Does your common interest homeowners association ever have trouble reaching a quorum to conduct a board of directors election? Does your association struggle to timely mail out notices and ballots? Is your association fiscally crippled by the costs of printing and mailing ballots, envelopes and notices? These were just a few of the questions the California state legislature hoped to answer on September 22, 2024 when it chaptered Assembly Bill (AB) 2159.  AB 2159 amended Sections 5105, 5110, 5115, 5120, 5125, 5200, and 5260 of the Davis Stirling Act relating to the implementation of electronic secret ballot voting, and became operative January 1, 2025.

AB 2159 is not a self-implementing bill. In other words, associations cannot rely on the legislative update alone to utilize electronic secret ballot voting. Associations must amend their existing election operating rules or, if they lack election operating rules, must adopt them to utilize the bill's features. Here is a bill summary:

Electronic Voting

• Amending Civil Code §§ 5105, 5110, 5115, 5120, 5125, 5200, and 5260.

Prior to this year, Associations were required to use only a method of mailed, secret written ballot voting for conducting elections for certain assessment increases, electing directors, amendments to their governing documents, granting exclusive use common area, and votes to reverse a petitioned rule change.

Now, Associations can conduct elections using a mixture of mailed, secret written ballots and electronic ballots. Boards must decide whether their association is better suited for a system in which electronic voting is the default, and members must opt-out of electronic voting for written ballots. Or, in the alternative, whether their association is better suited for a system in which mailed, secret written balloting is the default, and members must opt-in to electronic voting. Depending upon the default system, the association must implement a mixture of mailed and electronic ballots unless their entire membership designated their preference to opt-in or opt-out.

Many of my clients ask me whether implementation is worth it. On its face, AB 2159 would seem to reduce costs and increase efficiency by shifting from outmoded paper mail to technologically prevalent online voting at the click of a button. As we dig deeper, cost reduction seems marginalized at best and efficiency is stunted. Consider the following:

• Associations must pay for a website domain if they do not already possess one;
• Associations must pay a third-party to host an electronic voting system that will (1) authenticate the member's identity; (2) authenticate the e-ballot to ensure no alterations during transit; (3) transmit a receipt from the system to each member casting an e-ballot; (4) permanently separate any authenticating or identifying information from the e-ballot (so it is impossible to connect an election ballot to a specific member); and (5) store and keep e-ballots. "E-ballot" and "Simply Voting" are two such servicers;
• Associations must still incur paper balloting and mailing costs for members that choose not to opt-in or opt-out;
• Associations must send out additional electronic voting notices and preference requests;
• Inspector(s) of elections incur more costs that are passed on to associations by tracking e-voting deadlines, notices and instructions.

Costs and efficiency aside, if your association is very large (i.e. greater than 100 members), or otherwise struggles to consistently attain a quorum to conduct elections resulting from voter apathy, then implementing electronic voting could be extremely beneficial to your association. Members are more likely to participate in the election process when their vote can be cast in less than five minutes, rather than the time-consuming efforts involved in hauling a mailed secret ballot down to the post office. Further, e-ballots nearly eliminate the advent of invalidation from technical or procedural errors in casting mailed secret ballots.

This office can prepare legally compliant election rules or amend existing election rules to implement electronic secret ballot voting for between an estimated $775 - $850, depending upon the complexity of your association's governing documents. 

Authority to Reduce Quorum Requirements in Director Elections (2025 Update)

• Amending Civil Code § 5115

In my last update I disclosed this change to the Civil Code that permitted Boards to schedule a subsequent meeting at least 20 days following the initial meeting at which the directors would be elected, to reduce quorum to 20% of the membership (voting person or proxy) at the subsequent meeting (unless a lower percentage is authorized by the governing documents) in situations where the Association received an insufficient number of ballots necessary to constitute a quorum.

This year, AB 2460 tweaked some of the amendments ambiguities. If the association's governing documents already permit a quorum of less than 20%, this special right of quorum reduction is not authorized (because without that clarification, these associations would in effect be increasing their quorums.) 

Maintenance, Repair and Replacement of Common Area Utilities

• Amending Civil Code § 4775.
• Amending Civil Code § 5550.
• Amending Civil Code § 5610.

Prior to this year, common interest associations were responsible for maintaining, repairing and replacing common area unless re-allocated under the governing documents. In doing so, they would prepare a reserve study to address future replacement of major facilities under their management and supervision. Finally emergency assessments were limited for emergency situations described under the law.

Effective this year, governing documents that fail to assign responsibility of restoring interrupted gas, heat, water or electrical services that begin in the common area will default repair and replacement duties to the association. These, of course, are not utilities maintained, repaired or replaced by public, private or other utility service providers. Associations must begin efforts to restore services within 14 days of the interruption, and the legal adjustments permit for reduced quorums and e-mail director voting to accommodate swift action. The 14-day requirement is waived in states of local or national disaster or emergency.

Reserve studies are now required to include gas, water and electrical service components provided the association is assigned repair or replacement duties.

The bases to levy an emergency assessment are not updated to encompass such utility service interruptions.

Corporate Transparency Act Reporting Requirements (2025 Update)

In last year's update, I discussed the creation of the Corporate Transparency Act, its reporting requirements, and how associations are not exempt. Associations remain non-exempt as of this posting.

As of February 18, 2025, the case of Smith, et al. v. U.S. Department of the Treasury, et al. (Case No. 6:24-cv-00336) lifted the appellate court's injunction on the reporting requirements, thereby reinstating reporting deadlines. The new BOI filing deadline is March 21, 2025. However, in FinCEN's latest update on February 27, 2025, FinCEN will not issue any fines or penalties or take any other enforcement actions against any companies based on any failure to file or update BOI reports pursuant to the Corporate Transparency Act by the current deadlines. No fines or penalties will be issued, and no enforcement actions will be taken, until a forthcoming interim final rule becomes effective and the new relevant due dates in the interim final rule have passed.

Homeowners Associations and their managers are encouraged to review FinCEN's requirements for more information.

Civil Engineers Now Authorized to Conduct Elevated Balcony Inspections.

• Amending Civil Code § 5551.

Prior to July 15, 2024, only licensed structural engineers could be retained by associations to conduct their required visual inspections of exterior elevated structures (e.g. balconies). Now, associations can retain licensed civil engineers to conduct such inspections.

Legislative Flashback: AB 1572 (2023) Requirement to Cease Irrigating Non-Functional Turf.

In this flashback series I am reminding associations of AB 1572. For background, AB 1572 was adopted in 2023 to eliminate wasteful and incompatible irrigation of nonfunctional turf with potable water. Applied to common interest communities,  AB 1572 directs common interest associations to cease irrigating nonfunctional common area turf with potable water by January 1, 2029. 

• Amending Water Code §§ 110, 10540, 10608.12, 10608.14, and 10608.22. 

The directive is not intended to be an "all or nothing" approach to common area turf. Associations should take a piece-meal approach and determine whether each piece of common area turf qualifies as 'functional' and therefore exempt, or 'nonfunctional' and therefore subject. Generally speaking, turf is functional if it is used recreationally or socially, and is nonfunctional if enclosed, in a publicly dedicated right of way, or not functional. We are willing to prepare an opinion for your association based upon its unique common area circumstances.

Closing.

In conclusion, Associations or Board members following these updates may want to consider amendments to or restatements of their community's CC&Rs, Bylaws, or Operating Rules. For more information or requests for proposal, please find us at the "Contact" tab at the top of this page or message me directly at [email protected]. All queries welcome.

Kyle C. Sproul, Esq.

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