Berding | Weil - Attorneys At Law

Ten Things You Need to Know About the New Records Law

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.

1.   Most association bylaws permit members to inspect “books and records”. Does the law change this or make inspection rights clear?

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.

2.   Who must pay for copying and producing these records?

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.

3.   Can the association withhold the records if the requesting member refuses to pay?

No.

4.   Do the new production rules apply to current records or those kept in storage or archives?

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.

5.   How much time does an association have to produce the records?

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.

6.   Where are the records to be produced, inspected and copied?

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.

7.   In the past, the association could withhold the membership list so long as it agreed to provide to the requesting party an alternative means of communicating to the members. Is this still the law?

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).

8.   Can the association remove privileged or sensitive information before producing the records?

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).

9.   What can happen if the association violates the new law?

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.

10.   What should we expect for document requests?

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.

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