Newsletters

Community Associations Newsletter - January 2018

Date: January 30, 2018

It’s My Right! Statutory Books and Records Inspections by Owners

By: Tiffany M. Releford, Esq.

Originally published in the January 2018 volume of the Washington Metropolitan Chapter Community Association’s Institute’s Quorum.

An owner’s zealous search for information may involve a request to review the association’s books and records. The District of Columbia, Maryland, and Virginia have statutes detailing the books and records available for examination and copying by owners. Accordingly, the board of directors and managers should be informed of what books and records owners have a statutory right to inspect. This article will set forth the highlights of the relevant statutes in the District of Columbia, Maryland, and Virginia.

District of Columbia

Section 42-1903.14 of the District of Columbia Condominium Act, authorizes inspections of an associations books, minutes, and records by an owner. The statute requires the association to keep detailed records of the receipt and expenditures of the condominium. It also requires the association to keep the unit owners’ association membership list, mailing addresses of unit owners, and financial records, including the aggregate salary of the association employees, available in the District of Columbia and within 50 miles of the District of Columbia for examination and copying by an owner in good standing, or the owner’s authorized agent. Good standing is defined in the statute as an owner who is not delinquent for more than 30 days in the payment of any amount owed to the association, or who has not been found by the association or its executive board to be in violation of the condominium instruments or rules of the association.

In addition to the owner being in good standing, the request for examination must be made for a proper purpose related to the owner’s membership in the association, and not for pecuniary gain, commercial solicitation, or another purpose unrelated to membership in the association. However, not all of the association’s books and records are available for examination. An association may withhold from inspection and copying:

Information that is in draft form not yet incorporated into the association’s books and records
Books and records relating to personnel matters
Pending or anticipated litigation (where there has been a specific threat of litigation from a party or the legal counsel of a party)
Contracts, leases or commercial transactions currently in or under negotiation; communications with legal counsel
Matters involving state or local administrative or other formal proceedings before a government tribunal for enforcement of the condominium instruments or rules and regulations
Disclosure of information in violation of law
Minutes or other records of an executive session of the board of directors
Documentation, correspondence, management or reports compiled for or on behalf of the unit owners’ association of the board of directors by its agents or committees for consideration in executive session
Individual unit owner or member files, other than those of the requesting unit owner

Recognizing how burdensome compiling and arranging an examination of these records can be, the statute limits examination and copying to reasonable hours on business dates. It also permits the association to impose and collect a fee reflecting the actual costs of materials and labor for providing access to copies of the requested books and records. This fee may be collected upfront prior to providing copies of any books or records.

Maryland

In Maryland, an owner’s right to inspect an association’s books and records is found in Section 11-116 of the Maryland Condominium Act and Section 11B-112 of the Maryland Homeowners Association Act. Like the District of Columbia, for condominium associations the books and records, including insurance policies, shall be maintained in Maryland or within 50 miles of its borders and available for copying during normal business hours after reasonable notice. Under the statutes, members of an association are permitted to inspect the books and records of the association, subject to certain exceptions. An association may withhold from inspection:

Personnel records, not including information on individual salaries, wages, bonuses and other compensation paid to employees
An individual’s medical records
Individual’s personal financial records
Any records relating to business transactions currently in negotiation
Written advice of legal counsel
Minutes of closed meetings of the board of directors or other governing body of the counsel of unit owners

In addition, in Maryland, requests for financial statements or meeting minutes from the governing body of the association shall be produced within 21 days if the financial statements or meeting minutes were prepared within three years immediately preceding receipt of the request. If the financial statements or meeting minutes were produced more than three years before receipt of the request, they should be produced within 45 days. Understandably, responding to these requests can be burdensome which is why the Maryland laws allow an association to impose a “reasonable charge” for inspection and copying of books and records. Any reasonable charge may not exceed the fee charged by the circuit courts in Maryland.

