOA election, if there is a tie vote, there is no mechanism for an automatic recount. The inspector can, however, on his/her own order a recount. As provided in Civil Code 5110(c), inspectors have the authority to determine the tabulated results of the election and to perform any acts as may be proper to conduct the election with fairness. In addition, the board could authorize a recount if they thought it beneficial, i.e., it would be less expensive than a run-off election.
The Cost. If neither the inspector nor the board initiates a recount, the person requesting it pays. The cost will depend on the size of the association (the number of ballots cast) and whether the recount is done by machine or by hand. If a recount is too costly and the candidates want to avoid a runoff election, they could agree to a coin toss to break the tie. Barring that, the association will need to conduct a runoff at the association's expense.
RECOMMENDATION: Boards should amend their election rules to address recounts and tie votes.
QUESTION: We launched a recall of our board and one of the directors resigned. If our recall fails for lack of quorum, our inspectors of election said their policy is to not open ballots. We would like the inspector to tally the votes even if there is no quorum. We want the board to appoint the candidate with the highest number of votes to fill the empty seat.
ANSWER: It is common that inspectors not open ballots when there is no quorum. Even if you could convince them to do so, the board is under no obligation to fill a vacancy with the person receiving the highest votes in a failed election. Directors have the discretion to pick someone they believe will contribute the most to the board.
Those members who initiated the recall will have to wait for the next election cycle to make another run at getting their candidates on the board.
JOINS ADAMS STIRLING
I am pleased to announce that attorney Carrie Heieck joined our firm and will anchor a new office in Carlsbad, our tenth office in the state.
Corporate Experience. Carrie joins ADAMS | STIRLING with more than a decade of experience representing businesses, property owners, and homeowners' associations in real property issues, corporate formations, contract negotiations, HOA disputes, compliance matters, and business law.
Litigation Experience. In addition to her corporate experience, Carrie has significant litigation and trial experience involving real estate and foreclosure matters representing large institutional clients.
Education. Carrie earned her Bachelor of Arts in Communications from the University of Arizona, Tucson. She then earned a Juris Doctorate from the Whittier Law School in Costa Mesa, California where she attended on a full academic merit scholarship and graduated magna cum laude.
We are very happy to have such an experienced attorney in the San Diego market. If your association needs legal services, contact us for a proposal.
SMALL HOAs. In your latest newsletter, an answer to a question included this: “the Davis-Stirling Act is not designed for small associations.” Can you expand on this? What constitutes a “small association”? Ours has 17 units and we have a management company. Is this considered too small for the Davis Stirling Act? I have been on the board for 5 years and receive your newsletters. We thought we were covered by the Davis-Stirling Act. -Lois L.
RESPONSE: When it comes to the Davis-Stirling Act, size does not matter. The Act applies to tiny 2-unit associations the same as large 10,000-unit ones. That's the problem. The legislature did not take into account that small HOAs don't have the resources to comply with all the Act's requirements.
Members of CAI's Legislative Action Committee raised the issue when the DS Act was being rewritten. We urged California's Law Revision Commission to reduce the burden on small associations. For a variety of reasons, the rewrite took effect January 1, 2014 without the requested relief.
Defining Small. The primary problem is defining "small." Should it be 5, 10, 15, or 20 units? If 10 is the cutoff, all those with 11 units will be forced to shoulder the burden. That does not seem fair. What about a 100-lot association with very little common area and a tiny annual budget with dues of $9 per month? They can't afford compliance any more than a 10-unit association.
The variable for determining size is not the number of units, it's the budget. However, once you set a dollar value, most associations will do everything in their power to get under that threshold and stay there, even if it means deferring maintenance and underfunding reserves. Legislation has a way of producing perverse results.
What To Exempt? Once "small" is defined, the next task is deciding which of the Act's requirements to exempt. I can think of a number of provisions to strike. Unfortunately, persuading the legislature is another problem.
NOTE: Reducing the burden on small associations does not have much traction with the legislature. They are preoccupied with more important matters such as controlling cow flatulence. Governor Brown signed a bill last month regulating the gas passed by cows. Small associations would likely be viewed as a fly on the cow's hide--a nuisance.
Reserves. Your reserve discussion intrigues me. Our reserves are at 17% and the BOD proposed a $16,000 special assessment to achieve a 70% funded reserve but it was defeated by a margin of 2 to 1 in a community vote. The board then increased dues by 20%. Does the BOD have a legal obligation to fund the reserves to maintain the community? -Wayne R.
RESPONSE: Boards have a duty to impose regular and special assessments sufficient to perform their obligations under the governing documents. (Civ. Code §5600(a).) Setting aside sufficient funds to repair and replace major components is arguably one of those duties. In Raven's Cove v. Knuppe, the court held that the failure of the developer-controlled board to fund the reserves was a breach of their fiduciary duties.
Expert Cases. Over the years, I have been retained as an expert in cases where associations (and their boards) were sued for failing to properly fund reserves. In each case, lawsuits were triggered by large dues increases and special assessments to repair major components. The two most common big ticket items are roofs and plumbing.
Deferred Maintenance. Boards who want to be "nice" and not raise dues should know that no good deed goes unpunished. The only way to keep dues artificially low is to defer maintenance and reduce funding of the reserves. That eventually leads to a costly day of reckoning. In one of my cases, roofs failed throughout the complex flooding many units. The association was sued for the damage caused by the deferred maintenance and for negligently funding reserves that resulted in huge dues increases and special assessments. The court focused on CC&R provisions obligating the board to maintain the common areas. It did not go well for the association.
RECOMMENDATION: Fund your reserves! Small increases in reserve contributions over time are much kinder to members than large special assessments, huge dues increases, and litigation.
Peeping Board #1. I gain knowledge and a bit of humor reading the wacky legal liability of board and committee members and managers over-stepping their legal bounds. -Ted S.
Peeping Board #2. I seem to recall that something in the Talmud prohibits the "unwanted gaze." -Fred G.
Peeping Board #3. Being a retired Fair Housing investigator, I’m concerned that this peeping board member may be using his role as a pretext for what might certainly be construed as sexual harassment. Perhaps it might be helpful to address the board’s responsibility to abide by the federal, state and city Fair Housing laws, including but not limited to disparate treatment and behavior (like peeping) that may interfere with the peaceful enjoyment of an owner or renter’s living environment or create an intimidating and hostile environment with a board or board member who wields much power over many owners--many of whom are women. -Peggy S.
Reno, NV. Merely due to the content & brevity of your newsletter, I kinda wish I was living back in CA in an HOA which utilizes the services of one of your offices. Sad to say, there are no other reasons enticing me to return to my birth state. It would be truly wonderful to work with a law firm in my own state just as helpful, knowledgeable and good-natured as you folks in the HOA business. Know of any firm in or near Reno, NV? -Donald M.
RESPONSE: I'm not familiar with firms in Nevada. There is, however, a California attorney who goes back and forth to Nevada handling HOA clients. His name is Matt Grode. You might send him an email. Maybe one of our readers can recommend a Nevada firm they like.