Inspection of Records in a Homeowners Association

By Tom Fier: Attorney at Law
www.tomfier.com

INSPECTION OF RECORDS IN A

HOMEOWNERS ASSOCIATION

     The matter of inspection of records comes up in almost every homeowners association.  Some of the most frequent questions are: "What records are subject to inspection?  What are the limits on these inspection rights?  Who pays for the costs involved?  What are the inspection rights of directors?"

     These questions, as well as other questions dealing with  inspection rights within an association, are addressed in this article.  Civil Code sections 5200-5240 deal with this subject.

     What records are subject to inspection?

     a. Financial documents (a summary of the association's

        reserves, the annual budget report, financial statement

        reviews, and audits);

     b. Interim financial statements;

     c. Executed contracts, not privileged;

     d. Written board approval of vendor or contractor proposals

        or invoices;

     e. State and federal tax returns;

     f. Reserve account balances and records of payments made

        from reserve accounts;

     g. Agendas and minutes of meetings of the members, the board

        and committees appointed by the board, excluding minutes

        and other information from executive sessions of the board;

       

     h. Membership lists, including name, property address, and

        mailing address (but no records/information concerning

        those members who have opted out);

     i. Check registers;

     j. The governing documents;

     k. Reserve studies; and

     l. Enhanced association records which means invoices,

        receipt and cancelled checks for payments made by the

        association, purchase orders approved by the association,

        credit card statements for credit cards of the

        association, statements for services rendered and

        reimbursement requests submitted to the association

        (Civil Code § 5200).

     Can information be withheld or redacted?

     Yes, if it is likely to lead to identity theft; to fraud in connection with the association; documents that are privileged or confidential (subject to attorney-client privilege, litigation, or confidential settlement agreements); a release that is likely to compromise the privacy of a member; information that contains     disciplinary actions, collection activities or payment plans of members, or any personal identification information (i.e. social security number, tax identification number, driver's license number, credit card number, bank account number or bank routing number); minutes and other information from an executive session, personal records, and interior architectural plans, including security features.

     If information is withheld or redacted, the association must provide a written explanation (Civil Code § 5200).

     Who may inspect?

     A member or member's designated representative may inspect [Civil Code § 5205(a)], as well as a director.

     Where may a member inspect/copy the records?

     Inspection or copying of records may be done in the association's business office within the association or at a place agreed to by the requesting member and the association [Civil Code § 5205(c) and (d)].  If a written request is made, the association may deliver copies to the member [Civil Code

§ 5205(e)].

     Can the association charge?

     Yes.  The association may bill the requesting member for the actual cost of copying and mailing.  The association shall inform the member of the amount and this shall be paid prior to copying and sending [Civil Code § 5205(f)].  Additionally, the association may bill a requesting member up to $10.00 per hour not to exceed $200.00 per written request, for the time involved in redacting an enhanced record.  These costs shall be prepaid. [Civil Code § 5205(g)].

     Can the records be produced electronically?

     Yes, the requesting member can request that he/she receive records by electronic transmission or machine-readable storage media so long as the records can be transmitted in redacted format that does not allow the records to be altered.  The association can charge for this cost. [Civil Code § 5205(h)].

     What are the required time frames that the association must keep records?

     a. Records for the current fiscal year, plus two previous

        years.

     b. Minutes of members and board meetings need to be kept

        permanently. [Civil Code § 5210(a)].

     Under what time frame must the association produce records?

     a. Association records prepared during the current fiscal

        year: 10 days following receipt of the request [Civil

        Code § 5210(b)(1)].

     b. Association records prepared during the previous 2 years:

        30 days [Civil Code § 5210(b)(2)].

     c. Minutes: within 30 days of the meeting (Civil Code § 4950).

     d. Membership list: 5 days (Civil Code § 8330).

     Can members request e-mail addresses of other members?

     Yes.  The court in Worldmark, The Club v. Wyndham Resort Dev. Corp. (2010) 187 Cal.App.4th 1017 noted that "address" was broad enough to include e-mail addresses.

     Does a member need a reason to request inspection?

     Yes, records and minutes may only be inspected for a purpose reasonably related to the member's interest as a member.  [Civil Code § 5230 a)].  Corporations Code § 8338(a) states that a membership list may not be used to solicit money; for any purpose that the requesting member does not reasonably and in good faith believe will benefit the association; for a commercial purpose or for sale to any person.

     What are a director's rights of inspection? 

     A director has an "absolute" right, at any reasonable time, to inspect and copy all books, records, and documents of the association (Corporation Code § 8334).  This absolute right is constrained by a director's fiduciary duty to act in the best of interests of the association [Corporations Code § 7231(a)], to restrain directors from exercising these rights for personal gain, or to further interests contrary to the interests of the association.

     Can a lender inspect the books and records of the association?

     Most governing documents protect a lender's right to inspect the association's books and records as a way to protect their security interest.

FREQUENTLY REQUESTED DOCUMENTS

                                                                                          Member       

         

Document	Yes	No
Audits	x
Bank Statements		x
Ballots	x
Checks (cancelled)	x
E-mail Addresses of Members	x
Financial Statements	x
Invoices/Bills	x
Litigation Documents		x
Membership List (but not for a commercial purpose)	x
Minutes	x
Proxy		x
Reserve Study	x

    

It is important to maintain accurate and up-to-date records.     If an improper motive is suspected, be cautious in releasing documents.  For special situations, consult your attorney.