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July, 2010 rev.

What You Need to Know About Records Inspections - Request, Process and Charges

You had better know the new laws .. or else ...

I" f you want to pull this law, go to the main page and click on The Davis Stirling Act link on the , or go to www.ca.gov and navigate to the California Codes, look for Civil Code Section 1365.2.You can find any law in California through the above site - and it's the only way to keep ahead of the 8-ball with regard to CID (common interest development) legislation.

Now, on to the basics: Owners of property in homeowner associations generally have the right to request inspection and copy "accounting books and records and minutes of the proceedings of members and the board and committees of the board" of their association, under Corporations Code Section 8333. This is not new. However, Civil Code Section 1365.2 identifies the records that can be inspected and copied in great detail. It applies to all homeowner associations; and although it in some ways reflects existing law (with regard to the membership lists and financial records, it adds some interesting (and possibly difficult) detailed records to the list, and adds conditions and some costs for HOAs, and expands current thinking.

This law is covered in great detail (more than 25 pages) including the statute, suggested policies, various interpretations boards and owners might have to contend with, and lots more information in the Records Inspection Primer available in the Webstore here. Access via the "webstore" link at the top of this page, or publications page. The Primer is $25.

The association is required to make the "accounting books and records and proceedings of the association" available for inspection and copying by a member of the association, or the member's designated representative. The records include minutes, the membership list, and general financial records and items that are subject to disclosure annually to members. Then it goes on to define "enhanced" records which provide more detail, such as invoices, contracts (that are not confidential), wages paid to employees, and that kind of thing. Information that could lead to identity theft can be redacted, and the cost of having the redaction performed is limited at least for associations (but not the vendors who provide the services).

The member of the association may "designate another person to inspect and copy the records on the member's behalf." The member must make this designation "in writing."

"Designated representative" could be the Owner's attorney, accountant or financial advisor, but I believe an Association would have to accept others as well. If an Owner has designated power of attorney to another with regard to the property, that will most likely qualify that person as a "designated representative." I have in the past dealt with requests for review by the Owner's realtor, their business partner, their life partner, their minister, or a relative of the Owner. The "writing" is a critical component in my view. Having the Owner make the designation in writing provides protection so that the Association is not stuck with an issue of disclosure of private association information to outsiders.

The association must make these records available for inspection and copying "in the association's business office within the common interest development." If the association does not have a business office within the development, the association must make these records available "at a place that the requesting member and the association agree upon."

Some attorneys (including me) take the position that HOAs may require that the Owner bring their own copy service if they want copies of records, especially when facilities are not available at the business office or in a case where the records request is extensive and it will take a lot of time to make the copies, or where an Association does not have a business office or copier available, or where the Owner refuses to pay for copies.

If the Owner or his or her representative is an offensive, rude or difficult person, the Board and/or Manager might prefer to copy the records and send or have them delivered to the party, rather than invite them onto the premises, even if the owner demands a visit. If the items requested are items that are required to be kept in the records or routinely provided to Owners (like minutes, or financial records or reports that must be sent out on an annual basis), I believe the Association could run into difficulty if it forced a process where charges for copying get exorbitant or the process required is unduly difficult for the Owner in question.

If the association and member cannot agree upon a place, or if the requesting member submits a written request directly for copies, the association "may satisfy the requirement to make the records available by mailing copies of the requested records to the member by first-class mail within 10 days of receiving the member's request", except for records created prior to the current or previous fiscal year or some of the enhanced records. In some cases, the board is given 30 days. There is more on this in the Primer mentioned above.

The association "shall inform the member of the amount of copying and mailing costs before sending the requested documents."

The law does not say that the Association may collect the costs before it sends out the documents, prohibiting boards (in my view) from holding records "hostage". I suspect there will be many fights over this as well. If a management company has to put staff to the task of copying records and it takes hours or the whole day, then the costs could be quite high, and someone will have to cover those costs (will it be the HOA or the HO?). If the Board ignores the deadline for providing records, it may be penalized quite severely (see below).

However, once the documents are provided, there is no easy mechanism for the association to recover the costs, so it might be left without recourse to recover the costs. A small claims court action could be filed to recover the costs but who wants to go before a Judge or hearing officer and ask for money for association records? If there is authority in the Association CC&Rs; for a "reimbursement assessment", this might be an avenue to recover unpaid costs. This will probably require attorney advice, and at the least will require a hearing - per the statutory disciplinary guidelines mandated by legislation last year.

