Secret ballot needed for CA HOA?

Better yet what are your rules in your own documents? That is where you start NOT with the state.

In CA, the board is allowed to have a special assessment of 5% of the gross approved budget without a vote of the members.

My understanding that the election is handled in the same fashion as the annual election process.

Edward,

According to the Davis-Sterling website:

"As provided for in Civil Code §1363.03(b), notwithstanding any other law or provision of the governing documents, the following matters must be voted by secret ballot:
"•special assessments over 5% (see exceptions) or regular assessments over 20%

"•election and removal of directors

"•amendments to the governing documents (see exception)

"•grant of exclusive use of common area property (see exceptions)"

From your post it is not clear if the $20-a-month-increase and the fence replacement loan are two separate votes or whether the increase is a special assessment to pay for the capital improvement fence replacement project.

If this is a permanent increase in your regular assessment and your monthly assessment is currently greater than $100, a $20 increase would fall below the threshold for requiring a secret ballot.

If borrowing money for the fence is a separate issue, then it does not fall into any of the categories listed and does not require a secret ballot unless it will incur a special assessment. In fact, normally the decision to borrow money would rest with the board and not the membership.

If this is a vote to impose a special assessment to fund the fence replacement, then you must use a secret ballot if this will increase your monthly assessment by more than 5%. If your current monthly assessment is greater than $400, you do not need a secret ballot; below that amount you do.

One question that comes to mind is why is there a need to borrow money for capital improvements that should be coming from your reserve account? This strongly suggests that your board is not doing its job. You should have a reserve study to determine what capital assets will require repair/replacement, when that time will most likely come, and how much it will cost. And then you should be funding the reserve account accordingly. Your board should never go before the members and ask for additional funds to repair or replace capital assets.

Or it could be simply that a previous board tried to do it's job and fund the Reserves but the membership voted not to.

I would not normally think of setting aside reserve funding as something members vote on. That is, it is part of the board's responsibility. But it seems to be not so cut and dried, as the following passage from Davis-Sterling indicates:

Duty to Fund Reserves

There is no statute that specifically requires associations fund their reserves. The legislature has repeatedly amended the reserve provisions in the Davis-Stirling Act and has had many opportunities to impose funding requirements but has not done so. Instead, it keeps increasing notice requirements.

Indirect Duty. An argument can be made that there is an implied requirement to fund reserves because boards have a duty to impose regular and special assessments sufficient to perform their obligations under the governing documents. Civil Code §1366(a). Setting aside sufficient funds to repair and replace major components is arguably one of those duties. In Raven's Cove v. Knuppe, the court held that the failure of the developer-controlled board to properly fund the reserves was a breach of the board's fiduciary duty.

Special Assessment. Boards must exercise prudent fiscal management in maintaining the integrity of the reserve account, and shall, if necessary, levy a special assessment to recover the full amount of the expended funds within the time limits required by this section. This special assessment is subject to the limitation imposed by Civil Code §1366 (unless the expenditures were for emergencies as defined by Civil Code §1366(b)). The board may, at its discretion, extend the date the payment on the special assessment is due. Any extension shall not prevent the board from pursuing any legal remedy to enforce the collection of an unpaid special assessment. Civil Code §1365.5(c)(2).

Fee Limitation Argument. A member of the Foothills Townhomes Association sued his association claiming that a special assessment to fund the reserve account violated Civil Code §1366.1. He argued that it "exceeded the amount necessary to defray the costs for which it is levied" because there was no requirement that reserves be funded. The court disagreed and ruled that replenishment of the association's reserve account was a valid basis for a special assessment. Plaintiff also argued the special assessment was unnecessary because the reserves could be funded incrementally over time. The court again disagreed:

Whether the fund could have been replenished over time is irrelevant to whether the assessment exceeded costs for which it was levied. As a matter of law, an assessment does not violate Civil Code section 1366.1 merely because the costs could have been recouped incrementally. Nothing in the language of the statute suggests that is so. (Foothills Townhomes v. Christiansen)

Prudent Funding. Even though there is no mandate by the legislature to fund reserves, the prudent course is to fund reserves in accordance with the association's reserve funding plan.

Source: http://www.davis-stirling.com/tabid/1602/Default.aspx#axzz2MIggWgvD