The decision to record a Notice of Delinquent Assessment (an “assessment lien”) against a member’s property for delinquent assessments must be made by the board of directors and may not be delegated to an agent of the association. (Civ. Code § 5673.)
Decision Made at Open Meeting & Recorded in Minutes
The decision must be made by at least a majority vote of the directors in an open board meeting, and the vote must be recorded in the minutes of that meeting. (Civ. Code § 5673.)
Provisions of an association’s bylaws may contain provisions that purport to allow an association’s board of directors to suspend a member’s voting rights as a form of discipline (e.g., in response to the member’s assessment delinquency or violation of the governing documents). However, due to the language of Civil Code Section 5105 (regarding the election rules that an association is legally required to adopt), associations are not able to deny a ballot to a member “for any reason other than not being a member at the time when ballots are distributed.” (Civ. Code § 5105(g)(1).)
Record Date
The term “record date” refers to the date established in the provisions of an association’s bylaws or, in the absence of such a provision, by the association’s board of directors for the purpose of determining which members are entitled to vote at a member meeting/election (e.g., to develop the “Voter List”.) Notwithstanding any other law, an HOA’s election rules must prohibit the denial of a ballot to an owner for any reason other than not being an owner at the time when ballots are distributed. (Civ. Code § 5105(g)(1).) The time when ballots are distributed therefore serves as the record date regardless of any contrary provisions in the association’s governing documents.
Contents of Voter List
The voter list must include the name, voting power, and either the physical address of the voter’s separate interest, the parcel number, or both. The mailing address for the ballot must be listed on the voter list if it differs from the voter’s physical address or if only the voter’s parcel number is used. (Civ. Code § 5105(a)(7).)
Verification of Individual Information on Voter List
The association must permit members to verify the accuracy of their individual information on the voter list at least thirty (30) days before ballots are distributed. (Civ. Code § 5105(a)(7).)
Adjourned Meetings
The record date also applies in the case of an adjourned meeting (i.e., if the association failed to achieve quorum at the initial meeting), unless the board fixes a new record date for the adjourned meeting. (Corp. Code § 7611(b).)
Cumulative voting pertains to director elections. It provides every member with a number of votes equal to the director seats which are up for election, and further allows each member to distribute those votes amongst the candidates as they so choose provided that the total number of votes cast by the member does not exceed the number of seats up for election. For example, if there are five (5) seats up for election, every member is given five (5) votes. A member may cast all five (5) of his/her votes for a particular candidate, or three (3) votes for one candidate and two (2) votes for another, or one (1) vote for each of the five candidates, etc. so long as the total number of votes cast by the member does not exceed the number of seats up for election.
If an association’s governing documents provide for cumulative voting, the association is required to allow cumulative voting utilizing the required secret balloting procedures. (Civ. Code § 5115(e).)
Director Recalls
Cumulative voting has significant implications on the number of votes required to remove (recall) directors from the board. (See “Removal & Recall of Directors.”)
Developer Control
Provisions that allow for cumulative voting are automatically included in the bylaws of newly built associations in order to bolster the strength of the new homebuyers while the association is under developer control. Those provisions are included to satisfy the requirements imposed upon developers under 10 CCR § 2792.19 which mandate the use of cumulative voting for all director elections in which more than two (2) director positions are open for election by the association’s membership. (10 CCR § 2792.19(b)(1).) For master planned communities, developers may use a certain “class” of voting membership that grants the developer the right to elect a majority of the directors for an extended period of time. (10 CCR § 2792.32(f); See also “Developer Voting Rights & Classes of Membership.”)
Once the developer is no longer involved in the association, the association’s membership may vote to amend the bylaws in order to remove provisions that call for cumulative voting. The authority to do so is explicitly provided for under Corporations Code Section 7615(a).
(a) The first election of a governing body for the Association shall be conducted at the first meeting of the Association. All positions on the governing body shall be filled at that election.
