How are timeshare interests counted when an Arkansas suburban improvement district votes to change or fill its board?

Plain-English summary

A prosecuting attorney asked how many votes a timeshare within a suburban improvement district (SID) would have in a board vote. The example described one building with 28 timeshare units, but did not identify the type of district or election. The AG said he could not give an unequivocal number without those facts.

He focused on the statute governing a district with fewer than 6,000 lots that changes from selecting successor commissioners by the remaining commissioners to selecting them through property-owner elections. In the vote on whether to make that change, each assessed property gets two votes. The time-share owners' association casts those votes for a time-share property. The AG said the time-share instrument might allow estate owners to direct the association's vote.

Once commissioners are elected, a different rule applies to filling vacancies: each property owner has one vote for each position. The AG said a time-share estate is characterized by statute as an estate in real property with incidents of a fee-simple estate. An estate owner therefore appears to be a property owner entitled to vote in an authorized vacancy election. The opinion also describes one-vote-per-owner rules for other types of SIDs.

The AG noted that the legislature expressly addressed time-share voting in conversion elections, but had not done so for vacancy elections. He said it was unclear how much the time-share instrument or district rules could address resulting questions and suggested legislative clarification might be warranted. He did not analyze whether a holder of a time-share use, rather than an estate, had a vote.

What this means for you

District boards and timeshare owners

First identify the district and the kind of election. For a conversion vote under the statute discussed here, the unit of voting is each assessed property and the association casts the time-share property's votes. For a vacancy election, the opinion focuses on ownership of a time-share estate. Local counsel with the district's facts can determine which statute applies.

Currency note

This opinion was issued in 2014. Check current SID and time-share law before using its analysis for an election.

Common questions

Does each time-share unit automatically get two votes?
No such across-the-board rule appears in the opinion. The two votes are for each assessed property in the particular conversion election the AG discussed, with a time-share owners' association casting them.

Who votes in a board vacancy election?
The opinion describes one vote per property owner per position in an authorized election. It says each owner of a time-share estate appears to qualify because that estate is an interest in real property.

Does the opinion decide the rights of a time-share use holder?
No. It addresses time-share estates and does not decide the separate question of a time-share use holder's voting rights.

Was the 28-unit example enough for an exact answer?
No. The AG said the request did not identify the kind of SID or board election and referred the specific application to local counsel.

Background and statutory framework

The opinion distinguishes the vote to change a district's board-selection method from later elections to fill board vacancies. The first counts votes per assessed property; the second counts one vote per property owner. Its analysis of time-share estates rests on the statute's characterization of those estates as real property, while acknowledging that statutory voting treatment of multiple owners in vacancy elections was not fully addressed.

Source

• Landing page: https://arkansasag.gov/divisions/opinions-foia/attorney-general-opinions-search/

Original opinion text

STATE OF ARKANSAS

THE ATTORNEY GENERAL
Dustin McDaniel

Opinion No. 2014-101

December 8, 2014

Robert T. Rogers, II, Prosecuting Attorney
19th Judicial District - East
202 North Springfield
Post Office Box 536
Berryville, Arkansas 72616

Dear Mr. Rogers:

I am writing in response to your request for my opinion regarding the following question:

How many votes does a timeshare within a suburban improvement district have in a vote for the Suburban Improvement District Board?

You have provided the following "example":

If there is one building containing 28 timeshare units, is the timeshare unit entitled to two votes for the entire building or does each of the 28 units get two votes? Could all owners of a timeshare unit get a vote?

You have specified no particular type of suburban improvement district as being at issue in your request.

