Suppose an owner in your association has requested access (inspection and/or copying) to certain financial records of the association. What are the obligations of the board to provide this information? Can it withhold any information? Can you charge for access? The answers are provided for in Colorado law (both the Colorado Common Interest Ownership Act (“CCIOA”) and the Colorado Revised Nonprofit Corporation Act (“Nonprofit Act”)) and the association’s governing documents. This article will help guide your association through any such request from an owner.
What documents are considered “records” of an association?
Prior to January 1, 2013, associations in Colorado were required to keep “financial and all other records” reasonably available for examination and copying by a unit owner and such owner’s authorized agents. On January 1, 2013, legislature passed the Colorado a bill HB 1237 took effect. This bill amended CCIOA to provide an exclusive list of documents considered records of an association for purposes of inspection by owners.
Pursuant to this revised law, in addition to any records specifically defined in an association’s governing documents, associations must maintain the following records (for this purposes of this article, the list is limited to financial records): 1) detailed records of receipts and expenditures; 2) financial statements for the past three years and tax returns for the past seven years; and 3) financial records sufficiently detailed to enable the association to comply with C.R.S. §38-33.3-316(8) (i.e. production of a statement of unpaid assessments).
The revised records laws further provide that all records maintained by an association must be available for examination and copying by a unit owner or the owner’s authorized agent. As such, owners must be provided access, with limited exceptions, to the financial records referenced above.
A common request we see is the request for access to delinquent owners’ accounts and information. Please note that the statute does not define such as records of the association subject to inspection and copying. Furthermore, the statute is clear that associations shall not disclose account information of other owners. Therefore, such information may not be provided to requesting owners, although delinquency dollars (with no identification of owners or addresses) may be provided generally.
How does an owner request this information?
An association may require unit owners to submit written requests, describing with reasonable particularity the records sought, at least 10 days prior to inspection or production of the documents. Examination and copying times can also be limited to normal business hours or the next regularly scheduled board meeting if the meeting occurs within 30 days after the request. Most importantly, the statute no longer requires owners to demonstrate a proper purpose for the inspections and the associations can no longer request that a purpose be stated.
Can the association withhold all or part of any record?
As far as exceptions and what can be withheld from examination and/or copying, the following records may be withheld to the extent that they pertain to: 1) pending, potential, or threatened litigation, mediation, or arbitration; 2) communications with legal counsel that are otherwise protected by the attorney-client privilege or the attorney work product doctrine; 3) individual units other than those of the requesting owner; or 4) account information of members, including bank account information.
Can the association charge for the document production?
Yes. The cost of production does not have to be met by the association. A reasonable charge may be imposed and can be collected in advance to cover the costs of labor and materials incurred for the production of requested documents.
Additionally, your governing documents may include additional definitions for “records” of the association and inspection requirements, so make sure you are familiar with all such provisions. An inspection of records policy is required by statute, so if you haven’t had legal counsel review and revise the policy to comply with the new law, you should do so as soon as possible.
Remember, board members are fiduciaries, meaning that they are entrusted to protect the assets of the association and be accountable. You do not want to find yourself or your fellow board members in a situation involving the failure to follow the requirements of records inspection rights. Additionally, when boards are perceived to be anything less than transparent, owners become distrustful of the association and begin to question everything such board does. In 2012, 17% of the 477 complaints received by the HOA Information Office and Resource Center related to records and transparency issues.
If you have questions or need information about providing access to financial records, please contact one our attorneys at: 303.432.9999.