OF VOTING RIGHTS
QUESTION: Our governing documents give the board authority to suspend members’ voting rights when they are delinquent. If a member who owns more than one separate interest is delinquent on only one unit, can the suspension globally apply to all votes that member has? Sometimes even one or two votes can make a difference.
ANSWER: I don't believe global suspension of voting rights is allowed. Typically, an association's bylaws tie voting rights to ownership interests and state that each member gets one vote for each condominium or home owned. Voting rights can then only be suspended for the unit that is delinquent.
Due Process: Before suspending a member’s voting rights, he or she must be given at least 15-day's notice in advance of the intent to suspend privileges (Corp. Code §7341(d).) and given an opportunity to be heard by the board before any suspension can be imposed. This procedure is known as “Due Process.”
How Long Can the Suspension Last? Suspension of voting rights is normally tied to delinquency, not a rules violation. Generally, the suspension will last until the owner’s account is brought current. Suspension for a rules violation is typically for a set period of time such as 30 days unless it is a continuing violation.
RECOMMENDATION: If your association is going to suspend voting rights prior to an election, be sure to calculate the time needed to provide proper notice of hearing, and then send written results of the hearing to the owner after the hearing. Suspending the voting rights of a delinquent owner may impact the quorum or approval requirements for the election.
Thank you to Laurie Poole in our Carlsbad/San Diego offices for answering this question.
QUESTION: What if one forgets to use the small envelope and just uses the outer envelope with signature as required. Is the ballot valid? Should the votes be counted?
ANSWER: Yes, the ballot is valid and the votes should be counted.
Double Envelope Required. The Davis-Stirling Act requires associations to use election procedures that require a double envelope system with the ballot in a sealed inner envelope. (Civ. Code §5115(a)(1).) However, a ballot is not invalid because it was placed directly in the outer envelope. This ballot irregularity is similar to what occurs when an owner inadvertently signs their ballot.
Most association votes are covered by the voting procedures of Civil Code §5115. These procedures require associations to give members a method for confidentially submitting votes (e.g., with no name, address, lot parcel or unit number on the ballot), plus a way for inspectors of election to ensure votes are cast by eligible members (e.g., identifying information on the outer envelope).
Envelope Signature Required. Owners must fully comply with certain requirements (e.g., sign the outer envelope) to ensure ballot validity. However, when a member does not use the inner envelope but simply places their ballot within a sealed outer envelope displaying their identifying information, it is the member who has waived a certain level of their vote confidentiality. That confidentiality is essentially lost until the ballot is removed from its outer envelope and placed among the other ballots.
Inspector's Authority. When determining ballot validity, inspectors have authority to make a judgment call. We favor counting votes when the intent of the voter is clear and the irregularity is not an otherwise fatal flaw. Inspectors should also take into consideration any specific requirements of an association’s election rules. Inspectors can:
Perform any acts as may be proper to conduct the election with fairness to all members in accordance with this article, the Corporations Code, and all applicable rules of the association regarding the conduct of the election that are not in conflict with this article. (Civ. Code §5110(c)(8))
RECOMMENDATION: Deciding questions of ballot validity is done by the inspectors and not by the attorney, and similar ballot irregularities should be treated similarly. The Inspector's Report should reflect the handling of such irregularities where appropriate. Although the Davis-Stirling Act only requires preservation of ballots, all election materials should be kept for at least one year.
Thank you to Nancy Sidoruk, who covers the Inland Empire, for this article.
FORECLOSURE & DEBT COLLECTION
GO TO U.S. SUPREME COURT
The most commonly used foreclosure proceeding is going head to head with one of the country’s top consumer protection statutes. The U.S. Supreme Court has granted a “petition for a writ of certiorari” opening the arena for an epic showdown.
The issue: Do the sometimes onerous conditions on consumer debt collections apply in foreclosures where the creditor is seeking to repossess the real property only and is not seeking a money judgment.
There are 13 federal appellate courts (known as circuits). California is in the 9th Circuit and is joined by its neighbor, the 10th Circuit, in holding that the FDCPA does not apply to non-judicial foreclosures but…the ornery Fourth, Fifth and Sixth Circuits are sticking together and holding that the FDCPA does apply.
Bets are that, when the bout occurs this fall, the Supreme Court will find non-judicial foreclosure to be the victor in this battle of business vs. consumers. For exciting nighttime reading, see Obduskey v. McCarthy & Holthus LLP.
Thank you to Richard Witkin, our foreclosure guru, for this update.
Kudos. The Davis-Stirling website has been a tremendous source of information for the little person who serves on a board. Most of us have good intentions, however don't really know what the hell we need to do to represent the average homeowner and I am sure you know what good intentions get you, in trouble. THANKS SO MUCH. -Joe C.
Santa Barbara Office. Thank you for the newsletter and the news that you have now opened an office in Santa Barbara. We have used your firm for several years now. Thank you. -James N.
Lawyer Letters. Once again, my compliments and gratitude for your excellent website and your case law index by subject. Along with the rest of the website, it is a resource for all persons interested in the advancement of civil society in HOA governance. Thank you for bringing Kulick v Leisure Village to your readers attention. I recommend adding to your case law library Rogo v. Gottlieb. It illustrates limitations on anti-SLAPP motions. -Dan M.
