Senate Bill 323
Senate Bill 323, known as the “New Election Law”, has been signed into law and will become effective on January 1, 2020. Below is a summary of what you need to know and how this will impact your Association’s Board Member elections moving forward.
This new law will require that all Associations update their election rules to reflect the required changes, including Board Member qualifications, member voting rights, nomination and annual meeting notice requirements, and inspector of election requirements. Because rule changes require a 28-day review period by the membership, it is important that Associations move quickly to update their election rules and distribute them for review prior to adoption to ensure your Association is in compliance as soon as practical, understanding that it is nearly impossible for Associations with elections scheduled early 2020 to fully comply.
Board Member Qualifications
The new law restricts what an Association is permitted to adopt as qualifications to serve, but below is a list of permitted qualifications for Boards to consider. Please note, these qualification requirements must be included in your Association’s Election Rules to be enforceable.
• Current on Assessments - Nominees must be current on all assessments, including regular and special assessments. The only exceptions are if an owner has paid their assessments under protest or if they are on an approved payment plan. Please note: This also means that current Board Members must also be current on their assessments.
• Only One Board Member per Residence – Nominees may be disqualified if another member of their residence is already serving on the Board of Directors or is already a nominee.
• Been an Owner More than One Year – Association’s may adopt a rule that a nominee be an owner for one or more years to be eligible.
• Clean Criminal Record – Nominees may be disqualified if they have been convicted of a criminal act that would prevent the Association from obtaining and/or maintaining fidelity (criminal) bond coverage.
• IDR Required Prior to Disqualification – The new law requires Associations offer any nominee they intend to disqualify the option of Internal Dispute Resolution (IDR) prior to officially disqualifying them from running. Should the Association fail to offer the nominee IDR, that nominee will have the right to run whether or not they meet the qualifications set forth in the Association’s Election Rules.
Associations may no longer suspend voting rights for delinquent assessments or non-compliance violations. The new law states that the only legitimate reason for not permitting a member to vote is if they did not close escrow prior to the ballot mailer going out.
The law also states that residents with power of attorney granted from a member have the right to vote on behalf of that member.
Notice Requirements & Election Timeline
Pre-election notice requirements will now require election planning to start four (4) months prior to the scheduled election date. Pre-election requirements include establishing an inspector of election, the specifics of which are addressed in more detail below.
•Four Months Prior to Election Date
The Association’s Board will need to approve/appoint an Inspector of Election.
SB 323 no longer permits third parties who are under contract with the Association to serve as inspector of elections. This includes, but is not limited to management, the Association’s law firm or the Association’s CPA. There are several independent third-party election company options, but it is important to budget for this additional expense moving forward and proactively reach out to them well in advance of your scheduled election as they will likely be severely impacted by the demand this new law creates.
• Three Months Prior to Election Date
It is now required that General Notice of nomination submission procedures and deadlines be sent out by the Inspector of Election at least thirty (30) days prior to the deadline for nominations. This General Notice must provide for both the deadline and procedures for submitting nominations. Please note: This requirement can be satisfied by posting the General Notice in a common area or simply including this information along with the Association’s Call for Candidates.
The new law requires a thirty (30) days Call for Candidates period be provided for members to submit nomination forms.
• Two Months Prior to Election Date
The Inspector of Election must now also provide a General Notice to the members at least thirty (30) days prior to the distribution of ballots, detailing when and where to submit ballots and the date, time and location of the annual meeting/election. In addition, the General Notice must include a list of the candidates’ names.
• One Month Prior to Election Date
Finally, the new law requires that the election rules be distributed to all members at least thirty (30) days prior to the election. This requirement may be satisfied by including the election rules as part of the ballot mailer or posting on the Association’s website. Should the latter be the preferred method of delivery, the web address where the election rules can be found must be included on the ballot in 12pt font stating “The rules governing this election may be found here.”
Updating the Association’s Election Rules
Associations should move expeditiously to update their election rules to comply with SB 323. Beginning January 1, 2020, the new law requires that all Election Rule changes be made at least 90 days prior to an election. While it would be nearly impossible to fully comply if your Association’s election is scheduled for early 2020, Boards should consult with their respective attorneys regarding how best to proceed as legal opinions may differ. Under the new law, Civil Code 5145 was also amended to require that courts invalidate an election unless the Association can show, by a preponderance of evidence, that the Association’s non-compliance did not impact the outcome of the election. In other words, this civil code amendment makes it much easier for elections to be challenged and puts the burden of proof on the Association, making it especially important that Associations update their election rules to ensure compliance as soon as possible.
Inconsistencies with Governing Documents (CC&Rs and Bylaws)
As with any other inconsistencies between Association governing documents and the law, the law will take precedence and govern. As such, it is possible that your Association’s new election rules, which will be drafted to meet the new requirements set forth in Senate Bill 323, will conflict with your Association’s governing documents. This does not mean that the Association is required to rush out and update the governing documents. It simply means that the new legal requirements will govern.
Please note: PMP Management is not a law firm and nothing contained herein should be considered legal advice. Associations are encouraged to consult with their respective attorneys regarding the impact of these new laws.
Keep these Board Member Best Practices in mind to aid you in your success as a diligent and effective Board Member. Questions or feedback can be submitted to PMP’s own Dr. HOA at mailto:DrHOA@pmprollc.com