Real Estate & Property Law

Are Managers' Reports Open to Inspection by Members?

I get all kinds of questions from readers. They are usually preceded by appreciative words. I appreciate the feedback. Here is an email from a reader about management reports, wondering if they are subject to owner inspection:

"Fan of your website, my question is this: I remember reading that Association members can request a copy of the Managers Report contained within board packets for board meetings (sensitive information redacted of course)?"

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This isn't exactly a question, but I get the gist. I don't see it (managers reports or board packets for that matter) in the law in California that applies to records inspections and if it isn't in the law there is not a requirement to provide it to owners. That is not to say a board could not allow owners to see the packets. However, when boards act without regard for the laws, it can get a board and/or association into trouble so I advise against it. Being congenial and neighborly is laudible and I generally applaud transparency - however, disrespecting the law or purpose for it can create problems board members cannot even imagine - until they happen. It is important to know and respect the limits. As for the records inspection law, there was lots of push and pull to come to the language finally presented, and then there was some correction in clean up legislation. The purpose of the law is to allow owners to inform themselves about the finances of the association and how the assessments are spent, what money is set aside, and some of the detailed records supporting the calculations of the board, and also to allow owners a means of communicating with other owners in the association. It is not to assist members in second guessing the board members or criticizing what they or the manager gathers in the way of information to assist in the decision making process or to allow neighbors to have private information about their neighbors.

California law in the Davis Stirling Act regulates what records are open to inspection by members. There is nothing in this list giving owners the right to inspect and copy manager?s reports or board packets. If an owner wants to see these items, he or she should run for the board and serve the association.

Here are the excerpts from the law. If an association?s governing documents include other items, then those other items are subject to inspection. Inspection and copying of confidential records such as any related to executive session meetings or attorney-client privileged items should not be subject to inspection. The law offers protection for these items for good reason. See section H.

These excerpts are taken from the book The Davis Stirling Act In Plain English, available on the guru website in the webstore:

?1365.2. ASSOCIATION RECORDS; AVAILABILITY TO MEMBER; REDACTIONS; USE BY MEMBER; REMEDIES
(a) For the purposes of this section, the following definitions shall apply:

(1) "Association records" means all of the following:
(A) Any financial document required to be provided to a member in Section 1365.
(B) Any financial document or statement required to be provided in Section 1368.
(C) Interim unaudited financial statements, periodic or as compiled, containing any of the following:
(i) Balance sheet.
(ii) Income and expense statement.
(iii) Budget comparison.
(iv) General ledger. A "general ledger" is a report that shows all transactions that occurred in an association account over a specified period of time.

The records described in this subparagraph shall be prepared in accordance with an accrual or modified accrual basis of accounting.

(D) Executed contracts not otherwise privileged under law.
(E) Written board approval of vendor or contractor proposals or invoices.
(F) State and federal tax returns.
(G) Reserve account balances and records of payments made from reserve accounts.
(H) Agendas and minutes of meetings of the members, the board of directors and any committees appointed by the board of directors pursuant to Corporations Code Section 7212; excluding, however, agendas, minutes, and other information from executive sessions of the board of directors as described in Section 1363.05.

(i) Membership lists, including name, property address, and mailing address, if the conditions set forth in clause (ii) are met and except as otherwise provided in clause (iii).
(ii) The member requesting the list shall state the purpose for which the list is requested which purpose shall be reasonably related to the requester's interest as a member. If the association reasonably believes that the information in the list will be used for another purpose, it may deny the member access to the list. If the request is denied, in any subsequent action brought by the member under subdivision (f), the association shall have the burden to prove that the member would have allowed use of the information for purposes unrelated to his or her interest as a member.
(iii) A member of the association may opt out of the sharing of his or her name, property address, and mailing address by notifying the association in writing that he or she prefers to be contacted via the alternative process described in subdivision (c) of Section 8330 of the Corporations Code. This opt-out shall remain in effect until changed by the member.
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(J) Check registers.

(2) "Enhanced association records" means invoices, receipts and canceled checks for payments made by the association, purchase orders approved by the association, credit card statements for credit cards issued in the name of the association, statements for services rendered, and reimbursement requests submitted to the association, provided that the person submitting the reimbursement request shall be solely responsible for removing all personal identification information from the request.

Full post as published by California Condo & HOA Law on January 08, 2011 (boomark / email).