YOUR TERM IS UP

BY TYLER KERNS, ESQ.

Maximum and minimum terms for board directors, and pros and cons of staggered versus concurrent appointments.

A director’s “term of office” refers to the period of time for which he or she is elected to serve on the board of directors. When preparing for an association election, it is important to understand the term of office for the directors of the particular association and some of the issues that can arise relating to terms of office.

Provisions regarding terms of office for directors are typically found in an association’s bylaws. However, an association’s articles of incorporation may also include a provision regarding director terms of office. If there are no provisions regarding terms of office in either the bylaws or the articles of incorporation, it may be worth taking a look at the CC&Rs (in particular, older CC&Rs sometimes include provisions that would more appropriately be included in bylaws).

If an association’s governing documents are silent as to director terms of office (which would be very unusual), Corporations Code §7220(a) provides that the default term of office is one year. Corporations Code §7220(a) also provides that the maximum allowable term of office for directors is four years.

STAGGERED OR CONCURRENT TERMS

Terms of office may be concurrent or staggered. Concurrent terms of office mean that all directors’ terms expire at the same time. As such, at every election, the entire board is up for election when an association’s directors serve concurrent terms. With staggered terms of office, on the other hand, the terms of office of different groups of directors expire in alternating years. For example, with a board consisting of five directors serving staggered two-year terms, if two directors are up for election every even-numbered year, then the other three directors would be up for election every odd-numbered year. Staggered terms can be advantageous because they ensure that at every election, there will always be one or more directors (depending on the size of the board) who will remain on the board with knowledge of any ongoing issues that the association is facing at the time.

Concurrent terms of office are most commonly for one year, and staggered terms of office are most commonly for two years. Accordingly, most associations hold director elections every year as part of their annual meeting of members. As discussed above, depending on whether the association has concurrent or staggered terms of office for directors, either all or some of the seats on the board of directors will typically be up for election each year. However, some associations have concurrent director terms of office that are longer than one year, and in those associations, an election of directors only needs to occur as frequently as the expiration of the directors’ terms. For example, if an association’s directors are elected for concurrent terms of three years each, then an election of directors would only occur every three years. Again, remember that Corporations Code §7220(a) provides that the maximum allowable term of office for directors is four years, and Civil Code §5100(a)(2) requires that associations hold a director election at the expiration of the directors’ terms of office and at least once every four years.

TERM LIMITS

Pursuant to Corporations Code §7220(b), unless an association’s bylaws or articles provide otherwise, each director shall hold office until the expiration of their term and until a successor has been elected and qualified (unless the director is removed from office). Directors may be elected for an unlimited number of successive terms. Some associations had historically implemented term limits for directors in accordance with their governing documents. Term limits are intended to limit the number of terms (or, more often, the number of successive terms) to which a director can be elected. However, upon the passage of Senate Bill 323, Civil Code §5105 was amended effective January 1, 2020 to specify reasons for which a person could be disqualified as a candidate for election to the board. Having served a maximum number of prior terms was not included in the list of specified reasons for disqualification and, therefore, term limits are now seemingly unenforceable. As of the time of this writing, new “clean-up” legislation is pending that would add the following to the list of permissible reasons for disqualifying a person as a candidate for election: “If the person has served the maximum number of terms or sequential terms allowed by the association.” If passed, the new legislation would once again allow associations to adopt and enforce term limits if set forth in their governing documents.

Lastly, since provisions regarding terms of office for directors are included in an association’s governing documents (typically the bylaws), any change to the governing document provisions regarding director terms of office would require an amendment to the governing documents. Civil Code §5100(a)(1) includes amendments to the governing documents as one of the matters that must be approved by a vote of the owners conducted in accordance with the statutory secret ballot voting process. Associations should consult with legal counsel regarding any potential changes relating to director terms of office.

Tyler Kerns, Esq. is an attorney specializing in community association law with Kriger Law Firm. He’s worked in the industry for 11 years and is based out of La Mesa, California.