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06/03/08: Access To Association Records

Housing Counsel

By Benny L. Kass

Q: We live in a large homeowner association. Have you ever heard of a contract between the Board of Directors and the management company hired by the association which contains a confidentiality agreement, whereby the homeowners are not privy to the contents of the agreement. Both our Board and the management company refuse to allow any of the homeowners to see the contract? Also, if our Bylaws state that the management contract can only be for a 2 year period, how can the management company have the Board sign a 5 year contract, which we understand is the case?

A: Access to community association information, books and records is a hotly debated issue throughout this country. Many state laws – such as in the District of Columbia and Maryland – specifically require that all such documents be made available upon reasonable request by a homeowner. Some states, such as Virginia, add the requirement that the person requesting this information demonstrate that the request “is for a proper purpose related to his membership in the (association) and not for pecuniary gain or commercial solicitation.”

There are certain documents which should be available only to the elected board of directors. For example, the Virginia law specifically excludes such documents as personnel matters relating to specific, identified persons or a person’s medical records; contracts that are being negotiated and have not yet been finalized, and pending or even probable litigation. The latter is defined as “those instances where there has been a specific threat of litigation.” Clearly, in order to properly formulate a defense – and to preserve the lawyer-client privilege – homeowners other than the board should not be privy nor have access to this information.

You should also carefully review your association legal documents, since they may also contain language addressing this issue.

Unfortunately, those Boards that want to preserve their own privacy have often used the “proper purpose” test as a shield to avoid releasing any documents, including in your case the management contract.

What is a “proper purpose”? As far as I am concerned, any document that the Board signs – or any moneys which the Board spends – is for the benefit of all owners and thus all owners have – or should have – the absolute right to review this material.

Several years ago, I represented a condominium unit owner who wanted to know the salaries for the various staff members were worked in her building. The Association balked at releasing this information, citing privacy concerns.

We told the Judge that we did not want to know the addresses, the social security numbers or even the home telephone numbers of these employees. We further explained to the Judge that these salaries were made from association funds, and my client had the right to access this information.

After a bitter court battle, the Judge ruled in favor of my client.

Homeowners should not have to go to court, and spend their own time and money just to obtain documents that they have the legal right to review. But too many Boards of Directors – and property managers – have the mindset that privacy will avoid confrontation and challenges to their authority.

You have the absolute right to obtain a copy of the management contract. If, as you suggest, it is for a five year term, and the Bylaws of your Association limit such contracts to only 2 years, I suspect that is why your board is refusing to release the contract.

I suggest that you discuss this matter with the association attorney. Although he or she was retained by the Board of Directors, the attorney is the lawyer for the entire association. In that capacity, the lawyer must act in the best interests of all of the unit owners – and not just on behalf of the Board.

It may very well be that you are in error. The management contract may only be for two years, and in full compliance with your Bylaws. But since this document is hidden from view, rumors and speculation thrive and grow wilder with the passage of time.

Boards of Directors and management companies must understand that communication and disclosure generally solve most – if not all – of homeowner’s concerns. Your Board was elected by the membership and that membership has the right to “throw the rascals” out of office if they do not behave responsibly.

If all of your efforts with the Board fail, then I recommend that you organize a group of owners who share your concerns and retain a private lawyer to assist you. While I cannot guarantee success, I believe a law suit (or even the threat of a lawsuit) will pry that management contract out of darkness.