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March 9, 2006
Records Inspections - A Few Things to Think About
In California, many of you are probably aware of the new laws on inspection of records that kick in July 1, 2006. Members will have more rights than ever to see detailed association financial records, right down to the checks and check stubs. But there are some things to get straight.
There are some conflicts in the new law with existing law. A big question arises as to whether members can get membership lists or not (names, addresses and voting rights of fellow members), and whether Associations may still be able to provide an alternate for mailings to giving the list out (such as by accepting the ready to mail communications, and using a mail service at the Owner's expense). Civil Code Section 1363(f) says: "Members of the association shall have access to association records, including accounting books and records and membership lists, in accordance with Article 3 (commencing with Section 8330) of Chapter 13 of Part 3 of Division 2 of Title 1 of the Corporations Code. The members of the association shall have the same access to the operating rules of the association as they have to the accounting books and records of the association." The Corporations Code allows for the alternate method of mailing out owner communications if they have asked for the list. The new law, however, found at Civil Code Section 1365.2, does not seem to allow for this alternate mailing offer except as to owners who have "opted out" from having their names and addresses given to other owners who request a membership list. So how do they "opt out" if they do not know they can? It would be up to the Association to tell them. And up to the Association's legal counsel to advise which law actually controls on this particular question.
For Associations, it seems that you could require an owner to bring their own copy service to the association site, or manager's office, or wherever you and the owners agree the records shall be produced, rather than having to provide copies made at your own facilities. But if you are not willing to bring the records to the Association site, or you cannot agree on an alternative site with the owner, then you may have to provide copies of the requested information. You can estimate the cost, but the law does not provide you with a clear mechanism to collect it, or to withhold records until it is paid.
For Owners, you are entitled to see a lot of association records, but do you need them all? If you ask for everything you are entitled to under the statute, the Association can "throw in the kitchen sink" meaning include all records and reports that you get each year anyway, and charge a cost similar to that of a copy service, or actual costs of a copy service, which are probably more than 20-25 cents per page, front and back. Therefore, for example, if you ask for 3 years worth of checks, front and back, you may be paying hundreds of dollars for costs of producing the records. (And yes, I believe an association could probably recover the copy costs and the costs of going to small claims court by producing a cost sheet from a copy service if you resist paying, or in some cases if appropriate pursue reimbursement assessments for their costs against you, so be prepared to pay up!) And all information relating to bank account numbers of the checks and where they were deposited will likely be redacted, another charge to you, of up to $200. Most accounting services today for management companies and otherwise use computerized checks so a check register may have all the information you need about payees and amounts, at least for starters on your quest to answer questions about association use of funds. Furthermore, if you have received a review prepared by an independent CPA, which is required to be provided to you at no charge each year if your association grosses more than $75,000 in revenues, you can see a lot about what money went where. So why be obnoxious about your needs?
Applying this new law will be a balancing act, and balancing needs and obligations is much easier if opposing parties take a reasonable approach at the outset, before any grudges are formed.
Posted by Beth Grimm at March 9, 2006 1:09 PM