By Alyssa Gautieri
Community associations are required to maintain books and records of expenditures, budgets, audits, receipts of operation, annual reports, and meeting minutes. Do owners have the right to review these records at any time and what is the best process for allowing them to do so?
According to Stacey R. Patterson, Esq. an attorney who serves as counsel with Ansell Grimm & Aaron, P.C., “owners are entitled to review the business records kept by their particular association that are not otherwise protected by attorney-client privilege or specific state laws and policies.”
For more specific guidelines for condominiums, Patterson recommends consulting the statutes or legislation in your particular state. For example, in New York, consult the New York Condominium Act – codified at RPP §339-d et. als. and in New Jersey consult the New Jersey Condominium Act codified at N.J.S.A. 46:8B-1 et. als.. With regard to corporations or homeowner associations, owners should consult the non-profit corporation statutes in their particular states. Owners should also consult their particular association’s governing documents for procedures relating to request for documents.
Some business records may be protected by disclosure as an attorney-client communication. Attorney-client privilege protects communications between association boards and/or agents with their attorneys from disclosure to third parties. Information that is privileged involves confidential communications between an attorney and a client made for the purpose of seeking or providing legal advice. “If there’s a question about whether a communication is protected from disclosure as privileged, it is best to discuss the issue with your attorney,” Patterson said.
Further, if a board is unsure about whether something must be disclosed to owners, Patterson suggests to err on the side of transparency. “If it’s not an attorney-client communication, my recommendation would be to turn it over unless there is a compelling reason not to,” she said.
Patterson suggests that associations adopt a uniform policy for handling record requests from owners. The policy should outline the procedures that owners must follow when making these requests and how the board will respond.
Owner requests for records should be in writing and be specific. Certain states, such as New York may require that requests for association records be made in good faith and for legitimate purposes. This serves to minimize fishing expeditions. If the owner seeks copies of hard files, the board can require a fee to be paid up front before providing such copies. Further, if owners seek to inspect hard copies, it is recommended that they be required to schedule an appointment during the association’s agent’s business hours.
If a request is made during the on-going COVID-19, an in-person inspection may not be practical or safe. In the alternative, and in light of the accessibility and availability of electronic communications, it may be more practical in many cases to send documents electronically which serves to reduce costs and manpower needed as well as to avoid in-person contact”. “A switch to electronic storage of records is also a more streamlined way to maintain and access records,” according to Patterson.
The right to inspect records is reserved for unit owners only. Non-owners or renters are not entitled to inspect records unless a court orders their turnover.
Issues may arise when dealing with certain records such as delinquency reports, which are considered financial records. An association may choose to redact personal information such as names or addresses within records to protect the privacy of unit owners. Further, “the problem with providing delinquency reports is that the information is ever-changing and it is difficult to ensure that the information is up-to-the-minute accurate from the time the report is created to the time it is produced in an inspection,” Patterson said.
Patterson explained that a unit owner can pursue legal action if they believe that they have been improperly denied access to certain business records. In New York, the unit owner challenging denial of access must be able to demonstrate that the request for access is made in good faith and for a legitimate purpose.
In New Jersey, a dispute about access to records is housing-related. Housing-related disputes are typically handled through an alternative dispute resolution (ADR) hearing. ADR is an informal process handled by a mediator. ADR serves as a vehicle to attempt to resolve disputes without the cost of pursuing litigation. “In ADR, a mediator will consider the positions of the parties and attempt to resolve the dispute in the best interest of everyone involved,” explained Patterson. “If unsuccessful, the parties always have a right to their day in court”.