Virginia

The statutory right of an owner to examine an association’s books and records in Virginia is similar to the District of Columbia and Maryland statutes. An owner’s statutory right to inspect is found in Section 55-79.74:1 of the Virginia Condominium Act, Section 55-510 of the Virginia Property Owners’ Association Act, and Section 13.1-932, et. seq. of the Virginia Nonstock Corporation Act. Like the District of Columbia, the condominium and property owners’ statutes require associations to keep detailed records of the receipt and expenditures of the association. Property owners associations must also keep the association’s membership list, addresses and the aggregate salary information of the association employees, including under Section 55-510 of the Virginia Property Owners’ Association Act the actual salary of the six highest compensated employees of the association earning over $75,000, available for examination and copying by owners in good standing. Good standing is not defined in the statutes; however, it may be defined in the association’s governing documents, or the association may adopt a rule defining good standing. Owners may exercise their right to examine association books and records upon five business days’ written notice for a professionally managed association and ten business days’ notice for a self-managed association. The notice must provide a reasonable rationale for the request and describe the specific association books and records to be examined.

Similar to the District of Columbia, the condominium and property owners association statutes state the request must be for a proper purpose related to membership in the association, and not for pecuniary gain or commercial solicitation. Like the other jurisdictions, the books and records that can be withheld from examination or copying include:

Records concerning personnel matters related to specific identified persons or a person’s medical records
Contracts leases, and other commercial transactions currently in or under negotiation
Pending or probable litigation (where there has been a specific threat of litigation from a party or legal counsel of a party)
Matters involving state or local administrative or other formal proceedings before a government tribunal for enforcement of the condominium instruments or rules and regulations
Communications with legal counsel related to the subjects noted above or protected by attorney-client privilege or the attorney work-product doctrine
Disclosure of information in violation of law
Meeting minutes or other confidential records of an executive session of the executive organ
Documentation, correspondence, management or executive organ reports compiled for or on behalf of the association or the executive organ by its agents or committees for consideration in executive session
Individual unit owners or member files, other than those of the requesting unit owner

Drafts not yet incorporated into a condominium association’s books and records can be withheld from examination, but draft minutes of a property owners association may be subject to inspection. Under Section 55-510(F) of the Virginia Property Owners’ Association Act, draft minutes that are not otherwise permitted to be withheld for the reasons provided above, shall be open for inspection and copying within either 60 days from the conclusion of the meeting to which such minutes appertain or when such minutes are distributed to board members as part of an agenda package for the next meeting of the board of directors, whichever occurs first. Virginia associations may impose and collect a charge, reflecting the reasonable costs of materials and labor, prior to providing copies of the requested records. However, the executive organ of the association must adopt a cost schedule before imposing a charge. The cost schedule shall specify the charges for materials and labor, apply equally to all owners in good standing, and be provided to the requesting owner at the time of the request.

Under the Virginia Nonstock Corporation Act, a corporation is required to keep permanent records of meeting minutes, actions taken by members or the board of directors without a meeting, and all actions taken by a committee of the board of directors. The corporation must also maintain accounting records and a record of all members’ names and addresses that can be put in alphabetical order by class and are in written form or in another form capable of conversion into written form within a reasonable time. The corporation must also keep a copy of its articles or restated articles of incorporation; bylaws or restated bylaws and all amendments thereto; resolutions; all written communications to members within the past three years; names and business address of the current directors and offices; and the most recent annual report. Under Section 13.1-933 of the Virginia Nonstock Corporation Act, a member can inspect the records upon at least five days written notice, during business hours at a reasonable location specified by the corporation. However, the member may only inspect and copy the records if he/she has been a member of record for at least six months immediately preceding the demand; the demand is made in good faith for proper purpose; the purpose of the request and records requested are described with reasonable particularity; and the records are directly connected to the purpose of the request. Like the other Virginia statutes, the corporation may impose a reasonable charge for costs of labor and materials for copies of the documents provided to the member.

Notwithstanding the foregoing, it should be noted that while certain records can be withheld from inspection by an owner, a member of the board of directors is permitted to examine those records in the discharge of his/her duties as a director. However, even when such information is made available to a director, it should be safeguarded and kept confidential.

Service Animals/Assistance Animals: Can They Vacation In Your Community?

By: Chad J. Toms, Esq.