When assessing costs, keep in mind that case law in California last year contains language and guidance that could be construed to prohibit Associations from charging money to the Owner for retrieval time it takes to dig up Association minutes buried in the storage boxes. The implication of the case was the Associations should not have to dig for records that should be easily accessed (and I believe it extends to financials and all documents that need to be regularly disbursed because of Association or Owner/Seller) disclosure requirements, meaning costs of copies and mailing may be the only remaining legitimate costs chargeable for some records. This will become a cost of "doing business" for associations. Some say management companies as agents for associations are held to the same standards and limitations but even if that is true, managers will take care of this by charging more for management or burying the contingency somewhere in their contracts. After all, they have to be able to be able to recover their own costs of doing business and make a profit too, if they are to remain viable business entities capable of providing services to HOAs.

The penalties for not providing this information (in a timely manner) are actual damages plus a fine of $500 for each occurrence, and reimbursement of attorney's fees (for enforcement). An example where a judge might find such fines appropriate might involve an owner needing information to satisfy a buyer, being unable to get it, and loss of sale. And the $500 penalty would require no proof other than to establish that the Board failed to provide requested records that are required by the statute to be provided. Need I say anything more about this other than "OUCH"!

The association may redact (cover up or black out) information from these records for any of the following reasons:

  • "The release of the information is likely to lead to identify theft."
  • "The release of the information is reasonably likely to lead to fraud in connection with the association."
  • "The information is privileged under law."
  • "Except as provided by the attorney-client privilege, the association may not withhold or redact information concerning the compensation paid to employees, vendors, or contractors." If the Board is asked to provide any financial documents that contain confidential, executive session privileged records, or the type of information that if disclosed puts another party at risk or breaches their privacy, then there are some protections built by these bulleted items. These protections are very important. Association executive session documents need to remain confidential for the protection of the Association (which is all of the Owners). "Identify theft" is a big concern these days and is defined as "the unauthorized use of another person's personal identifying information to obtain credit, goods, services, money, or property." Since the law states that compensation information for individual employees is to be set forth by job classification and title, not the employee's name, social security, or other personalized information, there is a clear message that this information needs to be available to members, through the financial records. The language seems to suggest that the Association may have to provide some personnel records reflecting compensation at least; however, it would be fair to say some attorneys (including me) will adopt the position that to the extent payment or compensation for employees or vendors are indicated in the financial income and expenses documents and reports with enough specificity about job class, etc., that no other information needs to be provided about employees. Walking this fine line will, of course, require Associations to seek more legal help in determining what records to disclose and what to refuse, or risk the civil fines or litigation.

The records may not be sold or used for a commercial purpose, or for any other purpose that is not reasonably related to a member's interest as a member. The association may bring a legal action against a person who violates this section. (Action may be "for injunctive relief and for actual damages to the association caused by the violation.")

Legal action or an injunction may become a necessity in the most egregious abuses of information gathered by Owners because of the mandates on Associations found in this new law. However, it seems an unlikely event under any normal circumstances. The association may also seek injunctive relief to stop the misuse of information given to an owner.

The association is entitled to recover reasonable costs and expenses, including reasonable attorney's fees, if successful in an action to stop misuse of the information.

The member of the association may bring an action to enforce his or her right to inspect and copy the subject records. If a court finds an association unreasonably withheld access to these records, the court "shall award the member reasonable costs and expenses, including reasonable attorney's fees, and may assess a civil penalty of up to five-hundred (500) dollars for each violation."

This law provides a remedy for owners who want to review records of the association and meet roadblocks put up by the board and/or management. Owners will be entitled to- sue associations in small claims court for withholding of records, so handle these matters delicately and follow the law, and consult with knowledgeable legal counsel if issues arise or to help set Board policy. And of course, check out the $25 Primer if you need more information.

    By Beth A. Grimm, Esq., (copyright 2010, all rights reserved). an educator and an attorney who practices exclusively in the area of homeowner association law. She is an active member of two ECHO RESOURCE PANELS (EAST BAY AND LEGAL) and is a frequent contributor to the ECHO JOURNAL and other CID industry publications in California.




By Beth A. Grimm, Attorney. A "service oriented" attorney and member of ECHO and CAI and various other industry organizations in California and nationally, host of the website www.californiacondoguru.com; two Blogs: California Condominium & HOA Law Blog, and Condolawguru.com Blog, and author of many helpful community association publications which can be found in the webstore on her site.

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