FYI - March 2006
ELECTIONS - RESERVES - AND OTHER LEGISLATION
© Beth A. Grimm, PLC
I don't know how many more months I can talk about elections before you all tune out, but I will keep talking about them until I have something concrete to offer you, and by that time, I will be in a position to assist those who have asked me to write their election rules. What's going on is there is a law in place that is supposed to take effect July 1,2006 regulating elections. However, there are proposed amendments to that law in the form of SB 1560 that is being hashed about among those in the know to try and fix what needs to be fixed with regard to law. In addition, there is a possibility, though it may be remote, that implementation of the new law may be delayed for six months or more. The proposed amendments do away with the requirement to adopt rules per Civil Code Section 1357.100 but require procedures in "the governing documents". Therefore, I do not want to jump the gun, charge you all money to prepare election rules, fret about whether they (the rules) have any credibility left, have them sent out and approved, and then have to start over again or discard the work product. So, be patient a bit longer. If your association has an election coming up between now and August 1, you would do well to ask for some special interim help on how, in good faith, to comply with the current situation with regard to elections law. There is a way to combine proxy and written ballot procedures so as closely as possible to align to existing law however it might change between now and July 1. However, the specific techniques that you choose to employ depend completely on exactly when the meeting as, and whether it is your hope that the election will take place at that meeting, or whether you want to use it as a springboard to recruit candidates for your Director elections. Either is probably a reasonable course of action at this particular time in history, because of what is going on in Sacramento.
So what else is going on in the legislative arena? At this point in time, there have been some new bills introduced, but already changes are being made. In a nutshell, keep an eye on:
AB 2100 -- reserve funding -- Laird. This is a CAR sponsored bill, as we have come to expect every year.
The Realtors are and continue to be concerned that their clients know what they are getting into and so they keep pushing legislation that moves Associations closer and closer to mandating adequate reserve funding. Essentially, the bill does these things:
(1) Contains a requirement that says associations will need to disclose any loans that will not be paid off in the current fiscal year as part of the reserve study;
(2) Provides that Boards will have to "approve" a reserve study that will meet the needs of the association for the next 30 years with regard to maintenance, replacement and repair ;
(3) Provides that Associations will have to seek owner approval of the reserve study; and
(4) Provides that members of the Board will have to be up front about disclosing any contract that if entered into by the Association will provide them with direct financial benefit.
There is a good chance, it seems, that the requirement that associations must seek approval of reserve studies will go away. It does not make any sense to force associations to present reserve studies to their members for approval when the Board hires a professional to prepare it. In fact, boards should not be preparing the reserve study unless they have the specific expertise needed for analyzing the condition of the components the Association maintains, and for estimating that costs of maintenance, repair and replacement of those components for the next 30 years. However, disclosure of loans that are a debt of the association would benefit potential purchasers and add to their understanding of what they are buying into. Under current law, status of, comments on, and payments on loans can get buried in other financial reporting documents. As for having to disclose conflicts of interest such as a financial interest in a contract that the Association is considering, it seems like that should be a given and something any one would think that was the right thing to do. However, apparently, that is not always the case, because this kind of legislation is triggered by stories about these things that pop up here and there.
AB770 and SB 551 (Mullin and Lowenthal) Ombudsman Program. These bills are a carry over from last year. They would provide, at the state level, an ombudsperson program which would require the ombudsperson to, among other things, offer training materials and courses to directors, owners officers, etc. in subjects relevant to the operation of a CID and the rights and duties of the association or owner. The bill also requires maintenance of a toll-free phone number and Internet web site for purposes of further providing information and assistance, and would require certain things of association directors or agents, such as attesting to the fact that they have read the governing documents of the associations they manage. The bill would impose a biennial fee on associations of $10 per door to pay for these programs.
CA DAY IN SACRAMENTO - THE REAL DEAL. If you want to know what's happening in Sacramento, and even better, if you want to take a personal visit to your legislators and get some support from some people who really understand the process in doing that, join us all at the Community Associations Institute-California Legislative Action Committee "CA Day In The Capitol" on April 22-24 in Sacramento. If you attend all three days, you will have the opportunity to (1) take a manager law class that provides credit toward manager certification requirements on Saturday; (2) take a class on the elections law or dealing with the new laws relating to records inspection, both of which become effective on July 1, 2006, on Sunday morning; (3) you can visit Old Town or the Capitol Sunday afternoon or attend delegate meeting where discussions will take place regarding the proposed new laws; (4) attend a dinner out with the entire group, and (5) then on Monday, the big day, have pre-arranged visits to the legislators with people who have done this before. You can choose any or all of the above separately if you can't make the entire weekend.
To get information on this "CA Day in the Capitol", go to http://www.clac.org. If you would like, you can contact me and I will send you a brochure in PDF format. If you are planning on staying in Sacramento, you'll want to make your reservations at the Hyatt across from the Capitol at the earliest possible opportunity so call as soon as you can. There is a block of rooms reserved but they go fast.
FYI JANUARY 2006
SB 61 ELECTIONS, CAMPAIGNING, USE OF ASSOCIATION
RESOURCES, WHERE IS IT GOING?
You probably wonder why I have not yet written on this new elections bill in an FYI specifically. If you have been following my blog, though (front page of the website), you will see that I have been writing that is. Fast and furiously, I have been reaching out for information needed to propose some reasonable modifications to a bill that confounds some election processes, and fixes others. The reason that I have not presented anything definitive is that there will be cleanup to this bill. It's just a matter of time. If you want to know more and can come to Pleasant Hill to attend the meeting in January on inspectors of election, you will get the full scoop. (See enclosed flyer.) If you cannot, watch the FYIs, the blog (on the front of the website) and the Legal Digests in the coming months. You will get some direction and help. And here is a voting process that complies for the most part with the new SB 61 while ironing out some of the problems it creates. Other Associations are using this now, some for more than 10 years. It requires some special printing and the envelopes and ballots contemplated by the new statute, and some ingenuity, but if you integrate this system into your practices, I think you will be ahead of the curve when this statute actually takes effect on July 1, 2006. Remember, the new law applies only to certain elections (for directors, for special assessments, for transferring use of common area to a member, and for CC&R amendments) but you can use this for all elections.
Under the new system, an association must send out a ballot for voting purposes, along with one "blind envelope" (meaning one that carries no indication of identity of sender but only a control number or code), and one envelope addressed to the Inspector(s) of Election (which will be required after 7/1/06). The secret ballot goes in the "blind" envelope which is sealed and that one goes into the envelope addressed to the inspector. People voting by sending in this ballot from home are not likely to execute a proxy unless one is handed to them in a way they cannot miss it. So, one way to beat the quorum and proxy issues that arise in CC 1363.03 is to put the proxy right on the envelope that will be returned to the inspector of elections. This provides a means for the inspector to receive a sealed envelope that acts like a proxy, meaning that it can be returned to an owner who attends the meeting or turned over to another proxy holder named on a later dated proxy who attends the meeting. If no one shows at the meeting, the ballot inside can be voted confidentially, because the signed proxy on the envelope it is sealed into allows it to be so.
The whole process contemplates that for an election, the names of candidates will already be included on the ballot, because of processes that start months before the election is held, and protections that allow owners equal access to run for the Board. This will work for some, but not so well for others but practice makes perfect! I will expect to provide more on this in the coming months. Remember that the new law does not take effect until July 1, 2006, but it is important to understand about how it will work now, and how you will combine the absentee voting type of process with the corporate style using proxies and meeting attendees to create a legally valid quorum and election. Stay Tuned In ... It's bound to get interesting.
Copyright 2006, Beth Grimm, all rihts reserved.