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SB-1128 Common interest developments: governance.(2017-2018)

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Date Published: 09/06/2018 09:00 PM
SB1128:v92#DOCUMENT

Enrolled  September 06, 2018
Passed  IN  Senate  August 31, 2018
Passed  IN  Assembly  August 30, 2018
Amended  IN  Assembly  August 24, 2018
Amended  IN  Assembly  August 07, 2018
Amended  IN  Assembly  June 20, 2018
Amended  IN  Senate  May 15, 2018
Amended  IN  Senate  April 05, 2018
Amended  IN  Senate  March 22, 2018

CALIFORNIA LEGISLATURE— 2017–2018 REGULAR SESSION

Senate Bill No. 1128


Introduced by Senator Roth

February 13, 2018


An act to amend Sections 4040, 4360, and 5105 of, and to add Section 5106 to, the Civil Code, and to amend Section 7522 of the Corporations Code, relating to common interest developments.


LEGISLATIVE COUNSEL'S DIGEST


SB 1128, Roth. Common interest developments: governance.
Existing law, the Davis-Stirling Common Interest Development Act, governs the management and operation of common interest developments by an association. Under existing law, an association that is required to deliver a document by “individual delivery” or “individual notice” is authorized to deliver the document by email facsimile, or other electronic means, if the recipient has consented in writing, unless the consent is revoked in writing.
This bill would authorize the recipient to consent to that delivery and revoke that consent by email.
Existing law requires the board of an association to provide general notice of a proposed rule change at least 30 days before making the rule change.
This bill would instead require general notice of at least 28 days before making the rule change.
Existing law requires the election of directors who serve on the association board, except if the governing documents provide that one member from each separate interest is a director. Existing law requires the association to adopt rules regarding qualifications for candidates for the board and any other elected position, and procedures for the nomination of candidates, consistent with the governing documents. Existing law requires these rules to specify a method for selecting independent 3rd parties as inspectors of elections and authorizes the rules to provide for the nomination of candidates from the floor of membership meetings or nomination by any other manner.
This bill would specify the grounds for both authorizing and requiring disqualification of a nominee for election to the association board, and would delete a provision that specifies a nomination or election procedure shall not be deemed reasonable if it disallows a member from nominating himself or herself for election to the board. The bill would require, when the number of director nominees at the close of the nomination period is not more than the number of vacant director positions on the board, as determined by an inspector or inspectors of elections, the director nominees to be considered elected by acclamation if specified requirements are met, including a requirement that the association provide individual notice of the election and the procedure for nominating candidates and the board adopts a resolution, as specified.
This bill would incorporate additional changes to Section 5105 of the Civil Code proposed by SB 1265 to be operative only if this bill and SB 1265 are enacted and this bill is enacted last.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 4040 of the Civil Code is amended to read:

4040.
 (a) If a provision of this act requires that an association deliver a document by “individual delivery” or “individual notice,” the document shall be delivered by one of the following methods:
(1) First-class mail, postage prepaid, registered or certified mail, express mail, or overnight delivery by an express service carrier. The document shall be addressed to the recipient at the address last shown on the books of the association.
(2) Email, facsimile, or other electronic means, if the recipient has consented, in writing or by email, to that method of delivery. The consent may be revoked, in writing or by email, by the recipient.
(b) Upon receipt of a request by a member, pursuant to Section 5260, identifying a secondary address for delivery of notices of the following types, the association shall deliver an additional copy of those notices to the secondary address identified in the request:
(1) The documents to be delivered to the member pursuant to Article 7 (commencing with Section 5300) of Chapter 6.
(2) The documents to be delivered to the member pursuant to Article 2 (commencing with Section 5650) of Chapter 8, and Section 5710.
(c) For the purposes of this section, an unrecorded provision of the governing documents providing for a particular method of delivery does not constitute agreement by a member to that method of delivery.

SEC. 2.