(b)
(1) Voting for the governing body shall be by secret written ballot. Cumulative voting in the election of governing body members shall be prescribed for all elections in which more than two positions on the governing body are to be filled subject only to the procedural prerequisites to cumulative voting prescribed in Section 7615(b) of the Corporations Code.
(2) Unless the entire governing body is removed from office by the vote of members of the Association, no individual governing body members shall be removed prior to the expiration of his term of office if the votes cast against removal would be sufficient to elect the governing body member if voted cumulatively at an election at which the same total number of votes were cast and the entire number of governing body members authorized at the time of the most recent election of the governing body member were then being elected.
(c)
(1) A special procedure shall be established by the governing instruments to assure that from the first election of the governing body and thereafter for so long as a majority of the voting power of the Association resides in the subdivider, or so long as there are two outstanding classes of membership in the Association, not less than 20% of the incumbents on the governing body shall have been elected solely by the votes of owners other than the subdivider.
(2) A governing body member who has been elected to office solely by the votes of members of the Association other than the subdivider may be removed from office prior to the expiration of his term of office only by the vote of at least a simple majority of the voting power residing in members other than the subdivider.
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A member of an association is generally entitled to cast one (1) vote for each unit the member owns within the association. (See “One Vote Per Unit.”) However, the developer of the association (the builder of the common interest development (“CID”)) is permitted to establish different classes of voting memberships in the association’s governing documents. (10 CCR § 2792.18.) Developers do so in order to maintain control of the CID for as long as possible as units are sold to individual homebuyers while the CID is being built-out.
Class A Membership
Class A members are designated as owners of units and have one (1) vote for each unit/lot owned. (10 CCR § 2792.18(b)(1).)
Class B Membership
Class B membership is reserved to the developer, who is given up to three (3) votes for each unit/lot held by the developer. (10 CCR § 2792.18(b)(2).) Class B membership is tied to the developer’s ownership of separate interests (units) that are subject to assessments. (10 CCR § 2792.16(f)(2).) Pursuant to 10 CCR § 2792.32(c), Class B membership automatically converts to Class A membership when any of the following occur:
Class C Membership
Class C membership may only be used in master planned communities and extends only to votes for electing directors to the board. It allows the developer to preserve control of the board by giving the developer the right to elect a majority of the directors for an extended period of time. (10 CCR §2792.32(f).) Pursuant to 10 CCR § 2792.32(f)(1), these rights automatically terminate when any of the following occur:
(a) Regular assessments to defray expenses attributable to the ownership, operation and furnishing of common interests by the Association shall ordinarily be levied against each owner according to the ratio of the number of subdivision interests owned by the owner assessed to the total number of interests subject to assessments.
(b) In the case of a subdivision offering in which it is reasonable to anticipate that any owner will derive as much as 10% more than any other owner in the value of common services supplied by the Association, the assessment against each owner may be determined according to a formula or schedule under which the assessments against the various subdivision interests bear a relationship which is equitably proportionate to the value of the common services furnished to the respective interests.
(c) The subdivider -and his successor in interest, if any -is an owner subject to the payment of regular and special assessments against subdivision interests which he owns provided, however, that the subdivider and any other owner of a subdivision interest which does not include a structural improvement for human occupancy may be exempted by the governing instruments from the payment of that portion of any assessment which is for the purpose of defraying expenses and reserves directly attributable to the existence and the use of the structural improvement. The exemption may include, but shall not necessarily be limited to:
Roof replacement;
Exterior maintenance;
Walkway and carport lighting;
Refuse disposal;
Cable television; and
Domestic water supplied to living units.
(1) Any exemption from the payment of assessments attributed to dwelling units shall be in effect only until the earliest of the following events.
(A) A notice of completion of the structural improvements has been recorded.
(B) Occupation or use of the dwelling unit.
(C) Completion of all elements of the residential structures which the Association is obliged to maintain.
