Articles

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

Date: January 30, 2018

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

By: Tiffany M. Releford, Esq.

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.