 Section 4360 of the Civil Code is amended to read:

4360.
 (a) The board shall provide general notice pursuant to Section 4045 of a proposed rule change at least 28 days before making the rule change. The notice shall include the text of the proposed rule change and a description of the purpose and effect of the proposed rule change. Notice is not required under this subdivision if the board determines that an immediate rule change is necessary to address an imminent threat to public health or safety or imminent risk of substantial economic loss to the association.
(b) A decision on a proposed rule change shall be made at a board meeting, after consideration of any comments made by association members.
(c) As soon as possible after making a rule change, but not more than 15 days after making the rule change, the board shall deliver general notice pursuant to Section 4045 of the rule change. If the rule change was an emergency rule change made under subdivision (d), the notice shall include the text of the rule change, a description of the purpose and effect of the rule change, and the date that the rule change expires.
(d) If the board determines that an immediate rule change is required to address an imminent threat to public health or safety, or an imminent risk of substantial economic loss to the association, it may make an emergency rule change, and no notice is required, as specified in subdivision (a). An emergency rule change is effective for 120 days, unless the rule change provides for a shorter effective period. A rule change made under this subdivision may not be readopted under this subdivision.

SEC. 3.

 Section 5105 of the Civil Code is amended to read:

5105.
 (a) An association shall adopt rules, at least 90 days before any election, in accordance with the procedures prescribed by Article 5 (commencing with Section 4340) of Chapter 3, that do all of the following:
(1) Ensure that if any candidate or member advocating a point of view is provided access to association media, newsletters, or Internet Web sites during a campaign, for purposes that are reasonably related to that election, equal access shall be provided to all candidates and members advocating a point of view, including those not endorsed by the board, for purposes that are reasonably related to the election. The association shall not edit or redact any content from these communications, but may include a statement specifying that the candidate or member, and not the association, is responsible for that content.
(2) Ensure access to the common area meeting space, if any exists, during a campaign, at no cost, to all candidates, including those who are not incumbents, and to all members advocating a point of view, including those not endorsed by the board, for purposes reasonably related to the election.
(3) Specify the qualifications for candidates for the board and any other elected position, subject to subdivision (b), and procedures for the nomination of candidates, consistent with the governing documents.
(4) Specify the qualifications for voting, the voting power of each membership, the authenticity, validity, and effect of proxies, and the voting period for elections, including the times at which polls will open and close, consistent with the governing documents.
(5) Specify a method of selecting one or three independent third parties as inspector or inspectors of elections utilizing one of the following methods:
(A) Appointment of the inspector or inspectors by the board.
(B) Election of the inspector or inspectors by the members of the association.
(C) Any other method for selecting the inspector or inspectors.
(6) Allow the inspector or inspectors to appoint and oversee additional persons to verify signatures and to count and tabulate votes as the inspector or inspectors deem appropriate, provided that the persons are independent third parties.
(b) An association shall disqualify a person from nomination as a candidate pursuant to either of the following:
(1) An association shall disqualify a nominee for not being a member of the association at the time of the nomination.
(2) An association shall disqualify a nominee if, within the past 20 years, the person has been convicted of a felony involving accepting, giving, or offering to give, a bribe, the embezzlement of money, the extortion or theft of money, perjury, or conspiracy to commit any of those crimes. For purposes of this paragraph, “conviction of a felony” includes a conviction of a felony in this state and a conviction under the laws of any other state, the United States, or any foreign government or country of a crime that, if committed in this state, would be a felony, and for which the person has not received a pardon from a person or entity authorized to grant the pardon.
(c) An association may disqualify a person from nomination as a candidate pursuant to any of the following:
(1) Through its bylaws only, and subject to paragraph (2) of subdivision (d), an association may require a nominee for a board seat, and an incumbent board director during his or her board tenure, to be current in the payment of regular assessments, which are consumer debts subject to validation. If an association requires a nominee to be current in the payment of regular assessments, it shall also require an incumbent board director to be current in the payment of regular assessments.
(2) Through its bylaws only, an association may prohibit more than one person with joint ownership interests in the same separate interest parcel from serving as board directors at the same time, subject to the following:
(A) The board may disqualify a person from nomination as a candidate pursuant to this paragraph only in cases where that person, if elected, could not serve on the board without violating the above prohibition.
(B) Notwithstanding subparagraph (A), the board may disqualify from nomination as a candidate a person who is a joint owner of a parcel if one of the other joint owners is already properly nominated for the current election, and none of the joint owners is an incumbent board director.
(3) Through its bylaws only, an association may disqualify a nominee if that person has been a member of the association for less than one year.
(d) Before disqualifying a nominee for alleged nonpayment of regular assessments, the association shall provide the nominee the opportunity to engage in the internal dispute resolution process set forth in Article 2 (commencing with Section 5900) of Chapter 10.
(1) A disqualifying debt includes regular assessments and interest owed the association. Fines, fines renamed as assessments, collection charges, late charges, or other costs levied by a third party are not disqualifying debts.
(2) The nominee shall not be disqualified for failure to be current in payment of regular assessments if any of the following circumstances are true:
(A) The nominee has paid the regular assessment under protest pursuant to Section 5658.
(B) The nominee has entered into a payment plan pursuant to Section 5665.
(C) Upon request by the nominee to engage in the internal dispute resolution process, the association fails to convene a timely session of the process, or the nominee and the association are engaged in the process at the time of the deadline for nominations.
(D) It is determined, at the conclusion of the internal dispute resolution process, that the nominee does not owe a disqualifying debt.
(e) Notwithstanding any other law, the rules adopted pursuant to this section may provide for the nomination of candidates from the floor of membership meetings or nomination by any other manner. Those rules may permit write-in candidates for ballots.