RESPONSE

I cannot provide an unequivocal answer to this question, in part because you have not indicated what type of election relating to the board, or, for that matter, what type of suburban improvement district ("SID"), is at issue. For reasons discussed below, your "example" suggests, although it does not clearly establish, that you are referring to a time-share property in an SID containing fewer than 6,000 lots that either has converted or may convert to selecting commissioners by vote of the property owners. If so, A.C.A. § 14-92-240 will control. Each "property" in such a district has two votes in the election to approve or to disapprove the conversion. By contrast, each "property owner" in such a district, as well as in SIDs conducting elections under some other statutory provision, has one vote in an election to fill board vacancies. Under current law, each owner of a "time-share estate" owns an "estate in real property" marked by the "incidents of an estate in fee simple", a fact that would appear to qualify each holder of such an estate as a "property owner" entitled to vote for successor SID-board members.

DISCUSSION

In Op. Att'y Gen. 95-348, which I have attached for your convenience, one of my predecessors analyzed in detail the law with respect to elections in various types of SIDs. Given that the law remains the same in all material respects, I will not here repeat my predecessor's analysis. Proceeding from my predecessor's opinion, I will focus in my discussion below upon what issues of voting might arise under the limited facts provided.

You suggest in your "example" that the owner of a "timeshare unit" might be entitled to two votes. The Code contemplates two votes per property only in one variety of SID, and only then within the context of changing the method for selecting board members. This Code section provides in pertinent part:

(a) Any suburban improvement district which contains fewer than six thousand (6,000) lots and which selects successor commissioners by a vote of the remaining commissioners may alter the number and method of selection of members of the board of commissioners of the district pursuant to this section.

(b)(1) Any property owner in the suburban improvement district may make a written request for an election on the question of whether to change the method of selecting the board of commissioners of the district. The request shall be filed with a quorum court member whose district includes all or part of the suburban improvement district.

(4) Two (2) votes shall be awarded for each property. The interests of time-share owners shall be voted by the time-share owners' association ....

(c)(1)(A) Not more than sixty (60) days nor less than thirty (30) days after the measure is approved, the quorum court member who conducted the election under subsection (b) of this section shall hold a meeting to accept nominations for the new commissioners. Nominations for commissioners shall be made by property owners.

(B) The commissioners shall be elected, from among those nominated, at a subsequent public meeting to be held not less than thirty (30) days after the meeting to nominate commissioners.

(2) Each property owner in attendance at the meeting to nominate shall be entitled to nominate one (1) district resident property owner. Each property owner shall be entitled to one (1) vote for each position of commissioner to be filled. A property owner may cast his or her vote in person at the meeting conducted to elect commissioners or may vote by an absentee ballot. Absentee ballots must be received prior to the meeting held to elect commissioners. Any absentee ballot may be requested by any property owner.

(3)(A) A meeting shall be held annually to nominate successor members, and a subsequent meeting shall be held to elect successor members.

(B) The annual meetings shall be conducted by the board.

As reflected in subsection (b) of the statute excerpted above, in an election to change the method of selecting board members, a "property" is entitled to two votes. In the case of time-share units, the time-share owners' association is authorized to cast these votes. As further reflected in subsection (c), in an election actually to select board members, each "property owner" either present at an election meeting or voting by absentee ballot is entitled to one vote.

Under this statute, then, at issue are (1) what constitutes a "property" entitled to two votes in an election to change the manner of selecting successor members of an SID board; and (2) assuming an SID has committed to replace board members by election, what constitutes a "property owner" entitled to one vote to fill each vacant board membership.

With respect to the first of these issues, the subchapter of the Code generally devoted to SIDs defines "land" or "real property" as "all property subject to taxation for the purposes of this subchapter." "Taxation," as used in this definition, denotes assessments sufficient to defray the costs of SID improvements. In an election to change the method of selecting board members, then, each property subject to assessments would be entitled to two votes. In the case of each property occupied by time-share units, the time-share members' association would cast these two votes.

With respect to the related issue of how the association would cast these votes, in my estimation, the time-share instrument that established the time-share estates would control. In this regard, the Code expressly provides:

A project and time-share instrument that establishes a time-share estate located or offered in this state shall contain:

(5) ... any voting rights assigned to each time-share estate ... .

