New HOA Law Bans Proxy Votes

Published 08-01-2005

By Jim Small

A comprehensive new law governing homeowners associations goes into effect Aug. 12 and provides property owners more protection from — and recourse when dealing with — unscrupulous HOA board members, the sponsor of the legislation says.

Rep. Chuck Gray, R-19, said H2154 (Laws 2005 Chapter 269) attempts to address the minority of devious HOA board members that are creating the majority of the problems.

“Eighty percent of the HOAs are fine, but there are 20 percent out there…that are having problems,” he said. “But, they are having 80 percent of the problems.”

Among other things, the law — it was a strike-everything omnibus bill that combined the elements of four pieces of legislation — eliminates the use of proxy votes in association elections, reduces the threshold for removing a board member and requires HOAs to provide voting by absentee ballot.

Proxy Voting

“The reason we wanted to eliminate proxies is because of the misuse and abuse of a few members of boards and HOAs,” Mr. Gray said.

He explained that there were several instances in which board members would gather proxy votes from their neighbors — in other words, permission to cast a vote for them at the next board meeting — explaining there would be a vote on an innocuous issue. The board member, however, would neglect to tell the neighbors that there was also a vote on a controversial issue.

In other situations, Mr. Gray said some members would gather proxy votes for a meeting knowing a contentious issue would be added to the agenda at the last minute, thereby securing the outcome they sought.

The solution, he said, was to prohibit the practice of voting by proxy. In order to ensure all association members still have a say in elections, the new law requires HOAs to allow absentee voting and permits associations to count absentee ballots toward quorum requirements.

Paul Monaghan, a former board member of the 1,000-member-plus Arrowhead Lakes Homeowners Association in Glendale, says he wishes a law could have been drafted to only impact those associations that misuse proxies.

“This [law] still affects us,” he said, even though there has never been a problem in his neighborhood.

Most problems with HOAs are not caused by the entire board, but by individual elected board members, Mr. Gray said.

“Many of the problems we had coming to us…were because of rogue board members doing something unethical,” he said. “People are people — there’s a percentage that are good and honest… and there’s a percentage that’s devious.

When the new law goes into effect, 12, association members will have a considerably easier time removing an unethical board member from his or her post. Currently, statute provides that two-thirds of the total number of association members must vote for removal before the action is accepted, regardless of whether all eligible votes are cast.

“Two-thirds of [voters as] a threshold for a recall election was just insurmountable and almost never done,” Mr. Gray said.

The new law provides for a petitioning process to bring up a board member’s removal at a special board meeting. In HOAs with fewer than 1,000 members, the petition must be signed by 100 members or 25 percent of the members, whichever is less. If the HOA has more than 1,000 members, the petition must be signed by the lesser of 1,000 members or 10 percent of the members.

If enough signatures are gathered, a special meeting is to be held within 30 days. The quorum regulation for the meeting is the lesser of 20 percent of the members or 1,000 members, significantly lower than the 50-percent-plus-one requirement for regular meetings.

The board member will be removed from his or her seat if a majority of those voting in the recall election vote to do so.

Rep. Gray: Goal Is Local Control

The goal, Mr. Gray said, was to use the recall standards other elected officials are held to as a general pattern in order to give HOA members local control.

“We have to allow for local control,” he said. “Under the current system, local control was available, but not attainable, because you could not remove your board members like you could city or county elected officials.”

Mr. Monaghan said the prohibition of proxy votes would have made recalls extremely difficult under the current system, but the standards in the new law give association members a reasonable ability to remove someone from the board.

“Twenty percent is doable,” he said. “If I can’t get 200 [people to attend the meeting], there’s no necessity to do anything.”

Law Addresses Some Problems, Observer Says

Although the law does address some of the problems people were having with HOAs, George Staropoli, a homeowners’ rights advocate and author on the subject, says the effort does not get to the core of the issue.

“Overall, it is one more attempt by the Legislature to micromanage homeowners associations instead of dealing with the real issues of homeowners associations,” he said. “You haven’t solved anything.”

Mr. Staropoli says HOAs are, essentially, principalities and ought to be treated as such.

“Homeowners associations need to be subjected to the same rules and regulations as a public entity,” he said. “I’d like to see them brought under as municipal corporations.”

Mr. Gray doesn’t see that happening. He believes this law will solve most of the major problems people have been having with HOAs in recent years. The only legislation he thinks will be necessary in the future is penalties for associations that fail to follow statute and a loosening of the process by which HOAs can change their codes, covenants and restrictions.

“You kind of have to put some rules and regs in place to allow proper self-government,” he said. “From my perspective, the state should not be meddling too much more.”

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