Fenwick town council considers changes to its election law

Trusts will be addressed

Date Published: 
September 9, 2016

After facing confusion in back-to-back elections, the Fenwick Island Town Council sat down recently to discuss their intentions for voter and candidate eligibility.

First, they got a lesson in voter law and artificial entities from Town Solicitor Mary Schrider-Fox. After two hours of discussion on Sept. 1, the council instructed the Charter & Ordinance Committee to research and consider the following changes to town law:

• Allow trusts to have multiple votes, such as allowing spouses to vote.

• Allow any LLC to put forward one candidate for election, such as an owner or stockholder.

• Allow a voter’s power of attorney (POA) to last for several years, rather than requiring it be renewed annually, which could save Town Hall and citizens much time with paperwork.

• Write a definition of “resident,” which the charter lacks.

When the State of Delaware rolled out new municipal election laws around 2006, Fenwick Island made their own laws more amenable to the State’s. After the 2008 charter changes, Fenwick didn’t even host a contested election until 2015, so people didn’t notice new rules or unintended consequences.

But last year, people realized — often by surprise — that they needed to file POA paperwork and that trustee spouses could no longer vote.

Fenwick stumbled into election season again in 2016, when two candidates were ruled ineligible because their property was held by artificial entities.

Having served on the 2007-2008 council that made that year’s changes, Vicki Carmean and Audrey Serio agreed that some consequences were unintentional.

The CO Committee and Ad Hoc Elections Committee both grappled with the topic before the council reached down to provide direction this month.

Now, Fenwick must tread carefully, but swiftly. Another charter change requires a public hearing, multiple town council readings, a local legislative sponsor and a majority vote by the Delaware State Legislature, which only meets in spring and early summer.

“We are a very small town. Most people could care less about the election. Most people do not vote,” Serio said. “We have difficulty getting candidates, so I think we need to make the atmosphere the easiest we can, the least complicated we can under law, and try to get our residents to be interested in running for office and to vote.”

But more than 60 percent of eligible voters did cast ballots at the last two elections, said Councilwoman Julie Lee. So people are definitely participating.

“I know this doesn’t feel true to you guys because of the experience you’ve had. But from a legal standpoint, what you’ve got isn’t really that complicated,” Schrider-Fox said. “I know that’s not the way it feels.”

There are different rules for various artificial entities (also called “legal entities”), both by state law and in Fenwick. They also have different reasons for organizing their money or liability in such a way.

“Under your current charter, a trustee can run for office. A member of an LLC or a stockholder in a corporation cannot,” Schrider-Fox said.

A trust is an artificial entity, but “the trustee is the legal owner of that property,” whether it’s real estate or furniture, she said. “However, they hold that property with strings attached to it, meaning ‘for the benefit for someone else.’ There are hundreds of types of trusts.”

LLCs are different. “If you are a member of an LLC, you don’t have a direct interest in the property,” she said. “You just have an interest in the company,” which owns the property.

Full-time town residents are not impacted by this debate. A resident is always entitled to vote, regardless of land ownership. The council also noted that Delaware law recently changed, so that municipalities may not impose a durational residency requirement of more than 30 days to be eligible.

Who can vote or run?

“Every beach municipality allows non-resident property owners to vote,” said Lee, who suggested changing the charter language to “natural persons whose property is held in trust.”

She also proposed Fenwick return to its old rule of allowing trustee spouses to vote. For instance, the South Bethany charter allows all property owners to vote, including “any natural person who holds title of record either in his/her own name or as trustee … [and] the spouse of a freeholder whether their name is on the deed or not.”

Other ideas included allowing business owners to vote (in addition to property owners who rent business locations); forbidding business corporations from being candidates; or changing nothing.

Councilman Richard Mais rejected the idea of allowing spouses to vote, de facto, just because they’re married to a trust owner, since that would weight Fenwick’s vote toward non-residents.

However, there are already deeds with eight property owners listed. They all get a vote already, Schrider-Fox said. Adding a spouse only adds one vote per trust.

Meanwhile, Serio said she believes any property owner paying taxes should get to vote, whether in a family trust or a business LLC.

Voters must be either a bona fide resident; a human, non-resident property owner; or an artificial entity, such as a trust, corporation or other LLC. The artificial entity is granted a vote, not the people involved in it. That’s why the Fenwick charter says, “Any legal entity, other than a natural person entitled to vote, must cast its vote by … notarized power of attorney.”

“An artificial entity can only interact with the world through a human,” such as a board of directors or chairperson, Schrider-Fox said.

Candidates must be “a natural person who is a citizen of the United States [and] … either a bona fide resident of the Town or a property owner in the Town.”

The Fenwick Charter requires that at least four council members must reside within 50 miles of town.

Meanwhile, a person can physically cast multiple votes in an election. A regular deed holder gets one vote, regardless of properties owned. But by POA, a resident could cast multiple votes for other artificial entities.

Hypothetically, a person could get 50 votes by putting his properties in 50 trusts or LLCs. Meanwhile, a single house could be owned by 20 trusts, representing 20 property owners, who all vote through power of attorney.

“There’s nothing that I’ve heard here today that makes the process simpler” from a legal perspective, Schrider-Fox said. “You’re going to have a grumbler every election season who didn’t know what they had.”

Voters already required to bring deeds for proof

Because this beach town has so many types of ownership, Fenwick is unlikely to ever have a perfectly simple registration process.

“You’re always going to have to pull the deeds and look at how the people own the property,” Schrider-Fox said, especially when people own multiple properties in different ways.

“Technically, the people coming in to vote, they’re supposed to bring their deed with them,” she said. “Nobody does. They yell at [the town clerk], so she gets on the computer, she calls me.”

The women figure out the official ownership on their own, despite Fenwick’s charter twice stating that property owners registering to vote must bring proof, such as a deed.

“So, technically, Town Hall could have been turning people away,” Schrider-Fox said. “They didn’t do that. They went above and beyond … and did the legwork for them.”

Fewer people “than you think” were actually disenfranchised by the realization that trusts only get one vote, Schrider-Fox said. That’s because many husbands and wives discovered that their house was actually owned by two trusts — one trust per owner.

Voter education needed to avoid surprises

Part of the problem is voter education, especially when people create artificial entity in winter, Serio said.

“They have no idea, if they did that during winter, when they come to vote that they couldn’t vote,” Serio said. “Those are the people that get upset.”

Or, the older residents create a trust to pass property onto their children without realizing their votes might be limited.

“The problem is we’re dealing with the everyday Joe. To them, we’re taking their voting right away,” Serio said. “To them the problem is, ‘I’ve voted here for 25 years, and now I can’t vote.’”

However, it’s not really a financial advisor’s job to educate clients about local voter laws.

“You guys, as a group, can only do so much to help people along,” Schrider-Fox said. “At some point, they have to open the book or go online and be a little bit proactive for themselves and find out what the rules are.”