Do Members Have The Right to Inspect And Copy HOA Documents?
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Overview
Homeowners’ Association laws vary considerably from state to state. However, the right of homeowners to inspect community documents is uniformly recognized. After all, as a homeowner, you are a member of the community, and the ultimate purpose of any association is to benefit homeowners.
Just as the shareholders of a corporation have a right to know about the financial status, management, and assets of the business they own, so, too, do HOA members have a right to stay abreast of association budgets, expenditures, and financial transactions.
The right to inspect HOA documents is acknowledged in state statutes, but also derives from the common law, the system of case history that establishes legal precedent over time. Under the common law, every planned development owes general duties of care and good faith to its members. Implicit in those duties, is the right of members to know how their money is being used, and therefore, the right to review financial records.
Most state statutes are codifications of common law principles designed to protect both the members and the association’s board of directors by providing a clear template for their relationship. So, while reviewing old case law can be interesting and can provide a lot of useful background information on the development of HOA law over time if homeowners want to learn their legal rights concerning HOAs, state statutes are the place to start.
Of course, having the right to inspect records and exercising that right are two different things. State laws define which documents members can inspect, how they must make an inspection request, whether and how much the board of directors can charge for copies of HOA documents, and what recourse homeowners have if the board refuses inspection.
Some boards are more relaxed and will comply with requests that do not necessarily follow the letter of the law. However, some will be sticklers for the rules and refuse any request that does not precisely meet all statutory requirements. So, when requesting inspection of association documents, members should know how the rules work and which documents they can view.
Which documents do members have a right to inspect?
Most states broadly define documents members can inspect, with some exceptions for sensitive materials. Florida, for example, allows inspection of “official records,” including everything from financial records and tax returns to the community’s governing documents, member lists, meeting minutes, and plans for commons areas improvements[1].
California defines the documents subject to inspection as “association records” and “enhanced association records,” though the responsive documents are more or less the same as in Florida[2]. In California, a member requesting a membership list must state his or her reason for requesting the list, though not required in most states.
In Florida, for example, homeowners’ associations are expressly prohibited from compelling a requesting member to state his or her purpose for requesting to inspect association records. Although the board of directors has to make most records available for inspection, they do not have to retain records indefinitely (subject to a few exceptions), and most state laws define how long records must be maintained.
In California, association documents must be available for inspection for the year in which the request is made and for the two preceding years[3]. If the documents are more than three years old, the board does not have to make them available. However, minutes of member and board meetings are “subject to inspection permanently[4].”
Florida mandates that board meeting minutes, financial records, and copies of insurance policies must be available for seven years[5]. Arizona requires retention of financial records, board, and member meeting minutes, and communications between the association and its members for three years but does not specify a specific timeframe for other records[6].
Not every state defines which records an association must retain and for how long, but that information may be outlined in its bylaws. If neither the statute nor the bylaws provide any clarification, the board must act reasonably and in good faith.
If both the bylaws and the state code have record-keeping requirements, the state law will take precedence if there is any conflict, though the bylaws can provide higher record-keeping requirements. Regardless, the bylaws can mandate that the board keep more records, or keep them longer, than the statute, but cannot decrease the statutory requirements.
What documents does the association not have to produce?
Given the broad definitions of “official records” and “association records,” it is probably easier to think of HOA disclosure requirements in terms of what the association does not have to produce rather than what must be produced.
For example, minutes of executive board meetings are exempt from disclosure in most states[7]. The Florida law also exempts information relating to the sale or lease of a specific parcel and association personnel records, though not contracts of employment.
In any state, records subject to the attorney-client or work-product privilege do not have to be produced, and records relating to pending litigation are also frequently exempted. However, member lists are generally subject to inspection, though, under Arizona law, an association need not provide a member list if the requester has a commercial purpose.
Moreover, California permits an association to refuse to produce its membership list if it believes the requesting member’s intended purpose is “improper.” If challenged, the association has the burden of proving the purpose is improper[8].
California allows withholding or redaction if the production of the requested materials could lead to fraud or identity theft. California law exempts explicitly from inspection records relating to “goods or services provided a la carte to individual members of the association for which the association received monetary consideration other than assessments[9].”
The board may also withhold records of disciplinary or collection action taken against members and its personnel records, but not payroll records. The association is prohibited from withholding or redacting “information concerning the compensation paid to employees, vendors, or contractors.” However, employee compensation information should be identified by job title rather than explicitly identifying the employee[10].
Importantly, California HOAs must provide a written explanation for any redactions or withheld documents. It is worth noting that most states only require associations to make records available for inspection. That is, the board of directors usually does not have to produce unrecorded information, make calculations or synthesize information or data into a report for the requesting member, or provide any opinions (unless the opinion has been memorialized in the records).
However, the board’s duty to act in good faith prohibits it from making any withholding decisions based upon a grudge or dislike of the requesting member. So, if materials are made available for one member, the materials should not be withheld from another.
What is the procedure for requesting documents from an HOA?
Most associations adopt written procedures for member requests and the association’s response. The process may be in the bylaws or may be in separate rules promulgated by the board. As with record-keeping, if the association’s rules conflict with the statutory procedure, the statute will take precedence.
Most states do not have a detailed prescribed procedure for submitting inspection requests, other than to say the request must be made in writing to the board. Florida, though, requires members to submit requests by certified mail[11].