(2) The subdivider and any other owner of a subdivision interest may be exempted by the governing instruments from the payment of that portion of any assessment which is for the purpose of defraying expenses and reserves directly attributable to the existence and use of a common facility that is not complete at the time assessments commence. Any exemption from the payment of assessments attributed to common facilities shall be in effect only until the earliest of the following events.
(A) A notice of completion of the common facility has been recorded.
(B) The common facility has been placed into use.
(d) The governing body of the Association must comply with the provisions of Section 1366 of the Civil Code prior to any increase in assessments.
(e) (T)he governing body of the Association may not levy special assessments without complying with the provisions of Section 1366 of the Civil Code.
(f)
(1) Regular assessments against the subdivision interests in a phase of a multi-phase subdivision or against all subdivision interests in a single-phase subdivision shall commence on the date of the first conveyance of a subdivision interest in that phase under authority of a public report or on the first day of the month following the first conveyance of a subdivision interest in the phase.
(2) Except in those subdivision offerings where there is an approved subsidization plan which otherwise provides, voting rights attributable to subdivision interests shall not vest until assessments against those interests have been levied by the Association.
(g)
(1) A lien for regular or special assessments against an owner may be made subordinate by the CC&R’s to the lien of any first mortgage or first deed of trust (hereafter collectively first encumbrance) against subdivision interests of the owner.
(2) In the case of a subordination of a lien for assessments to a first encumbrance, the transfer of a subdivision interest as the result of the exercise of a power of sale or a judicial foreclosure involving a default under the first encumbrance shall extinguish the lien of assessments which were due and payable prior to the transfer of the subdivision interest.
(3) No transfer of the subdivision interest as the result of a foreclosure or exercise of a power of sale shall relieve the new owner, whether it be the former beneficiary of the first encumbrance or another person, from liability for any assessments thereafter becoming due or from the lien thereof.
(h)
(1) For the purpose of subdivision (d) and subdivision (e), a quorum means more than 50% of the members of the Association.
(2) Any meeting or election of the Association for purposes of complying with subdivision (d) and subdivision (e) shall be conducted in accordance with Chapter 5 (commencing with Section 7510) of Part 3, Division 2 of Title 1 of the Corporations Code and Section 7613 of the Corporations Code.
(i) Notwithstanding any other provision contained in this section, the governing body may increase assessments necessary for emergency situations pursuant to Section 1366 of the Civil Code.
(j) The governing body shall not expend funds designated as reserve funds for any purpose other than those purposes set forth in Section 1365.5 of the Civil Code.
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Virtually every set of association governing documents allow for only one (1) vote to be cast per “separate interest” (per unit) within the association, regardless of the number of persons on title to the unit. This is in accordance with the requirements contained within Title 10, Section 2792.18(a) of the California Code of Regulations.
Where ownership of a unit is vested in a number of persons (i.e., joint tenants, members of a partnership, etc.), whoever casts the secret ballot on behalf of that unit is presumed to be voting for all of his/her co-owners. (Corp. Code § 7612.) Once the secret ballot is received by the association’s inspector of elections, that ballot is irrevocable regardless if one of the co-owners desires for the ballot to be withdrawn or otherwise objects to the way in which the co-owner voted. (Civ. Code § 5120(a).)
Developer Voting Rights
The developer of the association (the builder of the common interest development) often establishes different classes of voting memberships in the association’s governing documents. Those classes allow for the developer to have up to three (3) votes per unit owned by the developer, subject to certain limitations. (10 CCR §§ 2792.18, 2792.32; See also “Developer Voting Rights & Classes of Membership.”)
(a) With the exception of those Associations which have two classes of voting membership, a member of an Association, including an Association which provides for unequal assessments against the subdivision interests, shall be entitled to one vote for each subdivision interest owned. If a subdivision interest is owned by more than one person, each such person shall be a member of the Association, but there shall be no more than one vote for each subdivision interest.
(b) An Association may have two classes of voting membership according to the following provisions:
(1) Each owner of a subdivision interest other than a subdivider is a Class A member. Class A membership entitles the holder to one vote for each subdivision interest owned.