Pursuant to this provision, the owners of time-share estates might in theory be empowered to direct by election how the time-share members' association should cast its votes in the SID election.

With respect to the second issue identified above, namely, what constitutes a "property owner" entitled to one vote to fill each vacant board membership, the Code assigns one vote to each "property owner" either present at an election meeting or voting by absentee ballot. Significantly, this conclusion applies not only in converted SIDs containing fewer than 6,000 lots, but in any other SID that conducts elections to fill vacancies.

As previously noted, A.C.A. § 18-14-104(a)(1) characterizes a "time-share estate" as "an estate in real property" that "has the character and incidents of an estate in fee simple at common law." As such, any owner of a "time-share estate" would appear to qualify as a "property owner" as that term is employed in A.C.A. § 14-92-240(c). Each such owner would in turn appear to be entitled to one vote in the SID election.

As noted above, based only upon your passing remark that "two votes" might be allowed per "timeshare unit," I have identified A.C.A. § 14-92-240 as most likely being the focus of your question, speculation that admittedly constitutes a slender reed upon which to hang an analysis of voting rights in this case. Nevertheless, specifically with regards to A.C.A. § 14-92-240, the legislature has chosen to assign particular voting rights to "properties" in one context, namely, elections to convert to a system of filling board vacancies by election, whereas it has chosen to assign different voting rights to "property owners" in another, namely, elections actually to fill such vacancies. Unaccountably, the legislature has addressed the issue of time-share voting in the former context but not the latter. It may be that, if confronted with the issue, it would adopt a rule that addresses voting issues in succession elections relating to multiple ownership of the sort that frequently marks a time-share arrangement. For the moment, it remains unclear to what extent such problems might be addressed in a time-share project instrument or in the SID's rules and regulations. Legislative clarification on these issues may be warranted.

Recognizing that other factual circumstances may apply, I can do little more than again refer you to the attached Opinion 95-348, which ably sets forth the rules potentially applicable to various forms of SID, including not only those addressed in A.C.A. § 14-92-240, but also those covered by A.C.A. §§ 14-92-209 and -204. I will summarize the pertinent provisions, however, as follows:

With respect to SIDs formed on or after March 16, 1981:

(1) A.C.A. § 14-92-209(a) sets forth the procedures for any recall and subsequent election to fill the resulting vacancy. By cross-reference to A.C.A. § 14-92-204(b)(7), this statute at subsection -209(a)(6) restricts voting to one vote per owner.

(2) Subsection 14-92-209(b) controls all elections to fill all other types of vacancies. By cross-reference to subsection (a), subsection (b) restricts voting to one vote per owner.

With respect to SIDs formed before March 16, 1981:

(1) Subsection 14-92-209(c)(1) specifies that following a recall, the one-vote-per-owner rule set forth in subsection -209(a) will apply to fill any resulting vacancy.

(2) Subsection 14-92-209(d)(1) specifies that subsection -209(b) will control to fill any other type of vacancy in a pre-March 1981 municipal water or sewer district, likewise meaning that the one-vote-per-owner rule will apply.

(3) Subsection 14-92-209(d)(2) dictates that prior law will apply to fill a board vacancy in any other type of SID falling in this general class. As my predecessor rightly noted, this rule does not foreclose an SID falling within this designation from opting to convert and proceed as described above pursuant to A.C.A. § 14-92-240, assuming the preconditions for doing so are met.

Irrespective of what type of SID is at issue, then, under current law, voting to fill SID vacancies, if authorized at all, will turn upon property ownership, with each owner assigned one vote per candidate under whichever of the statutes referenced above might apply. Local counsel fully apprised of all attendant circumstances would be best situated to offer advice in each specific case regarding which statute imposes this condition.

Assistant Attorney General Jack Druff prepared the foregoing opinion, which I hereby approve.

DUSTIN McDANIEL
Attorney General

DM/JHD:cyh

Enclosure