Senate Bill 323: More “One Size Fits All” For HOAs

Senate Bill (SB) 323 (Wieckowski) is now pending in the Assembly after passing through the Senate. The bill originally proposed to significantly expand election procedural requirements and now strays into additional areas, potentially creating even further problems for California HOAs.

Since July 2006, when 2005’s SB 61 became law, HOAs have the most complex election requirements of all California nonprofit corporations. For example, HOAs are the only nonprofit corporations barred from using electronic voting Civil Code 5115 requires paper ballots in double sealed envelopes). While many (including this author) felt SB 61 was overkill, SB 323 would take things even further.

Under current Civil 5200(a)(9), members can request the HOA membership roster, including names and addresses, but under Civil 5220 members can opt out of that roster and keep their information private. SB 323 would require adding email addresses to the available roster information, something which many homeowners prefer to keep confidential.

A proposed amendment to Civil 5125 would add additional items for post-election member inspection, requiring signed exterior ballot envelopes, voter lists and proxies also to be available for member inspection. Many residents do not wish their signatures or voting record to be available for public inspection.

Some associations have bylaws automatically disqualifying delinquent members from voting, while others hold hearings under Corporations Code 7341 to suspend delinquent member voting rights. However, SB 323 would force associations to give ballots to all members – even to those deemed ineligible to vote. This would, in effect, cancel Corporations Code 7341, leaving HOAs as the only corporations unable to suspend member voting rights.

SB 323 also would in a proposed revision to Civil 5115(a) require associations to send out pre-election alerts to members 30 days before sending out ballots, adding yet another expense and complexity to HOA elections. California Legislators have clearly forgotten that these laws apply to four-unit condos as well as 5,000+ member associations.

The most troubling aspect of SB 323 is its apparent statewide eligibility standard for HOA board service. It is unclear whether the bill would establish a limited list of disqualifications or if the list is non-exclusive. Under SB 323, non-members could not serve (some HOA bylaws do not require directors to be members), but members actively suing the HOA can still serve. Members delinquent in their assessments can still serve on the board so long as they have a payment plan in place (even if they refuse to pay the HOA’s collection costs). Why cannot HOA members determine their own board eligibility standards?

Finally, the bill proposes to add a new Civil Code 5910.1, barring HOAs from suing members unless they can show they engaged in internal dispute resolution in “good faith” (which term is undefined). Legal fees will skyrocket as homeowners have a new defense, claiming that the HOA was not “in good faith” in its prelitigation attempts to resolve the matter. So, under the proposed new 5910.1, the longstanding Evidence Code 1152 inadmissibility of settlement discussions, applicable to all other litigants in California, would not apply to HOAs.

Is Senator Wieckowski trying to help? He clearly is not listening to the HOA world. SB 323 is a terrible bill and hopefully the Assembly will reject it in August when it comes for a floor vote.

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®.