ELECTION RULES FOR CALIFORNIA HOAs

Every HOA Must Adopt Election Rules - Following the Civil Code Isn't Enough

By Amy K. Tinetti, Esq. - is a principal with the law firm of Hughes Gill Cochrane, P.C. Located in Walnut Creek, California. This article is intended to provide general information and should not be relied upon as legal advice.

Even though the elections law (now Civil Code sections 5100 through 5145) went into effect many years ago (July 2006), we still frequently come across associations without election rules in place. We often hear that some boards of directors resist investing in election rules because they do not want to spend the money. This is tragic, because election rules can be drafted quickly and inexpensively, by competent attorneys that specialize in common interest development law. The cost is particularly minimal in comparison to the serious risks involved in conducting votes and elections in the absence of voting rules.

Civil Code Section 5100 requires that four types of member votes be conducted pursuant to election rules which describe a dual-envelope secret ballot system:

Votes regarding assessment increases requiring member approval;

Election or removal of directors;

Amendment of the governing documents; and

The grant of exclusive use of common area to less than all members.

Why Do HOAs Fail to Adopt Elections Rules?

Although the law is explicit, many homeowners association boards and owners have no idea that their condominium or planned unit development is in violation of the law. Here are a couple of reasons why.

ELECTIONS ARE MENTIONED IN THE BYLAWS

Often, when attorneys ask for an association's election rules, HOAs instead give a copy of the association's Bylaws. Yes, the Bylaws (and sometimes CC&Rs and/or Articles of Incorporation) do typically address elections, but those documents are not election rules. Civil Code Section 5105 unambiguously states that "An association shall adopt rules, in accordance with the procedures described by Article 5 (commencing with Section 4340) of Chapter 3 [the rule change/adoption procedure], that do all of the following. . . ." The statute then goes on to list the things that must be included in election rules. The specific requirements for election rules in the Civil Code are rarely are found in Bylaws (or CC&Rs or Articles). Civil Code Section 5105 requires, on its face, that separate rules must be adopted pursuant to the procedure for adopting any "operating rules" (including at least 30 days' notice to the owners, member comments and adoption at an open board meeting).

AN HOA'S ELECTIONS HAVE BEEN CONDUCTED IN COMPLIANCE WITH THE LAW

It is not legally sufficient to conduct elections pursuant to the dual-envelope, secret ballot system proscribed by Civil Code Section 5115 without separate election rules. Civil Code Section 5145 provides that a member of an association may bring a civil action for any violation of the elections law, and provides that:

Upon a finding that the election procedures of this article, or the adoption of and adherence to rules provided by Article 5 (commencing with Section 4340) of Chapter 3, were not followed, a court may void any results of the election.

In other words, simply conducting a vote utilizing the dual-envelope, secret ballot procedure, without adopted and published election rules, violates the elections law, exposes the association to potential liability, and risks the nullification of any such vote or election.

Unlike other laws (such as the "internal dispute resolution" law), the Civil Code does not have a "default" set of election rules to follow if an association fails to adopt rules. Failure to adopt election rules is itself a violation of the law, period.

WHAT HAPPENS WHEN AN HOA VOTE OR ELECTION IS VOIDED?

The elections law was written to encourage disgruntled members to sue for violations of the elections law and to recover damages, civil penalties and attorneys' fees in the process. Moreover, the legislature has also given the courts the option to "void" results of an election. This carries huge risks for associations that many boards do not fully appreciate.

A BOARD ELECTED WITHOUT ELECTION RULES IN PLACE

Civil Code Section 5145 provides that a member of an association may bring a civil action for a violation of the elections law (including the fact that an election was conducted without election rules in place) within "one year of the date the cause of action accrues." If the cause of action "accrues" when a board is elected in violation of the law, and the election is subsequently voided, any action taken by the board in the interim may be invalidated. Considering the number of actions a board of directors takes in an average year (including collection and enforcement efforts, vendor contracts, etc.), the business of an association could be irreparably harmed if every action taken by a board was subsequently invalidated.