RESPONSE: Thank you for the tip; I added it to the library. Even lawyers sometimes get themselves in trouble with the letters they write.
Train Wreck #1. Sitting here in the relative safety of Arizona, it is fascinating to watch California lurch into complete insanity. Here is the current lurch: SB 1265 is the bill put forward by the Center for California Homeowner Association Law (CCHAL) and Sen. Wieckowski that strips homeowners of their right to adopt reasonable qualifications for board members. CCHAL and Sen. Wieckowski decided you should accept felons and delinquents on your boards as well as those suing your association and those in serious violation of the CC&Rs. -Bob A.
Train Wreck #2. If SB 1265 is adopted into law, associations will be severely limited in their ability to establish reasonable candidate qualifications. Please continue to voice your oppositions to this bill. -LP
Train Wreck #3. What can be done now to push back against the passage of SB 1265? -Maureen B.
RESPONSE: I will let you know when it's time to send more letters. If this bill is signed into law, it will be the third terrible bill in three years backed by the Center for California Homeowner Association Law (CCHAL).
The first was AB 1720 which tried to inject lawyers into board meetings. CCHAL thought it would enhance meetings if everyone had their lawyers in tow. Fortunately it was defeated.
The second was SB 407 (CCHAL & Sen. Wieckowski) which allows any politician, political party or interest group to take over an association's common areas for free and without insurance to raise funds, give speeches or for any other purpose of "public interest." And, the association picks up the tab. It passed.
The third is SB 1265 (CCHAL & Sen. Wieckowski) which strips away consumers' rights so they can't establish qualifications for serving on boards. It forces homeowners to allow felons, delinquents and litigants onto boards of directors (and give them access to records). CCHAL and Sen. Wieckowski made an exception for felons who commit financial crimes--they can be excluded from boards.
Train Wreck #4. I couldn't help myself. Neopets (a kid's gaming website) applies the term "scalawag" to animated animal pirates. -Frances W.
RESPONSE: We have a few scalawags in the legislature that some might equate to pirates.
Train Wreck #5. For one of your always interesting newsletters, would you comment on whether there is a difference between a “member” and a “resident” in an HOA or private community, or are the terms used interchangeably. Civ. Code §4515(b)(2) references “members, residents, and their invitees or guests,” which suggests the terms are not synonymous. -Roger H.
RESPONSE: Civil Code §4515(b)(2) is last year's train wreck where residents can invite "public officials, candidates for public office, or representatives of homeowner organizations to meet with members, residents, and their invitees or guests and speak on matters of public interest."
A resident is someone who lives in the association. A member is someone who owns property in the development which gives them voting rights and common area privileges. A member can be a resident or nonresident. (See Member Defined.)
The CCHAL statute allows residents to invite politicians to the common areas. It also allows them to invite guests and invitees to hear the politician speak and raise funds. A "guest" is someone you invite to your house. An "invitee" is someone you invite to attend a gathering, entertainment, or to do something.
That means a renter can invite a politician to speak and raise funds using your common areas. In addition, the renter can invite people to hear the speaker. The statute does not limit invitees to residents. That means people from outside the association can be invited into your common areas to participate in a fundraising event.
AB 2912 #1. Are you saying that we should insure our reserve fund plus 3 months of assessments? Could you explain this a little further. Is this common practice? -Helen S.
RESPONSE: Because of embezzlement, it is good practice for associations to insure their funds, add internal controls, and regularly review their finances.
Unfortunately, too many associations are lax in this regard. AB 2912 was introduced to help protect association finances.
AB 2912 #2. Always enjoy the newsletter and find it very informative. In regards to the most recent one and the question regarding insuring the balance in the reserves plus 3 months of assessments. Many lenders require the association’s insurance to meet those specifications to loan on a unit. Thanks for all the info you provide as well as always adding a good laugh! -Laura F.
Marginal Boards. I believe there is very little an owner can do if their board falls into the category of marginal boards except sue them which, as you say, is costly. This leads me to ask, what value is the Davis-Stirling Act as there is not any teeth in the Act? -Mike S.
RESPONSE: The Davis-Stirling Act has as much or more teeth than similar laws dealing with public officials. For example, suing government officials is not always possible, and when it is, it's more difficult than suing board members.
The Act allows you to sue your association in small claims court, it allows fines to be imposed, it provides for IDR and ADR, and it allows for the award of attorneys fees. Association boards can be ordered to comply with the law, and boards can be replaced.
Discourage Volunteers. Associations, like many cities and states can be badly managed. There is no "magic bullet" legislation. Passing ever-restrictive and punitive laws regulating associations is effective at one thing--discouraging good, qualified members from serving on the board.
Too Many Laws. There are already so many laws that lawyers and management companies and professional inspectors of election and consultants and CPAs have become a necessity for associations. In addition to discouraging volunteers, it drives up members' dues. The regulations have become an impossible burden on small associations.
RECOMMENDATION. There is a role for regulation but the excessive and unbalanced regulation imposed by CCHAL is not the answer. It has unintended, negative consequences. More regulation is not the best answer to every problem.
People who are unhappy with their association but keep putting the same people into office should rethink that strategy. It comes down to making a concerted effort to influence directors or replacing them. Suing is always an option but rarely the best one.