Electronic Business.. But Not For HOAs?

One of the more interesting anomalies in current California corporate law is that under the Corporations Code, ALMOST any corporation can vote via the internet or other electronic means, so long as members have the opportunity to opt out and use a written ballot. However, HOAs cannot do so, because the Davis-Stirling Common Interest Development Act requires that votes only be by secret written ballot (Civil Code 5115), which means electronic voting is illegal for California common interest development associations.

For small associations, this may not be a problem, since elections are less costly and it is easier to contact neighbors and collect ballots. However, larger associations commonly struggle with participation, and often cannot manage the logistics of “knocking on doors” to ask members to participate. Larger communities often spend thousands of dollars on mailers, only to have meetings fail for lack of quorum- requiring the association to send yet another mailer to all the members, asking for ballots to be returned.

The Act now acknowledges many ways in which an association or its members can choose to receive communications electronically- annual disclosures, specific notices, and other announcements (Civil Code 4035(b)(1), 4040(a)(2), and 4055, for example). However, that “green” and economical approach is prohibited with HOA ballots. Instead of receiving an electronic ballot, logging into a secure voting site, and then casting a ballot without stepping away from the desk (or smart phone or tablet), HOA members must expend paper and postage. Yet, all other non-profits can have electronic voting.

Assembly Bill 1360, authored by former Assemblyperson (now Senator) Torres, would give associations the option to offer the choice of electronic voting to members. The bill is sponsored by the Community Associations Institute, and if passed as written would place requirements on electronic voting providers which are not required of other corporations, making the security of votes for your homeowners board much more stringent than all other non-profit corporations. For example, such providers would have to have liability insurance and have no connection to the association management or the members. The voting system would have to give the voter a receipt, protect their identity and transmit the data to the Inspectors of Election in a secure manner.

The bill passed easily through the Assembly, but progress was slowed in the Senate when the Secretary of State announced her opposition to electronic HOA voting. The bill’s next step is a Senate Judiciary Committee hearing on June 24.

Read the bill, and decide for yourself if it would help your HOA, at www.leginfo.legislature.ca.gov. Search for AB1360, and click on the “Todays Law As Amended” tab to see exactly how the bill would change existing law. 

There are various pending bills regarding drought and other important issues, but these seemingly technical bills can have a great impact for many years.

Written by Kelly G. Richardson

Kelly G. Richardson Esq., CCAL, is a Fellow of the College of Community Association Lawyers and a Partner of Richardson | Ober | DeNichilo LLP, a California law firm known for community association advice. Submit questions to [email protected]. Past columns at www.hoahomefront.com. All rights reserved®.