(2) The subdivider is a Class B member. Class B membership entitles the holder to not more than three votes for each subdivision interest owned.
(3) In a single-phase subdivision development, Class B membership shall be irreversibly converted to Class A membership on the first to occur of the following:
(A) The total outstanding votes held by Class A members equal the total outstanding votes held by the Class B member.
(B) A prescribed date which is not later than the second anniversary of the first conveyance of a subdivision interest in the development.
(4) In a multi-phase development for which the subdivider has submitted a plan for phased development through annexation which satisfies the requirements of Section 2792.27, the Class B membership shall be irreversibly converted to Class A membership on the first to occur of the following:
(A) A prescribed date certain which is not later than the second anniversary of the first conveyance of a subdivision interest in the most recent phase of the development.
(B) A prescribed date certain which is not later than the fourth anniversary of the first conveyance of a subdivision interest in the first phase of the development.
(c) With the exception of Section 2792.4, no regulation which requires the approval of a prescribed majority of the voting power of members of the Association other than the subdivider for action to be taken by the Association is intended to preclude the subdivider from casting votes attributable to subdivision interest which he or she owns. Governing instruments may specify either or both of the following for approval of action for which a regulation of the Bureau – -other than Section 2792.4 – – -requires the approval of a prescribed majority of the voting power of members of the Association other than the subdivider:
(1) In those Associations in which Class A and Class B voting memberships have been prescribed in accordance with this regulation, the vote or written assent of a bare majority of the Class B voting power as well as the vote or written assent of a prescribed majority of the Class A voting power.
(2) In those Associations in which a single class of voting membership exists, either as originally established or after the conversion of Class B to Class A shares, the vote or written assent of a bare majority of the total voting power of the Association as well as the vote or written assent of a prescribed majority of the total voting power of members other than the subdivider.
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(a) A “Master Planned Development” is a development which ordinarily satisfies all of the following criteria:
(1) The development is or will be a planned development subdivision within the meaning of subdivision (k) of Section 1351 of the Civil Code.
(2) The development consists of, will generally consist of, or is proposed to consist of both (a) approximately five hundred (500) or more separate residential interests, and (b) one or more subdivisions, including planned developments, community apartment projects, condominium projects, stock cooperatives, time-share projects, or other residential, recreational, commercial, or mixed residential/non-residential projects.
(3) The Master Planned Development shall be managed by a community association ( “Master Association”) that is responsible for the maintenance and operation of areas and/or facilities affecting the Master Planned Development and enforcement of use restrictions pertaining to the Master Planned Development.
(4) The Master Planned Development is or will be developed in two or more phases.
Provided, however, the subdivider may demonstrate from specific facts and circumstances that a development that does not satisfy the criteria set forth in this subsection (a) should nonetheless be treated as a Master Planned Development.
(b) Recognizing that control by the subdivider over the governing body serving a residential common interest development and over the architectural control committee serving the development is ordinarily necessary until a reasonable portion of the project has been completed, in order to fulfill the expectations of the subdivider and the purchasers, the governing instruments for a Master Association shall substantially conform to the applicable standards prescribed in subsections (c) through (g), inclusive, below.
(c) SUBDIVIDER’S MEMBERSHIP VOTING RIGHTS: The governing instruments for a Master Association may include provisions for two classes of membership as defined in Section 2792.18(b). For such a Master Association, Class B membership shall be automatically converted to Class A membership and Class B membership shall thereafter cease to exist on the first to occur of the following:
(1) When seventy-five percent of the separate residential interests proposed for the overall Master Planned Development have been conveyed to Class A members;
(2) On the fifth anniversary following the most recent conveyance to a Class A member of the first separate residential interest in any phase of the overall Master Planned Development under the authority of a public report; or
(3) On the twenty-fifth anniversary of the first conveyance of a separate residential interest to a Class A member in the overall Master Planned Development under the authority of a public report.
