California law provides owners with access to many HOA documents, including financial records. What are those documents, how quickly must they be provided, and what are the limitations?
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.
Documents Subject to Inspection
The following documents are “association records.” Association members may inspect or request copies of these documents.
- Financial documents (a summary of the association’s reserves, the annual budget report, financial statement reviews, and audits);
- Interim financial statements;
- Executed contracts, not privileged;
- Written board approval of vendor or contractor proposals or invoices;
- State and federal tax returns;
- Reserve account balances and records of payments made from reserve accounts;
- 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;
- Membership lists, including name, property address, and mailing address (but no records/information concerning those members who have opted out);
- Check registers;
- The governing documents;
- Reserve studies; and
- 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).
And in the event of a challenge to an election, members may also request to inspect ballots. See Civil Code §5125.
Time Limits for Keeping Records
The association must maintain records for the current fiscal year, plus two previous years. However, minutes of members and board meetings need to be kept permanently. [Civil Code §5210(a)].
For more information, read about records retention guidelines for HOAs.
Time Limits for Providing Records
Association records prepared during the current fiscal year: 10 days following receipt of the request [Civil Code § 5210(b)(1)].
Association records prepared during the previous 2 years: 30 days [Civil Code § 5210(b)(2)].
Minutes: within 30 days of the meeting (Civil Code § 4950).
Membership list: 5 days (Civil Code § 8330).
Withholding or Redacting Records
A document may be withheld or redacted if information in a document 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). The association may also charge a fee for the cost of redaction (see below).
Owner, Board, and Lender Rights
The right to inspect records is determined by the requesting individual’s relationship with the association and the purpose of the request.
A member or member’s designated representative may inspect [Civil Code § 5205(a)] association records. However, 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.
A member also has a right to request the email addresses of other members. 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.
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) except when they don’t. 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.
Most governing documents protect a lender’s right to inspect the association’s books and records as a way to protect their security interest.
Documents May Be Inspected In Person, Copied, or Produced Electronically
In-Person Inspection. 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)].
Paper Copies. If a written request is made, the association may deliver copies to the member [Civil Code §5205(e)].
Electronic Copies. 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)].
Charges for Documents
Copying and Mailing. 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)].
Redacting. 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)].
Owner Rights At-A-Glance
|Frequently Requested Documents||Owner Rights|
|Email Addresses of Members||✔|
|Membership List (Non-commercial Purposes Only)||✔|
Tom Fier is an attorney at law and the past chair of the ECHO Legal Resource Panel.