SEC. 3.5.

 Section 5105 of the Civil Code is amended to read:

5105.
 (a) An association shall adopt rules, at least 90 days before an election, in accordance with the procedures prescribed by Article 5 (commencing with Section 4340) of Chapter 3, that do all of the following:
(1) Ensure that if any candidate or member advocating a point of view is provided access to association media, newsletters, or Internet Web sites during a campaign, for purposes that are reasonably related to that election, equal access shall be provided to all candidates and members advocating a point of view, including those not endorsed by the board, for purposes that are reasonably related to the election. The association shall not edit or redact any content from these communications, but may include a statement specifying that the candidate or member, and not the association, is responsible for that content.
(2) Ensure access to the common area meeting space, if any exists, during a campaign, at no cost, to all candidates, including those who are not incumbents, and to all members advocating a point of view, including those not endorsed by the board, for purposes reasonably related to the election.
(3) Specify the qualifications for candidates for the board and any other elected position, subject to subdivision (b), and procedures for the nomination of candidates, consistent with the governing documents
(4) Specify the voting power of each membership, the authenticity, validity, and effect of proxies, and the voting period for elections, including the times at which polls will open and close, consistent with the governing documents.
(5) Specify a method of selecting one or three independent third parties as inspector or inspectors of elections utilizing one of the following methods:
(A) Appointment of the inspector or inspectors by the board.
(B) Election of the inspector or inspectors by the members of the association.
(C) Any other method for selecting the inspector or inspectors.
(6) Allow the inspector or inspectors to appoint and oversee additional persons to verify signatures and to count and tabulate votes as the inspector or inspectors deem appropriate, provided that the persons are independent third parties.
(7) Ensure that the meeting at which the ballots are counted meets both of the following criteria:
(A) The meeting is accessible to all members and their representatives who want to witness the tabulation.
(B) The meeting is held at a common area meeting space of association property, or if no common area meeting space exists, at a location within a reasonable distance from the property.
(8) Unless individual notice has been requested pursuant to Section 4040, require general notice to be provided of all of the following:
(A) The date and time by which, and the physical address where, ballots are to be returned by mail or handed to the inspector or inspectors of elections, which shall be provided at least 30 days before the ballots are distributed.
(B) The date and location of the meeting at which ballots will be counted, which shall be provided at least 30 days before the ballots are distributed.
(C) The procedure and deadline for submitting a nomination, which shall be provided at least 30 days before the deadline for submitting a nomination.
(D) The list of all candidates’ names that will appear on the ballot, which shall be provided at least 30 days before the ballots are distributed.
(E) The list of all voters by name and parcel number, and voting power, which shall be provided at least 30 days before the ballots are distributed.
(9) Require any errors or omissions to the list of candidates’ names or list of voters to be immediately reported to the inspector or inspectors who will make the corrections within two business days.
(b) An association shall disqualify a person from a nomination as a candidate pursuant to either of the following:
(1) An association shall disqualify a nominee for not being a member of the association at the time of the nomination.
(2) An association shall disqualify a nominee if, within the past 20 years, the person has been convicted of a felony involving accepting, giving, or offering to give, a bribe, the embezzlement of money, the extortion or theft of money, perjury, or conspiracy to commit any of those crimes. For purposes of this paragraph, “conviction of a felony” includes a conviction of a felony in this state and a conviction under the laws of any other state, the United States, or any foreign government or country of a crime that, if committed in this state, would be a felony, and for which the person has not received a pardon from a person or entity authorized to grant the pardon.
(c) An association may disqualify a person from nomination as a candidate pursuant to any of the following:
(1) Through its bylaws only, and subject to paragraph (2) of subdivision (d), an association may require a nominee for a board seat, and an incumbent board director during his or her board tenure, to be current in the payment of regular assessments, which are consumer debts subject to validation. If an association requires a nominee to be current in the payment of regular assessments, it shall also require an incumbent board director to be current in the payment of regular assessments.
(2) Through its bylaws only, an association may prohibit more than one person with joint ownership interests in the same separate interest parcel from serving as board directors at the same time, subject to the following:
(A) The board may disqualify a person from nomination as a candidate pursuant to this paragraph only in cases where that person, if elected, could not serve on the board without violating the above prohibition.
(B) Notwithstanding subparagraph (A), the board may disqualify from nomination as a candidate a person who is a joint owner of a parcel if one of the other joint owners is already properly nominated for the current election, and none of the joint owners is an incumbent board director.
(3) Through its bylaws only, an association may disqualify a nominee if that person has been a member of the association for less than one year.
(d) Before disqualifying a nominee for alleged nonpayment of regular assessments, the association shall provide the nominee the opportunity to engage in the internal dispute resolution process set forth in Article 2 (commencing with Section 5900) of Chapter 10.
(1) A disqualifying debt includes regular assessments and interest owed the association. Fines, fines renamed as assessments, collection charges, late charges, or other costs levied by a third party are not disqualifying debts.
(2) The nominee shall not be disqualified for failure to be current in payment of regular assessments if any of the following circumstances are true:
(A) The nominee has paid the regular assessment under protest pursuant to Section 5658.
(B) The nominee has entered into a payment plan pursuant to Section 5665.
(C) Upon request by the nominee to engage in the internal dispute resolution process, the association fails to convene a timely session of the process, or the nominee and the association are engaged in the process at the time of the deadline for nominations.
(D) It is determined, at the conclusion of the internal dispute resolution process, that the nominee does not owe a disqualifying debt.
(e) Notwithstanding any other law, the rules adopted pursuant to this section may provide for the nomination of candidates from the floor of membership meetings or nomination by any other manner. Those rules may permit write-in candidates for ballots.
(f) Notwithstanding any other law, the rules adopted pursuant to this section shall do all of the following:
(1) Prohibit the denial of a ballot to a member for any reason other than not being a member at the time when ballots are distributed.
(2) Prohibit the denial of a ballot to a person with general power of attorney for a member.
(3) Require the ballot of a person with general power of attorney for a member to be counted if returned in a timely manner.
(4) Require the inspector or inspectors of elections to deliver, or cause to be delivered, at least 30 days before an election, to each member both of the following documents:
(A) The ballot or ballots.
(B) A copy of the election operating rules. Delivery of the election operating rules may be accomplished by either of the following methods:
(i) Posting the election operating rules to an Internet Web site and including the corresponding Internet Web site address on the ballot together with the phrase, in at least 12-point font: “The rules governing this election may be found here:”
(ii) Individual delivery.