(d) DELEGATE VOTING: The governing instruments for a Master Association may include provisions for establishing a geographical area in the Master Planned Development for one or more delegates to represent the collective voting power of the members residing in such residential or mixed residential/non-residential projects within the Master Planned Development. Arrangements in the governing instruments for the exercise of the voting power of the Master Association by delegates selected by each delegate district shall conform to the following criteria:
(1) The governing instruments must establish a procedure for the selection of delegates, for defining delegate districts, and for determining the number of votes that may be cast by a delegate.
(2) There shall be at least one delegate and one alternate for each delegate district.
(3) In any meeting of the members of the Master Association, the votes of members residing in a delegate district shall be cast by delegates selected to represent that delegate district.
(4) The duties of the delegates shall be prescribed in the governing instruments.
(e) QUORUM FOR MEMBERSHIP MEETINGS: The quorum for an adjourned meeting of the members of the Master Association, as described in Section 2792.17(e)(2) of these Regulations, may be set by the governing instruments at a percentage less than that prescribed for the regular meeting, but it shall not be less than 15 percent of the total voting power of the Master Association.
(f) GOVERNING BODY MEMBERSHIP:
(1) The governing instruments may include provision for the election of a majority of the governing body of the Master Association by the subdivider under a Class C vote or similar device. For such a Master Association, this arrangement shall irreversibly terminate on the first to occur of the following:
(A) When seventy-five percent of the separate residential interest proposed for the overall Master Planned Development have been conveyed to Class A members;
(B) On the fifth anniversary following the most recent conveyance to a Class A member of the first separate residential interest in any phase of the overall Master Planned Development under the authority of a public report; or
(C) On the twenty-fifth anniversary of the first conveyance of a separate residential interest to a Class A member in the overall Master Planned Development under the authority of a public report.
(2) The governing instruments may include provision for the election of twenty percent of the members of the board of directors of the Master Association by the subdivider until the first to occur of the following:
(A) When ninety percent of the subdivision interests in the overall development have been conveyed to Class A members;
(B) On the fifth anniversary following the most recent conveyance to a Class A member of the first separate residential interest in any phase of the overall Master Planned Development under the authority of a public report.
(C) On the twenty-fifth anniversary of the first conveyance of a separate residential interest to a Class A member in the overall Master Planned Development under the authority of a public report.
(g) ARCHITECTURAL CONTROL: Members appointed to the Architectural Control Committee by the governing body or by the subdivider need not be members of the Master Association. The governing instruments may include provision for the election of a majority of the Architectural Control Committee of the Master Association by the subdivider. This arrangement shall irreversibly terminate on the first to occur of the following:
(1) When ninety percent of the subdivision interests proposed for the overall Master Planned Development have been conveyed to Class A members; or
(2) On the fifth anniversary following the most recent conveyance to a Class A member of the first separate residential interest in any phase of the overall Master Planned Development under the authority of a public report.
(h) ADDITIONAL ASSOCIATIONS: If any residential structure or other major special benefit facility or amenity will be constructed or provided within the Master Planned Development and commonly maintained or operated for the use or benefit of some but not all of the homeowners within the Master Planned Development, ordinarily one or more separate homeowners associations shall be established under arrangements substantially satisfying the requirements of Sections 2792.4, 2792.8(a), and 2792.15 to 2792.26, inclusive, of these Regulations to maintain the residential structure or to maintain and operate the major special benefit facility or amenity and to enforce any obligation or commitment, and any bond or other arrangement securing such obligation or commitment, relating to the residential structure or major special benefit facility or amenity.
(i) Notwithstanding the foregoing, the subdivider may present to the Commissioner specific facts an circumstances relating to a Master Planned Development that demonstrate the need for alternative arrangements, satisfactory to the Commissioner, from those provisions set forth in subsections (c) through (h) above.
