The last two years were not only grim, confusing, and difficult for us as a nation, but for Boards of Directors serving their Community's Association as well. When Senate Bill 323 (amending Civil Code sections 5100 et. seq.) became effective in 2020, many Community Association Boards noticed the new legal framework was fraught with ambiguities, and left them unmotivated with more questions than answers. Thankfully, the California legislature rang in this new year with much needed updates to the most confusing of those statutes. What follows are some of the more imperative changes to the law, effective January 1, 2022:
Elections by Acclamation. Civil Code section 5103 now allows candidates to be elected by acclamation if the number of qualified candidates is not more than the number of vacancies to be elected, so long as proper notices and other conditions have been met. Acclamation is permissible for Community Associations of any size, and is no longer limited to corporations of 6,000 or more members. Associations prefer Acclamation provisions in their Bylaws to dispense with the expensive and time consuming efforts that accompany secret ballot voting.
Term Limits. Term limits on Board of Director seats are back. Previously, Senate Bill 323 mandated that all candidates be allowed the opportunity to run, regardless of a candidate's previous tenure on the Board. Now, Civil Code section 5103(d)(2) permits Associations to disqualify a candidate if the person has served the maximum number of terms or sequential terms allowed under the Association's governing documents.
Protecting Members' Personal Information. Civil Code section 5230(c) prohibits an Association or its manager/management company from selling or transmitting a member's personal information (e.g. name, address, email address) to third parties without that member's consent, unless required to do so by law. A member is now allowed to recover costs, expenses, and attorneys fees stemming from a violation of this law. This law seeks to curb management contracts with stipulations permitting sale of a member's personal information.
Websites Now Constitute "General Delivery". Previous law restricted "General Delivery" of notices to rather archaic mediums, such as Individual Delivery (Civil Code section 4040), newsletters, billing statements, bulletin boards, or television broadcasts. Now, Civil Code section 4045(a)(5) allows, in addition to those other mediums, Associations with Internet Websites to post notices on their website so long as the website has been designated as a location for posting general notices in their Annual Policy Statement.
Financial Transfer Thresholds. Previously, transfers of the lesser of 5% of the Association's total combined reserve and operating account deposits or $10,000 regardless of the Association's size required prior board approval. Effective January 1, 2022, Civil Code section 5502(a):
- For Associations of 50 members or less - Board approval is not required if the amount of the transfer is less than the lesser of $5,000 or 5% of the estimated income of the annual operating budget;
- For Associations of 51 members or more - Board approval is not required if the amount of the transfer is less than the lesser of $10,000 or 5% of the estimated income of the annual operating budget.
Rental Restrictions. Associations must take efforts to revise their governing documents to remove illegal restrictions on rentals or leases of separate interests within their community. Civil Code section 4741(f) extends the deadline for Associations to take corrective action to July 1, 2022. Additionally, the Board of Directors may do so without membership approval, provided the Board adheres to the membership notice requirements of Civil Code section 4360 (i.e. 28 day General Notice).
Out With the Old, In With the New - Virtual Meetings. Although in-person Board and Member meetings remain, the California Legislature recognized prior law did not effectively provide Community Association Boards with a safe way to conduct business during a disaster or emergency (e.g. the Covid-19 Pandemic). Civil Code section 5450 was changed to allow meetings to be conducted entirely on virtual platforms, such as Zoom or Teams, so long as the meeting was properly announced with statutorily required contents. Any vote of the directors in this format is done by "roll call". Any secret ballot vote of the members requires the camera be positioned upon the Inspector(s) of Election who are counting and tabulating the ballots.
Extension of Deadline for Petitioned Membership Meetings. Where a special meeting of the members for any lawful purpose is successfully petitioned by at least 5% of the members within the community, the date of the meeting is to be set by the Board and may not be less than 35 nor more than 150 days from receipt of request pursuant to California Corporations Code section 7511(c). Previously, the outside deadline was 90 days.
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 Election 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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