SEC. 4.

 Section 5106 is added to the Civil Code, to read:

5106.
 When, as of the close of the nomination period for directors on the board, the number of director nominees is not more than the number of vacancies on the board, as determined by the inspector or inspectors of elections, the director nominees shall be considered elected by acclamation only if all of the following requirements are met:
(a) The election rules required by Section 5105 have been adopted and complied with for the election.
(b) The association provided individual notice of the election and the procedure for nominating candidates at least 30 days prior to the close of the nomination period. In addition, the notice shall state the following, in 12 point font:
“At the close of the nomination period, if the number of nominees is not more than the number of vacancies on the board, election by acclamation may occur by board resolution. If election by acclamation is proper, the board will hold two public meetings, not less than 28 days apart, where a resolution to seat the candidates by acclamation will be introduced and may subsequently be voted on. At the first board meeting and by general notice, the board will announce an additional nomination period of 21 days where any member may submit their candidacy to the inspector of elections. At the second meeting the board may vote on the resolution as introduced, vote on the resolution as amended to include additional candidates timely submitted, or announce that a contested election will occur.”
(c) At the next scheduled meeting of the board after the close of the nomination period, a resolution is introduced to fill the vacancies to be elected with the names of the persons who have been nominated as of the close of the nomination period.
(d) The resolution described in subdivision (c) is adopted by the board not less than 28 days after it is introduced.
(e) At the meeting of the board described in subdivision (c), the board provides general notice of an additional nomination period of 21 days in which any additional candidates may submit his or her name to the inspector or inspectors of elections to fill the vacancies to be elected.
(1) In the event one or more candidates are timely submitted and the additional candidate(s) result in the total number of candidates exceeding the number of directors to be elected at that election, an election shall be held pursuant to general election rules as provided in this article.
(2) If, after the 21-day period, the total number of candidates, including the number of candidates submitting his or her name pursuant to this subdivision, does not exceed the number of vacancies up for election, the association shall amend the resolution introduced pursuant to subdivision (c) to include the additional candidates.
(3) If the association has adopted bylaws pursuant to paragraph (2) of subdivision (c) of Section 5105, and the resolution introduced pursuant to subdivision (c) includes more than one candidate with joint ownership interests in the same parcel, the board shall amend the resolution to remove the candidate nominated later in time, before moving forward with the acclamation vote.
(4) If the resolution is adopted, the new board shall take office immediately following adoption of the resolution.

