Can Owners By Petition Call Special Meetings in an HOA?

Here is a question that just keeps coming up, from readers, and from boards. What does it mean when 5% of the members of an HOA petition the board to call a meeting? Many California HOA documents have a provision like this:

 

“Section ___. Special Meetings.

Persons Entitled to Call Special Meetings. A majority of the Board, the president, or 5 percent or more of the Members may call special meetings of the Members at any time to consider any lawful business of the Association.”

 

The provision comes from the California Corporations Code. It’s a little different because the Corporations Code does not say “at any time” and the Corp Code uses “lawful purpose” instead of “lawful business”.

 

The real rub lies in the words “lawful business” instead of “lawful purpose” like the statute says.  I use the different words yet in the documents I write because I want the meaning to be clear. I use the words “valid purpose” and explain them. Clarity is easier to understand, and explain.

 

This is the paragraph I prefer to use:

 

“Special meetings of the Members may be called at any time by a majority of the Directors or upon presentation of a valid written petition signed by five percent (5%) of the Members calling for action for any valid purpose (which means an action item that would require voting by Owners).”

 

There is it, explained in Plain English. A petition would be valid (or enforceable, or lawful, or whatever words you want to use) if the purpose was for something that the owners could vote on. Think about it. This relates to calling a special membership meeting to force a vote –of members, not a vote of the Board.

 

The word “lawful business” is confusing because it suggests to me if business is involved, it would be an item before the Board, not the membership. Still, I’d argue even then that owners cannot force the board to take a vote or have a meeting for a purpose that involves anything the members cannot vote on. Example, a petition to force the board to lower the assessments would not be a lawful, or valid purpose. If the budget indicates an increase is needed or lowering the assessments would not pay the bills, voting on it would not be prudent.  This is completely within the board’s purview, not subject to a member vote, unless the board needs to raise more money than it can approve legally. The Board’s position trumps the owners meaning the Board can put out a ballot to increase assessments if needed. It cannot be forced to put out a ballot to lower assessments.

 

That’s my take on “lawful purpose”.

 

The next question is always: “You mean the owners can just go out and call a meeting if 5% sign a petition?”

 

No, that is NOT what the Corp Code means and it is NOT true. Why? Because even when the documents are silent on this part of it, I believe it applies. The Corp. Code fills in the blanks, even if you have an unincorporated association with the above 5% provision. One could argue this does not apply to unincorporated associations but I believe it would prevail as an argument in court, by analogy, industry standard, best practices, whatever you want to call it:

 

The Corp Code in the very next section after 7510 says:

 

“7511(c) Upon request in writing to the corporation addressed to the attention of the chairman of the board, president, vice president, or secretary by any person (other than the board) entitled to call a special meeting of members, the officer forthwith shall cause notice to be given to the members entitled to vote that a meeting will be held at a time fixed by the board not less than 35 nor more than 90 days after the receipt of the request. If the notice is not given within 20 days after receipt of the request, the persons entitled to call the meeting may give the notice or the superior court of the proper county shall summarily order the giving of the notice, after notice to the corporation giving it an opportunity to be heard. The court may issue such orders as may be appropriate, including, without limitation, orders designating the time and place of the meeting, the record date for determination of members entitled to vote, and the form of notice.”

 

I don’t think I have to explain the key words which are: “…Upon request in writing to the corporation … by any person (other than the board) …, the officer forthwith shall cause notice to be given … If the notice is not given within 20 days after receipt of the request, the persons entitled to call the meeting may give the notice or [file a court action] …”

Thus, the Board has first shot at calling the meeting, and if the petition is FOR A LAWFUL PURPOSE, should call it. Otherwise the members are left to call it and few, if any that I have ever talked to, understand there is a proper way to do things, outlined in the Corp Code and if not the documents.

This is what the Corp Code says: “7513 (c) Ballots shall be solicited in a manner consistent with the requirements of subdivision (b) of Section 7511 and Section 7514.”

This is what the Davis Stirling Act says in Civil Code Section 5100, with provisions about elections clear through Section 5145.

“(a) Notwithstanding any other law or provision of the governing documents, elections regarding assessments legally requiring a vote, election and removal of directors, amendments to the governing documents, or the grant of exclusive use of common area pursuant to Section 4600 shall be held by secret ballot in accordance with the procedures set forth in this article.

(b) This article also governs an election on any topic that is expressly identified in the operating rules as being governed by this article.”

 

As you can see, there is a DIRECT CONFLICT with the matter of balloting under the Corp Code provisions and balloting under the Davis Stirling Act provisions. And if you read on in the codes you will see that there can be no action taken at a meeting. HOAs can send out ballots, and can count them at a membership or board meeting, but the old way of petitioning for a meeting where action actually could be taken (before the HOA elections changes of 2006)  is gone out the window. And that complicates things.

 

And here is a common scenario of the blind being lead by the blind -the owners go ahead and hold a meeting and vote the old board out and the new board in. Then they demand the checkbook but the old board won’t give it up arguing the owners did not properly hold the election. And all  heck breaks loose. What then? I have an idea but that is for another blog.

 

As it happens, I think that recall is the most petitioned subject in the state. Now, boards can agree to a recall election when petitioned without even scheduling a meeting because the vote can be done wholly by mail. But if the documents say owners can petition for a meeting, does the board have to call a meeting??

 

Who but the most experienced attorneys can guide boards and owners through this wicked web?

 

Here’s a sticky wicket. What would the answer be if the members petitioned the Board to take a vote to fill in a pool, for example, rather than deciding on its own? Leaving owners out of that decision can get a board into trouble as we know from a 2013 case (Wittenberg).

 

Some boards do not put that kind of a thing to a vote – there is usually not a legal requirement, so some attorneys would say that is not a valid purpose. Others would say they have to do it because there is a petition. I would say there is no law that says that kind of a measure REQUIRES a member vote, but that the board is asking for trouble if it does not at least poll the owners on their position. Still, if the cost of filling in the pool and re-landscaping or restoring the area exceeds 5% of the budgeted gross expenses for the fiscal year – well then, the answer is different, because the Board may legally need to put it to a vote. The same applies to petitions to purchase or drop earthquake insurance. If the documents are silent, the question arises – can the Board make this decision on its own, or is an owner vote required, and can owners petition to force one?

 

The list of possibilities can lead to 100 more complicated questions and the law does not help a lot by setting up conflicts with existing documents, as is the case with many, many of the Corporation Codes vs. The Davis Stirling Act.

 

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