CONFLICTING DOCUMENTS ON CUMULATIVE VOTING

CONFLICTING DOCUMENTS ON CUMULATIVE VOTING

QUESTION: Our membership approved revised CC&Rs eliminating cumulative voting but failed to pass a bylaw amendment doing the same. What do we do now?

ANSWER: It depends. Under the new Davis-Stirling document hierarchy, any conflicts between your CC&Rs and your bylaws are settled in favor of your CC&Rs. Accordingly, if your CC&Rs prohibit cumulative voting and your bylaws authorize it, your documents conflict and your CC&Rs prevail. In this scenario, you can drop cumulative voting.

Amendment Language. If, however, your CC&R amendment simply deleted references to cumulative voting so your CC&Rs are now silent on the issue but your bylaws authorize cumulative voting, there is no conflict between the documents and your bylaws prevail. In this scenario, you're stuck with cumulative voting until you successfully amend your bylaws to drop cumulative voting or amend your CC&Rs to prohibit cumulative voting.

PAYMENT PRIORITY

QUESTION: We have many HOA boards who are frustrated at seeing unpaid late fees on their aged receivables report. Recently at an industry event, we were told that if an association changes its delinquency policy to say so, boards can apply owner payments to outstanding late fees before applying the payment to outstanding assessments. Is that true?

ANSWER: No it's not true. It doesn't matter if an association's CC&Rs, bylaws and collection policy all say you can apply payments to late fees first and then principal. The law states:

Any payments made by the owner of a separate interest… shall first be applied to the assessments owed, and, only after the assessments owed are paid in full shall the payments be applied to the fees and costs of collection, attorney's fees, late charges, or interest. (Civ Code 5655(a).)

Unless a statute defers to an association's governing documents, the statute prevails. In this case, the statute does not defer and payments must first go to assessments. To remedy the problem of unpaid late fees, your board can sue a recalcitrant member in small claims court for the unpaid late fees. Oftentimes owners will immediately pay rather than go through the hassle of appearing in court and risk a judgment against them.

NO CANDIDATES

QUESTION: We sent out a call for candidates for our annual election and there were no volunteers. If the law says we have to hold an election each year, how do we have one without candidates?

ANSWER: HOA governing documents normally call for an annual meeting at which, among other things, directors are elected. Even if no one shows up, holding a meeting satisfies Corporations Code §7510(b) and your governing documents.

Floor Nominations. If your election rules allow floor nominations and if someone shows up at the meeting and if that person is willing to nominate himself from the floor, you can fill an empty seat. That assumes you achieve quorum and it further assumes the person has not already voted for someone else (once cast, ballots are irrevocable).

No Annual Meetings. I know some boards dispense with annual meetings altogether and nobody cares...until someone is unhappy with a board decision and sues alleging the board's decision was ultra vires because no election was held. While plaintiff's position is contrary to statute (directors remains on the board until successors have been elected; Corp. Code §7220(b)), the association must defend against the lawsuit.

RECOMMENDATION. If apathy is running rampant in the community, you probably won't make quorum so you can't elect a floor candidate even if you shanghaied someone, dragged them to the meeting and raised their hand while they were still drugged. What you can do, however, is appoint them to the board. Once the drug wears off, the deed will have been done.