Senate Bill 432 (“SB 432” or the “Bill”), taking effect on January 1, 2022, makes changes and provides clarification to homeowners’ associations’ election procedures and director candidate qualifications.
First and foremost, the Bill resolves deadline conflicts with regards to recall elections caused by SB 323 which took effect on January 1, 2020. Generally, recall elections are called by a petition of the members, to which Corporations Code §7511(c) requires associations to hold recall elections no later than ninety (90) days from the date of the association’s receipt of the petition.
However, with SB 323 and the amendments it brought to Civil Code §5115, the law requires: (1) associations to provide general notice of nomination procedures and deadlines at least thirty (30) days prior to the deadline for submitting a nomination; (2) associations to provide general notice of, among other things, the candidate list at least thirty (30) days prior to distribution of the ballots; and (3) associations to deliver ballots and balloting instructions at least thirty (30) days prior to the voting deadline. SB 323 established a ninety (90) day minimum timeline for associations to carry out an election, making it impossible and impractical for associations to be able to comply with both Civil Code §5115 and Corporations Code §7511.
The Bill resolves this conflict by extending the timeframe in Corporations Code §7511(c) from 90 days to 150 days, providing associations with extra time to call for nominations, announce candidates, and distribute ballots, allowing associations to comply with both the Civil Code and Corporations Code. Further, the Bill adds an additional requirement to include the names and addresses of candidates on the candidate list.
The Bill also clarifies and restricts an association’s ability to disqualify candidates strictly to the qualifications listed in Civil Code §5100, including but not limited to, a candidate that would prevent an association from obtaining “insurance coverage required by Section 5806.” The Bill amends Civil Code §5806 to expand an association’s insurance obligations to include crime insurance and employee dishonesty coverage, in addition to a fidelity bond or its equivalent.
Moreover, the Bill allows: (1) associations to establish a maximum number of terms or sequential terms in which an individual can serve as a director or officer, and accordingly, (2) can disqualify a candidate if the candidate served the maximum number of terms or sequential terms allowed by the association.
Lastly, the Bill requires “additional persons” that inspectors of elections are authorized to appoint and oversee to verify signatures and count and tabulate votes to meet the same requirements as the inspectors as an “independent third party” (e.g., a volunteer poll worker, CPA, and notary public).
If you have any questions regarding the impact of SB 432 and how it will affect your elections, feel free to contact us and speak to one of our attorneys.