Many communities, especially those in the beach and resort areas, are noticing an increase in vest wearing dogs being brought on vacation despite rules that prohibit pets. Numerous internet companies advertise that with a “no questions asked” registration an owner can take their dog anywhere “legally” so long as it is wearing a service animal vest and has a certificate. Communities that see a large volume of vacation rentals are being inundated with vest wearing dogs on vacation that they believe are fake service dogs. As a result, communities should arm themselves with a working knowledge of the differences between the categories of these animals and know the questions an association may lawfully ask to validate a dog’s status.

There is no registry requirement for service animals nor must they be wearing a vest. There are, however, specific differences between a service animal and an assistance animal. Generally, a service animal is a dog (occasionally a miniature horse) that under Titles II and III of the Americans with Disabilities Act (“ADA”) is specially trained and accompanies a person with a disability in all areas where members of the public are allowed. The most common tasks performed by a service animal include pulling a wheelchair, retrieving dropped items, alerting a person to a sound, or reminding a person to take medication. Whereas, an assistance animal, including those needed for emotional support or therapy, can be any animal that a health care provider has determined provides benefit for an individual with a disability under the Federal Fair Housing Amendments Act of 1988 (“FHAA”) or Section 504 of the Rehabilitation Act of 1973.

I. Service Animals Under the ADA

“Service Animal” is a phrase connected only with the ADA. Title II (State and local government services) and Title III (public accommodations and commercial facilities) of the ADA recognize specially trained dogs as service animals. The ADA regulations also allow miniature horses that have been individually trained to do work or perform tasks for people with disabilities.

The ADA applies only to persons who fall under the definition of having a disability. Disability is defined as a person who: (1) has a physical or mental impairment that substantially limits one or more major life activities such as walking, seeing and hearing; (2) has a record of such an impairment; (3) is regarded as having such an impairment.

When it is not obvious what service an animal provides, only limited inquiries are allowed under the ADA. An entity or staff member may ask two questions: (1) is the animal a service animal required because of a disability? (2) what work or task has the animal been trained to perform? You cannot ask about the person’s disability, require medical documentation, require a special identification card or training documentation for the animal, or ask that the animal demonstrate its ability to perform the work or task.

The most important distinction for a community to know when being told a dog is a service animal is whether the ADA is even applicable to the community. That determination turns on whether the community is a place of public accommodation. While state statutes may differ on the precise definitions of a place of public accommodation, generally if a community has space that is open to the public it must comply with the ADA in that portion of the community. Some examples of this are hotels and motels operating in common with a condominium or a community that allow the public to access its restaurants, pools or other facilities. If no portion of your community is a place of public accommodation, the ADA is not applicable. However, if your community is bound by the ADA there are published guidelines that can be found at https://www.ada.gov/service_animals_2010.htm.

II. Assistance Animals Under Federal Fair Housing

The FHAA protects persons in a protected class, which includes those with a disability, from discrimination in obtaining housing. Under this law, a condominium or homeowner’s association must provide reasonable accommodations to people with disabilities so that they have an equal opportunity to enjoy and use a dwelling. The United States Department of Housing and Urban Development (HUD) uses the term "assistance animal" to cover any animal (not just dogs) that works, provides assistance, or performs tasks for the benefit of a person with a disability, or provides emotional support that alleviates one or more identified symptoms or effects of a person's disability. Assistance animals, including those for emotional support, may qualify as reasonable accommodations under the FHAA. While not defined in federal statutes, the term “emotion support animal” is understood to be a companion animal (not a pet) that a medical professional has determined provides benefit for an individual with a disability, typically a mental or psychiatric disability. Communities should also be aware that their state and/or locality may also have additional requirements relating to assistance animals under their fair housing laws.

Whether requested by a full time resident, short term tenants on vacation, or guests of residents and tenants an association must provide a reasonable accommodation in its rules, policies, practices or services, when necessary to afford a disabled person with equal opportunity to use and enjoy a dwelling. But unlike the ADA and its limitation on inquiry, FHAA encourages a community association and a resident to engage in an interactive process to discuss and exchange information about the person’s needs and the reasonableness of the requested accommodation/modification. Some questions to ask may include whether:

a) the resident, tenant, or guest is a person with a disability affecting a major life activity;

b) the animal is needed to assist the person with that specific disability; and

c) the animal actually assists the person with a disability.

