Echo Legislation Tracker 2021 Legislation

The Echo Legislation Tracker: 2021 Legislation

By Mark T. Guithues, Esq.

For more information on HOA Advocacy, visit the Echo website: www.echo-ca.org/article/hoa-advocacy/

AB 502 (DAVIES) – ELECTION BY ACCLAMATION

Election by acclamation occurs when there is the same number of candidates (or fewer) than there are open seats on the board. An association can declare those candidates who ran as board members without spending money printing and sending ballot mailings, reconvening the meeting multiple times for lack of quorum, or counting ballots. Echo supported AB 502 because of the time and dollar savings to HOA communities. Under AB 502, election by acclamation can occur if an association (a) does not use delegate voting; (b) attempted to hold a regular election by sending out ballots within the past three years; (c) provided individual notice of the election and procedures for nominating candidates at least 90 days before the deadline for submitting nominations; (d) distributed a reminder notice between 7 and 30 days before the deadline for submitting candidate nominations; and (e) voted in favor of acclamation at an open meeting. Each of the above notices has specific statutory required language.

ECHO EXECUTION: The key to implementing these new acclamation requirements into an election is to send out the initial election notice about six months before the actual date (election +30 days = time to send ballots; +30 days = send intro to candidates; +30 days = original request for candidates; +60 days = new notice of election and distribution of rules). This adds up to 150 days of notice according to the new law. Add time for mailing and mail houses (and remember to arrange for the independent inspector of elections). A second reminder of the election must be sent between 7 and 30 days before the deadline for submitting nominations.

AB 611 (SILVA) – SAFE AT HOME

Existing law requires every association to create a membership list and to distribute the list under certain circumstances. Associations are also authorized to withhold or redact information from association records in specified instances, including, but not limited to, when the release of the information could reasonably compromise the privacy of an individual member of the association. Under California law, victims of domestic abuse or sexual assault and other specified persons may apply for participation in an address confidentiality program called Safe at Home. This program designates the person’s actual address as confidential. Echo supports AB 611 because it adds new Civil Code Section 5216 requiring an association, upon request of an association member who is an active participant in the Safe at Home program, to (a) use the provided Safe at Home designated substitute off-site address for all association communications to such member; and (2) not include any information that would reveal the name, community property address, or email address of the Safe at Home participant to members of the association or the public.

ECHO EXECUTION: Upon request of a member who is an active participant in the Safe at Home program, associations are required to redact the participant’s personal information from membership lists, mailboxes, bank listings, resident directories, electronic keypads, unit property numbers, and internet web portal accounts. The HOA will send all information and notices to an address designated by the Secretary of State as a substitute address.

AB 1101 (IRWIN) – FINANCIAL CONTROLS AND INSURANCE

Existing law requires managers, at the written request of the board, to deposit funds into a California bank, savings association, or credit union that is insured by the federal government (e.g., FDIC). Echo closely watched AB 1101, which expands the types of government insurance to include the National Credit Union Administration Insurance Fund (NCUAIF) or a guaranty corporation meeting specified requirements, in addition to the FDIC. Existing law requires written board approval for transfers of more than $10,000 or 5% of an association’s total deposits. AB 1101 requires written board approval for all (reserves or operating) transfers over $5,000 or 5% of the estimated income in the budget for associations of 50 separate interests or less, and the lesser of $10,000 or 5% of the estimated income in the budget for associations with 51 or more separate interests. AB 1101 prohibits, without qualification, the commingling of association funds with the funds of the managing agent (usually the management company) or with other funds. Current law requires fidelity bond coverage for directors, officers, and employees, including for dishonesty and computer fraud. AB 1101 allows the use of insurance for such purposes and adds a requirement that crime insurance, employee dishonesty coverage, computer fraud, funds transfer fraud, and fidelity coverage be endorsed to include the association’s manager in addition to its directors and officers.

ECHO EXECUTION: Association funds need to be deposited in FDIC-insured accounts, which now include guaranty corporations and the NCUAIF. Regardless of whether funds are being transferred from reserves or operating (assuming more than 50 units), written board approval is needed to pay bills larger than $10,000. Boards can accomplish this by approving a motion at the beginning of the year for budgeted recurring large bills like landscape, irrigation, and insurance, and approving nonrecurring bills during the monthly financial reporting at meetings. Associations should use insurance, rather than bonds, to cover the enhanced panoply of covered perils and parties identified by the legislature. It is important to work with insurance professionals who are intimately familiar with these enhanced insurance requirements.

