California Law Sets New Requirements for Homeowner Association Meetings

When California Senate Bill 563 became effective law at the beginning of this year, it brought about a number of significant changes to the manner in which homeowner association (HOA) meetings may be held and conducted.  It also put new limits on the ability of HOA directors to act without holding a meeting.

A bill such as SB 563 affects a lot of Californians.  Over 6 million residential units – more than 25% of the state’s housing stock – are in common interest developments (CIDs).  These include condominiums, planned unit developments, community apartment projects, and housing cooperatives.  The manner in which their HOAs and governing boards may operate is regulated by the Davis-Stirling Common Interest Development Act.  One section of that act is known as the CID Open Meeting Act.  It is that section (Civil Code § 1368 ff.) that was amended by SB 563.

According to the bill’s author, Senator DeSaulnier, staff had received numerous complaints about HOA board meetings being conducted in ways that prevented members from participating or even knowing what was going on.  The bill was designed to achieve greater transparency in HOAs, to ensure open meetings, and to enable greater member participation.

Perhaps the most significant aspect of SB 563 is its prohibition (with the exception of emergencies) of what has been known as “action without a meeting.”  Many HOAs are corporations and, as such, are also subject to the California Corporations Code.  That code permits that action “…may be taken without a meeting, if all members of the board shall individually or collectively consent in writing to that action.”  Under the new law, whether the HOA is incorporated or not, no action shall be taken outside a meeting.  Moreover, every meeting must be noticed to the membership, with an agenda, at least four days before the meeting takes place.  Emergency meetings may take place without such noticing, and they may even take place via email; but they must meet the criteria that “there are circumstances that could not have been reasonably foreseen which require immediate attention and possible action by the board…”

The CID open meeting act provides that members must be allowed to be present at all meetings except for emergency meetings and executive sessions. The law has long allowed for the board to conduct executive sessions – with no members present – when it is addressing “litigation, matters relating to the formation of contracts with third parties, member discipline, personnel matters, or to meet with a member, upon the member’s request, regarding the member’s payment of assessments…”  SB 563 clarifies that an executive session is a meeting.  Under the new law, the time and place of an executive session must be noticed, with the agenda, to the members at least two days prior to the meeting.  This is required even though non-director members are not allowed to attend.

SB 563 permits meetings to take place via teleconferencing.  It requires that when such a meeting occurs, there must be at least one physical location where members may attend and where at least one board member is present.  It must be possible for members to hear what is said, and it must be possible for them to address the board.

Except in emergencies, it will not be possible for the board to conduct a meeting by email where there is no member observation or participation.

One of the most significant changes brought about by SB 563 is the result of a slight modification of wording.  Previously, a meeting was defined as “any congregation of a majority of the members of the board at the same time and place to hear, discuss, or deliberate upon any item of business scheduled to be heard by the board.”  That underlined portion has been changed to, “item of business that is within the authority of the board.”  That means discussions of any matter where the board might act, not just ones that are currently up for a vote.   One observer – an HOA counsel – commented that, as a result of this, many boards will inadvertently violate this new law, “unaware that they are subject to a state-imposed gag order outside of meetings. 

SB 563 has had its opponents as well as its supporters.  Now that it is the law, HOA directors and members need to learn what it requires.