SEC. 5.

 Section 7522 of the Corporations Code is amended to read:

7522.
 A corporation with 5,000 or more members may provide that, in any election of a director or directors by members of the corporation except for an election authorized by Section 7152 or 7153:
(a) The corporation’s articles or bylaws shall set a date for the close of nominations for the board. The date shall not be less than 50 nor more than 120 days before the day directors are to be elected. No nominations for the board can be made after the date set for the close of nominations.
(b) If more people are nominated for the board than can be elected, the election shall take place by means of a procedure which allows all nominees a reasonable opportunity to solicit votes and all members a reasonable opportunity to choose among the nominees.
(c) A nominee shall have a reasonable opportunity to communicate to the members the nominee’s qualifications and the reasons for the nominee’s candidacy.
(d) If after the close of nominations the number of people nominated for the board is not more than the number of directors to be elected, the corporation may without further action declare that those nominated and qualified to be elected have been elected.
(e) Notwithstanding subdivision (d), if a common interest development, as defined in Section 4100 of the Civil Code, is subject to this part and, after the close of the nomination period for the directors on the board of the association of the common interest development, the number of director nominees is not more than the number of vacancies on the board, as determined by the inspector or inspectors of elections selected pursuant to Section 5110 of the Civil Code, the director nominees shall be considered elected by acclamation only if all of the following requirements are met:
(1) The election rules required by Section 5105 of the Civil Code have been adopted and complied with for the election.
(2) The association provided individual notice of the election and the procedure for nominating candidates at least 30 days prior to the close of the nomination period. This notice shall state that when the number of nominees is not more than the number of vacancies on the board as of the close of the nomination period for directors on the board, the nominees shall be deemed elected to the board after the adoption of a resolution to that effect at a regularly scheduled board meeting.
(3) At the next scheduled meeting of the board after the close of the nomination period, a resolution is introduced to fill the vacancies to be elected with the names of the persons who have been nominated as of the close of the nomination period.
(4) The resolution described in paragraph (2) is adopted by the board not less than 28 days after it is introduced.
(5) At the meeting of the board described in subdivision (c) of Section 5106 of the Civil Code, the board provides general notice of an additional nomination period of 21 days in which any additional candidates may submit his or her name to the inspector or inspectors of elections to fill the vacancies to be elected.
(A) In the event one or more candidates are timely submitted and the additional candidate(s) result in the total number of candidates exceeding the number of directors to be elected at that election, an election shall be held pursuant to general election rules as provided in Article 10 (commencing with Section 5400) of Chapter 6 of Part 5 of the Civil Code.
(B) If, after the 21-day period, the total number of candidates, including the number of candidates submitting his or her name pursuant to this subdivision, does not exceed the number of vacancies up for election, the association shall amend the resolution introduced pursuant to subdivision (c) of Section 5106 of the Civil Code, to include the additional candidates.
(C) If the association has adopted bylaws pursuant to paragraph (2) of subdivision (c) of Section 5105 of the Civil Code, and the resolution introduced pursuant to subdivision (c) of Section 5106 of the Civil Code includes more than one candidate with joint ownership interests in the same parcel, the board shall amend the resolution to remove the candidate nominated later in time, before moving forward with the acclamation vote.
(D) If the resolution is adopted, the new board shall take office immediately following adoption of the resolution.

SEC. 6.

 Section 3.5 of this bill incorporates amendments to Section 5105 of the Civil Code proposed by both this bill and Senate Bill 1265. That section of this bill shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2019, (2) each bill amends Section 5105 of the Civil Code, and (3) this bill is enacted after Senate Bill 1265, in which case Section 3 of this bill shall not become operative.