Effective July 1, 2006, a new bill (AB 1098) concerning records inspection becomes effective. The law, contained in the Davis-Stirling Common Interest Development Act at Civil Code Section 1365.2, provides some clarification of membership inspection rights and establishes reasonably clear guidelines and deadlines for how an association must respond to a request. Unfortunately, the law also adds layers of ambiguity and serious financial risk for associations, directors and managers. Here is a quick guide to highlight the issues but given the ambiguities, where a document request is broad, vague or made in the context of controversial issues, we strongly suggest getting legal counsel involved early.
Yes, the effect of new Civil Code Section 1365.2 is to specifically define what books and records are subject to inspection and divides these documents into two categories. The first category (association records) includes financial and interim financial statements, the general ledger, executed and approved contracts (subject to exceptions), membership lists, check registers. The second category (enhanced association records) includes invoices, statements, receipts and cancelled checks, purchases orders, credit card statements and reimbursement requests.
The association is responsible for the time it takes to identify and produce the records. The owner can be billed for direct and actual copying costs and postage. The cost to excise (or redact) certain confidential information from the records can be passed on to the owner but is subject to specific cost limitations. The requesting member must be advised of the total cost prior to it actually being incurred.
The law generally applies to current records and those from the prior two years. The new law does not address records from prior years except to require that minutes of board and membership meetings, and after January 1, 2007, committees with decision making authority (most often, the ACC), must be made permanently available.
It depends on what records are being sought. Generally, current association records must be produced within 10 days; for records from the last two fiscal years, 30 days; membership lists are to be available within 5 days; and a reasonable period is permitted for the production of the enhanced association records.
Either at the association's on-site office or a location the parties agree upon. Otherwise, the association must mail the records to the owner. This last option can be very complicated to implement if the owner's request for records is very broad or unclear.
The law has changed somewhat. The membership list must be provided a requesting owner but removed from the list must be the names of members who have informed the association that they do not wish to have their names and addresses released. In that case, the board must provide an alternative means of communication to those opt out members (usually, this will mean that the association will mail the requesting owner's letter to the opt out members).
Yes. Information subject to redaction includes that likely to lead to identity theft, some personnel records and information that is privileged under law. This definition is very general and may include information protected by the attorney client-privilege and proprietary information contained in vendor contracts (including management, contractor, landscaper and other service agreements).
The association can get sued in small claims or superior court. If the owner prevails, he/she can recover attorneys' fees and costs. If the association acted negligently or unreasonably in responding to any single written request, it can be penalized up to $500. On the other hand, if the association releases information it shouldn't (such as proprietary information of a contractor) its exposure could be far greater. Each request has to be studied carefully to walk the fine line between under and over producing.
Expect that directors and management will need a lot of time to evaluate the requests, confer with counsel, and move quickly to identify the records and to carefully copy and then redact privileged information. Some but not all (and, in many cases, only a small percentage) of the cost can be passed on to the requesting owner.