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An Article
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LAWYERS ATTACK CULMULATIVE VOTING RIGHTS USING NEW LAW
Rewriting homeowner association CCRs to jettison owners' rights
January 09, 2006
By
AHRC News Services
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| Sacramento, California - A Note On Opinions: Like all bills passing through the legislature, government lawyers working in the Legislative Counsel office analysed SB 61, then wrote the bill in its final form. Industry lawyers/ lobbyists bartered on the bill language with lawmakers and their consultants so they could continue to take homes and life savings of homeowners for their legal fees.
Hardly had the ink from the governor's pen dried on SB 61 (Battin) when industry lobbyists sought to use it to take away the cumulative voting rights of homeowners. They want an opinion from lawmakers that SB 61 does takes away those cumulative rights.
Opinions are written by government lawyers working in offices like the Legislative Counsel or the State Attorney General's office at the request of lawmakers to clarify bills.
Sometimes these opinions are not based on sound reasoning. Nevertheless, these opinions can be used by lazy and biased judges to justify their unjust court rulings. ...AHRC News Services
REQUEST FOR AN OPINION ON SB 61 BY ECHO LOBBYIST SANDRA BONATO
The question for Counsel is: Does SB 61's requirement that director elections be conducted by mailed written ballot eliminate or retain cumulative voting in those community associations whose corporate bylaws authorize it, since the Corporations Code expressly does not permit cumulative voting when directors are elected outside of meetings?
December 14, 2005
VIA FACSIMILE TO 916 445-2209 AND U.S. MAIL
The. Honorable Alan Lowenthal, Chair
Senate Committee on Housing and Transportation
State Capitol, Room 2209
Sacramento, CA 95 814
Attn: Mark Stivers, Consultant
Re: Inquiry Regarding Effect of SB 61 (Battin)
Dear Senator Lowenthal:
Practitioners in the area of community association law are quite uncertain how to reconcile a particular effect on current law and association bylaws caused by SB 61.
Many different opinions are being heard, and we hope you can help us determine the more correct answer. The issue involves whether cumulative voting for directors survives the operative date of new Civil Code § 1363.03.
Cumulative Voting
SB 61 is silent on the subject of cumulative voting but, effective July 1, 2006, will require all community elections of directors to be conducted by mailed written ballot outside of a member meeting. The only portion of a director election that will occur at a meeting is the opening of ballots.
Existing law at Corporations Code sections 7513(e) and 7615(a) and (b) provides that members of nonprofit mutual benefit corporations may cumulate their votes in the election of directors only on two predicates: first, that the bylaws permit cumulative voting and, secondly, that, prior to commencement of the voting, a member stands up at the meeting at which the election is to be conducted and announces his or her intent to cumulate their votes. Only with permission given in the bylaws, only with that announcement, and only at a meeting does the Corporations Code permit cumulative voting. In essence, the "right" to cumulate votes is both statutory and misnamed - it is permissive by law, not mandatory.
Attorneys who practice in the field of nonprofit corporate law recognize that, without the power to elect directors at the annual meeting, the authority to cumulate votes can't lawfully be exercised.
On the other hand, current Department of Real Estate regulations require developer counsel to include cumulative voting in bylaws of new communities, as a way of ensuring that homeowners can collectively pool their votes to ensure some voice on the board during the period in which the developer is in control. As a result, thousands of sets of bylaws exist today with permissive cumulative voting. (Many have also jettisoned cumulative voting after the DRE no longer has jurisdiction over sales in the community, in favor of the more public law-like "one vote per candidate.")
As I understood it, the basic premise of Senator Battin's bill was to regulate community voting for directors in the same ways that public election law dictates. In that case, with extremely rare exceptions no one cumulates votes in public elections.
Accordingly, it is possible to interpret the complicated overlays of new Civil Code section 1363.03, existing corporate legal principles, and existing bylaws by concluding that section 1363.03 eliminates permissive cumulative voting because it eliminates voting at meetings. That leaves DRE regulations requiring cumulative voting out of sync with the new law.
There is no guidance in SB 61 to help us confidently reconcile these issues. Instead, communities with cumulative voting provisions in their bylaws will struggle to apply unclear legal principles to their voting procedures, with no outcome known for certain until a court speaks on the subject. And while it might seem obvious that the "conservative" view - i.e., eliminating cumulative voting as a procedure that isn't authorized in the new law and can't be achieved by applying existing law - is preferable, we see counsel stretching to create alternate authority that somehow supports the practice of cumulative voting outside of a meeting, particularly in developer-dominated communities.
We need your help. The proper election of the leaders of our communities turns on finding a solid answer. This issue is of serious enough concern that we hope you will forward our question to legislative counsel.
Very truly yours,
Sandra M. Bonato
Berding & Weil LLP
Attorneys at Law
Alamo, California
RELATED LINKS:
• Related link: SB 61 (Battin) - 2005
• SB 61 AND CULMULATIVE VOTING RIGHTS OF CALIFORNIA HOMEOWNERS
Whether there should be cumulative voting rights should not be determined by the legislative counsel
• Click here to write Senator Lowenthal & California Senate Housing & Transporation Committee members |
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Submitted Files
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sb61bill20051003chaptered.pdf
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SB 61 - Election oversight in California Homeowners Associations
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PDF document, version 1.3
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86KB
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SFX756.pdf
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Homeowner Association industry lobbyist letter for a legislative opinion on SB 61 (Battin) .
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PDF document, version 1.3
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112KB
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