State Imposed Election Procedures
“The Good, The Bad and The Ugly”
by Stanley Feldsott, Esq.

On July 1, 2006, California Civil Code Section 1363.03, entitled “Elections; Rules and Procedures”, becomes operative. It applies to all associations whether incorporated or not. I believe it fair to say that everyone would support the notion of having open and fair elections. Likewise, I have little doubt that over the years some abuses in the election process have been committed by some incumbent boards of directors. Whether these abuses rose to a level to justify the imposition of State mandated rules and regulations is now an academic question in that we now have a one and one-half page statute. The Legislature is busy writing cleanup legislation for this statute before the statute even becomes effective.

The initial problem facing an association is what to do, when, and how to do it. There is no doubt that all associations will have to change their election rules and procedures to conform to the statute. The first question to answer is whether the proposed changes should first be submitted to the membership for comment at least 30 days prior to adoption by the board of directors.

The statute itself mandates that the rules and procedures are to be adopted in accordance with the procedures required by Article 4 starting at Civil Code Section 1357.100. This Article requires, among other things, that proposed changes in election rules and procedures first be sent to the membership for comment at least 30 days prior to adoption by the board. Subsection (4) of Civil Code Section 1357.120 exempts rule changes that are required by law if the board of directors has no discretion as to the substantive effect of the rules change. Although arguments could be made to the contrary, it would appear that the “required by law” exemption does not apply because the new statute does afford the exercise of discretion. Why debate the issue? There is still time so give notice to the membership.

Nomination Process

The statute now makes it easier for anyone to get his or her name placed into nomination and printed on association ballots and proxies. The association is required to send nomination forms to all members and a member may nominate himself or herself. The form must also set out the required qualifications necessary to be a board member e.g. the association’s by-laws require that each director shall be a unit owner. It is suggested that these nomination forms be sent to the members at least 75 days before the date of the annual meeting with a requirement that the forms be received back by the association at least 30 days prior to the election. Although associations whose by-laws provide for a nominating committee may continue to make use of such committee, these committees will no longer be able to control who is nominated or otherwise limit others to having their name simply placed in nomination at the meeting without benefit of having their name appear on association proxies and ballots.

Campaign

Procedures must be adopted permitting all candidates and members advocating a point of view to have access to association media, newsletters or internet websites during the campaign. The association is prohibited from editing or redacting any content from these communications. Associations should be certain to include a statement specifying that the candidate or member, and not the association, is responsible for the content. Additionally, any member or candidate is essentially guaranteed access to the common area meeting space, if any exists, during a campaign at no cost for purposes reasonably related to the election.

Mail-In Ballots and Proxies

In conducting voting by mail, common practice was to have the member sign and identify his property on the ballot. In this way, the process was controlled and individuals could not vote twice or engage in ballot box stuffing. The new legislation requires a procedure similar to that used by absentee voters in general elections. The ballot itself has no identifying information and is placed in a sealed envelope. That envelope is then placed in another envelope which contains the members identifying information. This would seem to be a reasonable approach to preventing duplicate voting and ballot stuffing. Since the case of Chantiles v. Lake Forest II Master Homeowners Assn. (1995) 37 CA4th 914, 45 CR2d 1, members and even directors were denied unfettered rights to inspect the ballots or recheck the tabulation of votes as this would violate the notion of a secret ballot and the expectation of privacy. Utilizing the new mail-in ballot procedure provides adequate control of the mail-in balloting process, protects the sanctity of the secret ballot and the expectation of privacy while at the same time providing members and directors with the right to inspect the ballots for purposes of verification after certification of the results.