In both Florida and Arizona, associations must respond to requests within ten business days after receiving the request[12]. In California, the response time depends upon the nature of the records requested. Records produced during the current business year must be produced within ten days. However, the timeframe for the production of records from the prior two years is extended to thirty days, and fifteen days is allowed for the production of committee-meeting minutes[13].
The inspection itself should usually occur within the development or at an agreeable location nearby. California associations can also produce requested records by first-class mail or via email or other electronic means as long as the records can be transmitted “in a redacted format that does not allow the records to be altered[14].”
In Florida, records must be made available at a location within 45 miles of the development or in the same county. Florida also permits electronic production of association records[15].
Can the association charge a member to inspect documents?
Community associations can usually charge members a small amount for production, but the allowable charges are generally restricted to copying costs and limited labor costs.
California authorizes associations to charge “all direct and actual costs of copying and mailing,” along with up to $10.00 per hour (but not more than $200.00 total) for the labor necessary to redact records[16]. Any charges over what is permitted by law are not allowed.
Florida allows copy costs if more than 25 pages are produced and labor costs of not more than $20.00 per hour if more than a half-hour is necessary[17]. If copies are made on the association’s copier, the association can charge copy costs of up to $0.25 per copy. However, charges are limited to the actual costs incurred if an outside vendor is used for copying.
If the requesting member uses his or her device to copy or scan the documents, the homeowner’s association cannot charge for the copies[18]. Arizona limits copy costs to $0.15 per page, and the association cannot charge the member to inspect the documents[19].
Do board members have greater rights to inspect HOA documents?
For the most part, board members are treated similarly to directors of a corporation and, therefore, have expanded rights to inspect community records. For example, in California, a board member has “the absolute right at any reasonable time to inspect and copy all books, records, and documents of every kind and to inspect the physical properties” of the association.
Even more, board members usually do not have to pay for the costs of production or copying costs and are permitted to inspect the executive session minutes that are withheld from ordinary members.
Importantly, an association can deny a board member’s request for expanded inspection if the association believes the board member is acting to advance his or her personal interests, rather than those of the association. The board members expanded inspection rights cease when he or she is no longer on the board, even if the documents sought for inspection are related to when he or she served on the board[20].
What can a member do if an HOA refuses to allow inspection of documents?
Sometimes, even though the association is legally required to allow members to inspect records, the board may refuse to comply. In that situation, members have little recourse other than to take the association to court.
In most states, the action can be brought in small claims court, though a higher-level court may be a better option if there are other claims involved. While it is not mandatory to hire an attorney, it is usually a good idea - especially if the member is proceeding in a court other than small claims court – as procedural rules can be tricky and the association will almost certainly have counsel.
The damages available to members for an association’s non-compliance vary from state to state. In California, if the court finds that the HOA wrongfully withheld documents from a valid inspection request, the court can award the member his or her attorney’s fees, along with a civil penalty of up to $500.00 per wrongfully denied request[21].
On the other hand, if the court finds that the member brought an unreasonable or frivolous action against the association, the court can order the member to pay the costs incurred by the association in responding to the request and lawsuit.
Florida courts can award prevailing members their “actual damages” (the actual economic harm suffered by the member as a result of the association’s failure to honor the request) or civil penalties of $50.00 per day beginning on the eleventh day after the wrongfully denied request was made[22].
That is, the court can award a penalty of $50.00 for each day after the day upon which the association’s response was due. Importantly, an aggrieved member in Florida must serve the association with a demand for pre-suit mediation before filing suit[23].
The demand must be served by certified mail in the statutorily prescribed form, and mediation must be held within ninety days of the notice. The parties split the costs of mediation. If mediation is unsuccessful, or if the association refuses to participate, the aggrieved member can then institute a civil action against the association.
Member inspection rights are an essential part of the homeowner’s association/property-owner relationship. The right to review records allows members to stay up-to-date on community activities and finances and keeps board-members and the association itself accountable for their use of members’ assessment payments.
Members wishing to stay informed about community activities should:
Be aware of the inspection rights provided under the laws of the state where the community is located, and
Ensure that any inspection requests meet all statutory requirements and comply with any applicable association rules or bylaws.
References:
[1] Fla. Code §720.303(4).
[2] Cal. Civ. Code §5200(a).
[3] Cal. Civ. Code §5210(a)(1).
[4] Cal. Civ Code §5210(a)(2).
[5] Fla. Code §720.303(4).
[6] A.R.S. §10-11601.
[7] Cal. Code §5200(a)(8), Fla. Code 720.303(5)(C), ARS §33-1258(B).
[8] Cal. Civ. Code §5225.
[9] Cal. Civ. Code §5215(5).
[10] Cal. Civ. Code §5215(b).
[11] Fla. Code §720.303(5).
[12] Fla. Code §720.303(5)(a), A.R.S. §33-1805(A).
[14] Cal. Civ. Code §5205(c)(d), 5205(h).
[15] Fla. Code 720.303(5).
[16] Cal. Civ. Code §5205(f).
[17] Fla. Code §720.303(5).
[18] Fla. Code §720.303(5).
[19] A.R.S. §33-1805.
[20] See Wolf v. CDS Devco, 185 Cal.App.4th 903 (2010).
[21] Cal. Civ. Code §5235.
[22] Fla. Code §720.303(5)(b).
[23] Fla. Code §720.311(2)(a).