Communities should consider adopting policies that create procedures for residents to request an accommodation or modification under FHAA and outline how the association will handle requests. Communities may want to consider rules related to those assistance animals allowed as reasonable accommodations, including noise rules, clean-up for such animals, and even appropriate entrances. It should be noted, however, that communities cannot charge a fee for assistance animals as they are not pets. If a community determines it is a place of public accommodation and subject to the ADA, it may also adopt policies for interacting with service animals and their owners. Please contact us should you have any questions about handling service animals or assistance animals in your community.

Insurance Requirements For Condominium Owners

By: Thomas Mugavero, Esq.

Every condominium association is required, by statute and by governing document, to carry a master insurance policy on the building. Such policies cover the common elements and – in multi-story buildings at least – the individual units as well. The question has often arisen, however, whether unit owners themselves should carry homeowners’ insurance, generally known as “HO-6 policies.” The answer is, resoundingly, YES. It is risky not to do so.

We should note that, in the District of Columbia, the law requires each homeowner to obtain homeowners’ insurance, within a minimum coverage of $10,000 for property damage and $300,000 for personal liability. See D.C. Code § 42-1903.10. The Board may increase the minimum required coverage limits as a result of a properly noticed meeting. In Maryland, the governing documents may require unit owners to carry HO-6 policies, and to provide evidence of such coverage to the unit owners’ association on an annual basis. Md. Code, Real Prop. Art. § 11-114.2.

The most obvious coverage provided by an HO-6 policy is property damage: remuneration when an accident, either within or outside the unit, causes structural damage inside the unit. In Virginia, the matter is covered mainly by the governing documents themselves: if the agency causing damage arises out of the common areas (a burst pipe, a fire started in the hallway, etc.), then the association would have primary responsibility for repairing the damage. If the agency started within the unit, however, repairs are the responsibility of that unit owner – even where the damage caused is in another unit.

In the District of Columbia and in Maryland, the association is responsible for repairs to both the common areas and the individual units, regardless of where the damage originated. In each of these jurisdictions, moreover, the amount of the master policy deductible may be recovered from any unit owner from whose unit the damage originated, provided that advance notice of such requirement is given to all unit owners. Two differences, however, lie between D.C. and Maryland. First, in Maryland, the unit owner would not be responsible for more than $5,000 of the master policy deductible, while in D.C., the governing documents may allow for recovery of a higher deductible. Also, the D.C. statute specifically states that the association remains free to seek to recover the full amount of the repair costs from a unit owner whose negligence caused the damage.

In all three jurisdictions, the association is only responsible for bringing the unit back to the condition it was in when the developer first sold the unit. Any betterments that the unit owner might have installed – granite countertops, high-end appliances, etc. – would still be the responsibility of the unit owner.

In short, therefore, if a unit is damaged because of some event arising in the common areas, the association will be responsible for structural repairs in the unit, but only has to put the unit back to its original condition, regardless of any betterments or upgrades. If the damage arose from an individual unit, however, a Virginia association would have no duty to repair anything but the common elements; a Maryland association would have to repair everything, but could recover up to $5,000 from the unit owner for the master policy deductible. A D.C. association could recover the entire deductible, even if it is more than $5,000, and if the individual unit owner was negligent, could recover the entire repair amount from the unit owner. The best-case scenario, therefore, is that the unit owner would only be required to pay for any betterments or upgrades – even that, however, could cost thousands of dollars. And, depending on where the association is, the bill for the individual unit owner could be far greater.

Again, this analysis leaves out personal property – in the event of a flood, or a fire, you’re going to lose furniture, books, records and discs, electronic equipment, all the stuff that you will want to replace. Too, the condominium master policy is not going to provide any level of personal liability insurance. Thus, if a guest slips and falls in your kitchen because the floor is wet, or if your dog bites a neighbor, the existence of the association master policy will be of no comfort whatsoever.

The bottom line is that every unit owner should have an HO-6 policy, and it is in the best interests of the association that every unit owner have sufficient coverage. We recommend that, to the extent necessary and permissible under applicable law, the governing documents be revised to require such HO-6 policies.