(j) The subdivider of a Master Planned Development may enter into an arrangement with the Master Association to sell or to convey under a lease purchase arrangement common area amenities to the Master Association. The provisions of this subsection are not available to anyone other than the subdivider of a Master Planned Development. The sale or lease purchase arrangement shall include:
(1) All common area amenities subject to this arrangement shall be specifically identified and defined as “common area” or “future common areas” in the CC&Rs. The common area amenity must be a part of the proposed Master Planned Development, accessible to all homeowners who will be charged an assessment to pay for the amenity and must be located on a separate lot or parcel. The term common area shall not include any element or amenity within a separate interest or unit.
(2) All common area amenities subject to this arrangement that have not been completed shall be covered by a bond or other arrangement to secure completion of the amenities.
(3) The Master Association shall not be obligated to make any payments nor shall any homeowner be required to pay any assessment for common area amenities subject to this arrangement until those amenities have been completed and a Notice of Completion as defined in Civil Code Section 3093 has been recorded.
(4) The CC&Rs must obligate the Master Association to maintain and control the common area amenities subject to this arrangement after the sale or lease purchase and to act on those amenities, as appropriate, during the term of the sale or lease purchase.
(5) Title to the common area amenities shall be delivered free and clear of any liens or blanket encumbrances to the Master Association upon completion of the sale or lease purchase. All encumbrances affecting the common area amenities shall include assurances that the ownership or use by the Master Association shall not be adversely affected.
(6) The purchase price of the common area amenities shall not exceed the cost of construction of those amenities. The master subdivider shall provide a bond to secure completion of construction. The Bureau may, in its discretion, determine whether the purchase price of the common area amenities exceeds the cost of construction of those amenities. In order to make that determination, the Bureau may review construction bids, records or analyses submitted by the subdivider and, if deemed necessary, may request an independent third party evaluation. The costs of any independent third party evaluation shall be paid by the subdivider.
(7) The term of the sale or lease purchase arrangement shall not exceed ten (10) years and shall provide for substantially equal monthly payments by the Master Association sufficient to fully amortize the sale or lease purchase. The terms of the sale or lease purchase agreement shall be fair, just and equitable and may not provide for a prepayment penalty, negative amortization or balloon payments. Payments on the sale or lease purchase arrangement shall begin not later than three years from the date a Notice of Completion as defined in Civil Code Section 3093 has been recorded unless the Bureau has approved a longer time period.
(8) The master subdivider shall submit to the Bureau, prior to use or execution all sale or lease purchase agreements, covenants and documents relating to the sale or lease purchase agreement.
(9) The sale or lease purchase arrangement shall specify who is responsible for maintenance, insurance, reserves and operation of the common area amenities. In a lease purchase arrangement, the subdivider shall pay the property taxes attributable to the common area amenities. The subdivider shall post a bond or other form of acceptable security to insure performance if the master subdivider is responsible for any task requiring such security.
(10) The sale or lease purchase arrangement shall provide for the distribution of proceeds and the action to be taken in the event of condemnation or destruction.
(11) The Master Association CC&Rs and budget shall provide for: specific language binding the Association to fund the common area amenities prior to, during and after acquisition of the amenities; the ability of the Association to address issues related to the operation of the common area amenities while they are subject to a sale or lease purchase arrangement; sufficient funds to meet the monthly obligations of the sale or lease purchase arrangement, including a minimum 5% sinking fund to cover defaulting individual homeowner payments until such time as the sinking fund equals the outstanding balance; reserve payments for the common area amenities commencing upon recordation of a notice of completion; and, the right of the Master Association to file liens against the interests of homeowners who have failed to pay their respective portion of the sale or lease purchase costs. Individual homeowner assessments to create the sinking fund shall begin upon the commencement of payments by the Master Association under the sale or lease purchase arrangement. The sinking fund may only be used to cover defaulting individual homeowner payments on the common area amenities covered by the sale or lease purchase arrangement.
(12) The sale or lease purchase arrangement and agreements shall not be modified without the assent of a simple majority of the owners other than a subdivider.
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