08/15/07: Condo Owners Have The Right To Inspect Books And Records
By Benny L. Kass
Q: I own a condominium unit here in the District of Columbia and believe that our association is having financial problems. Recently, I sent a letter to our Board of Directors, asking for a copy of the most recent monthly financial report, as well as the name and mailing address of all co-owners. The Board responded that the privacy laws prevented the Board from providing that information.
Have any such privacy laws been enacted? Don't I, as a former member of the Board, have the right to know who is delinquent in our association?
A: Your Board of Directors is correct in not providing you the names and address of your co-owners, but absolutely wrong about the financial books and records.
Regarding the financial information, District of Columbia Condominium Act specifically states that this information "shall be made available for examination by a unit owner or the unit owner's attorney, accountant or authorized agent during reasonable hours on business days."
The association may want to charge a nominal fee should you want copies of these records, but you have the absolute right to know the financial condition of your Condominium. After all, you are paying fees to the association and you are entitled to know how this money is being spent. The fact that you once were on the Board of Directors is irrelevant; any unit owner has that same right.
Some states have imposed restrictions on this right, by requiring that you explain the reason for your request. But even in those states, your reason is quite simple: you are a unit owner and want to know if your board is squandering away the assets of the association,.
This is a hotly debated issue among community association professionals. There are some who take the position that the members elected the Board, and thus should trust that the Board is honest and competent to handle the affairs of the association, without interference from the membership. Others, including this columnist, take the opposite position: the Board has a fiduciary duty to its members, and the only way to instill trust and respect is for the Board to be open, and fully disclose all of its activities, which includes the financial affairs of the Association.
When you get to the issue of disclosing the names of delinquent owners, this gets more complicated. If you were behind on the payment of your fees, you do not want your neighbors to know this. But other condominium owners do want to know who is delinquent and what action - if any - the Board is taking to collect the outstanding fees.
I have always taken the position that a Board of Directors has the right to disclose to all owners the delinquency list. However, the Board has to be careful not to make any mistakes. For example, if the Board says that John owes $325, and before the publication is issued John pays this money, the Board could be in trouble with John. The correct way to report this is to say "as of August 1, 2007, John owes the association $325.00". This is a factual statement which cannot be legally challenged.
Several years ago, a Federal Court in Minnesota was involved in a case where a unit owner filed a lawsuit against his Board for publication of private facts regarding the owner's delinquency. The Court dismissed the claim, stating:
- to state a claim for invasion of privacy by publication of private facts, the matter publicized must be of a kind that would be highly offensive to a reasonable person and is not of legitimate concern to the public.
In that case, the Court held that the publication that was mailed to members of the community was not a distribution " to the public at large". (Cohen v Beachside, 2005).
So long as your Board publicizes the delinquencies only to your association members, and the facts in that publication are correct, the Board has the right to alert all owners as to who is delinquent. In fact, such disclosure often pressures the delinquent owner to pay up and become current.
There are areas, however, where privacy should trump disclosure. For example, if an owner has a serious illness or other hardship and is currently unable to pay his/her association fees, that owner should be able to discuss the situation privately with the Board, The Board may decide to defer payments for a few months and cancel any late fees. This information should be confidential, and the rest of the membership does not have the need to know.
Another area where privacy is important relates to your second question. You want the names and address of all owners. Presumably some owners do not reside in the complex but are renting out their apartments. You would like to send all owners - including the investors - a letter explaining your position and asking everyone for assistance. You may be considering asking for a recall petition so that you can "throw the rascals" out of office.
However, the addresses of owners should not be a public record. We read too many horror stories regarding "id theft", and a person's mailing address can be one important piece of information that will enable an unscrupulous person to begin to compile a profile on unsuspecting individuals. There is a solution to this. The Board - or its management company - has a mailing list of all owners. If you want to circulate information to everyone, the Board should be willing to mail your material to all Association members, on the condition that you will pay for the cost of copying and mailing. This procedure has worked successfully in many associations, and while privacy is protected, the individual owner's concerns are fully circulated.
Balancing privacy concerns versus an open government should not be limited to our Federal government. It is equally important in community associations.