The legislative approach with respect to voting by proxy is similar, but presents a number of mechanical problems. Proxies are of two types. There is a general proxy in which the proxygiver authorizes the proxyholder to vote at the proxyholder’s discretion. When that type of proxy is presented at a meeting, the proxyholder is provided an unmarked ballot. The second type of proxy is known as a directed or instructed proxy in which the proxygiver instructs the proxyholder how the proxy is to be voted. Space is generally provided on the proxy for a listing of the known candidate’s name and the proxygiver is able to indicate the number of votes to be given to each candidate. Under the prior law, from a technical standpoint, the voting instructions on the proxy were to be transferred to a ballot. The common practice was to simply put the directed proxies in the ballot box and then simply treat those proxies as if they were ballots at the time of tabulation. Members wanting to verify the accuracy of the count were again denied unfettered access since the sanctity of the secret ballot and the proxygiver’s expectation of privacy would preclude examination of those proxies used as if they were ballots.

Under the new legislation, the voting instructions have to be contained on a separate page without any identifying marks. That separate page is then separated from the proxy and placed in the ballot box thereby protecting the right of the secret ballot, the expectation of privacy and creating a paper trail where members can verify the tabulation of votes. Because the voting information is going to be separated from the proxy, it is necessary to wait until after registration is closed before logging in proxies and separating the voting instructions. This is necessary because later dated proxies may come in or a member may show up and wish to reclaim his proxy and vote in person. If the voting instructions are separated from the proxy before a later dated proxy is presented, you will have no way to reclaim the voting instructions. It is thus essential that, at some point prior to the commencement of the meeting, registration be closed. It is only then that you can determine with certainty if there are duplicate proxies or members appear who wish to reclaim their proxy.

Inspector of Elections

There is some confusion concerning who, under the new law, can serve as inspector of elections. The inspector must be an independent third party and under Civil Code §1363.03(c) (2), a number of independent parties are suggested e.g. a volunteer poll worker, a CPA, a notary public, a member of the association but not a member of the board or a candidate for the board of directors or someone related to a member of the board of directors or a candidate. This section then goes on to state

“An independent third party may not be a person who is currently employed or under contract to the association for any compensable services unless expressly authorized by rules of the association adopted pursuant to paragraph (5) of subdivision (a).”

What this distills down to is a provision that prohibits the community manager or the association attorney from acting as an inspector of elections unless the board adopts a rule that the community manager or the association attorney can act as an inspector of elections. Given the inspector’s many duties relative to the collection of the mail-in ballots and/or proxies (the number of inspectors remains the same, one or three), it is recommended that, if there is to be only one inspector, it be the community manager. If there are to be three inspectors, they should be the community manager, possibly the association attorney and an independent third party or an association member. It would seem that the community manager is in the best position to receive the mail-in ballots and/or proxies and maintain custody and control before and after the election. The association attorney would probably be in a better position to hear and determine all challenges and questions in any way arising out of or in connection with the right to vote.

Counting of Ballots

Here’s where it gets ugly. In most elections, the inspectors do the counting in a separate room outside the view of the general membership. I would think everyone would agree that not only should there be a fair and accurate count of the votes but that the membership should feel confident there was, in fact, a fair and accurate count of the votes. To require that all of the votes be counted in the open in front of all members (as this statute does) suggests that the legislators voting for this bill never attended a hotly contested annual election or recall election. A much better solution would have been to permit each candidate or group of candidates to select an observer to watch the counting.

Conclusion

This poorly drafted and in many respects ill-conceived legislation will become effective July 1, 2006. There is currently some attempt at creating cleanup legislation as well as delaying the effective date of the statute. Opening up the nomination process is certainly a good thing. Likewise, making association media and facilities available to candidates without censorship is a good thing. Academically, we all would support a secret ballot and the right to verify the count. The new procedures for mail-in ballots and proxies achieve that goal. Mechanically, and particularly with respect to proxies, the registration process is going to be time consuming and lengthy and in case of an error could foreseeably result in the need to postpone an election and/or start all over again. A much simpler solution would have been to give members the right to inspect the directed proxies with the proxygiver’s name and the proxyholder’s name redacted. That would certainly have permitted the continued utilization of the common practice of using directed proxies as if they were ballots and greatly speed up the registration process by permitting the inspectors to pre-register proxies. When it comes to counting ballots in public at a hotly contested election, this requirement is likely to get downright ugly.

Stanley Feldsott is Managing Partner of Feldsott & Lee, a Law Corporation.