SB 9 (ATKINS) – LOT SPLITTING

Most associations (if not condominiums) are made up of single-family residences. Echo opposed SB 9 because it requires the local municipality to approve owner-requested lot splits of single-family parcels, making each lot into two if the lot size meets certain minimal standards. When combined with last year’s accessory dwelling unit (ADU) and junior accessory dwelling unit (JADU) laws, this allows for the creation of up to six, eight, or even ten units on what was once a single-family parcel. It was originally thought, based on written assurances from the author, that this bill would not apply to associations, but such limitations never quite managed to get into the language of the new law, leading attorneys to differ and leaving the courts to ultimately decide whether SB 9 lot splitting can occur in associations.

ECHO EXECUTION: One can imagine having a single-family residence divided into two lots, each with its own ADU and JADU. This (now) six-plex, for which the legislature requires little to no parking, will create major parking and density issues for associations. It is presently unclear how assessments will be reallocated when there is a subdivision of a lot, how view rights and setback requirements historically preserved in CC&Rs will operate, and how height requirements will be enforced.

SB 391 (MIN) – EMERGENCY POWERS AND PROCEDURES; (ZOOM STYLE) VIDEOCONFERENCE MEETINGS

Existing law allows a board meeting to be held by videoconference if the notice identifies a physical location where members of the association may gather to attend. COVID-19 made gathering illegal, and so videoconference meetings continued without an identified physical location, arguably in violation of

The Echo Legislation Tracker Continued from page 33 the old law. Echo supported new Civil Code Section 5450, which established an emergency power and procedure expressly allowing teleconferences without an established meeting place if gathering in person is unsafe or impossible.

Power: In order to use videoconferencing without an identified gathering space, the association must be in an affected area where (a) a federal state of disaster or emergency is declared; (b) a state of emergency is proclaimed by the governor; or (c) a local emergency is proclaimed by a local governing body. If no emergency exists, there needs to be a physical gathering location following the old rules. Right now, COVID is providing the required qualifying state of emergency.

Procedure: If an association wants to hold videoconference meetings now without a gathering location, it needs to do the following:

(1) Give a Newly Required Notice: Written notice of the first meeting handled under this new protocol shall be by individual delivery (mailed first class or via email to those who have so agreed). This should be done now so all future meetings during COVID are consistent with this new law.

(2) Change the Notice/Agenda: The meeting notice/ agenda now needs to include (in addition to other required content like business to be discussed at the meeting): (i) clear technical instructions on how to participate; (ii) the telephone number and email address of a person who can provide technical assistance; and (iii) a reminder that a member may request continued individual delivery of meeting notices, with instructions on how to do so.

(3) Verbally Track How Directors Vote: Because some homeowners will attend telephonically, as opposed to by video, they will be unable to see how each director votes. Therefore, roll call must be conducted for each director vote. Finally, if ballots are scheduled to be counted and tabulated at the meeting, the meeting must be conducted by videoconference with the camera placed where members can witness the inspector of elections tabulating the votes.

ECHO EXECUTION: This statute takes effect immediately. Since there is a declared federal state of emergency, associations can and should feel free to hold meetings by videoconferencing. The association’s next notice should be provided by individual delivery, which includes mailing to the members or emailing those members who have consented to receive notices by email. Subsequent/ reminder notices may be posted. Such notices must include the normal agenda items, plus the technical assistance information. The roll call vote requirement and, of course, placement of the video camera where ballots will be opened and counted, should also be conducted.

SB 392 (ARCHULETA) – DOCUMENT DELIVERY

Associations must deliver certain notices and documents by “individual delivery” – meaning by mail or overnight delivery, or by email, fax, or other electronic means if the member has consented in writing or by email to electronic delivery. After January 1, 2023, associations will be required to deliver notices and documents in accordance with the preferred delivery method specified by the member, or, if the member has not provided a preferred delivery method, by traditional mail to the address last shown in the association’s records. Associations are already required to solicit on an annual basis the members’ address or addresses for delivery. The notice provided by the association will need to provide the option of receiving notices at a mailing address, a valid email address, or both. It also must disclose that a member does not need to provide an email address to the association. If the association maintains a website for communicating with its members, that website may be designated in the annual policy statement as the location for posting general notices to the members. Associations are required to keep and disclose the membership list to members, including the name of the member, mailing address, and property address. Members may now opt out of sharing their email addresses. A member’s personal information is prohibited from being sold for any purpose without the member’s consent, or from being transmitted to third parties without the consent of the member unless required by law. A member may bring an action against an association for injunctive relief and actual damages caused by the association’s use of the member’s information in violation of the new statute.

ECHO EXECUTION: Each year, when associations solicit their members’ contact information, they now must allow a member to specify a preferred delivery method (mail, email, or both), and they must provide a “simple method” for advising the association