Go back to 2012. An owner in your community e-mails the board or your manager, asking for copies of all of the association’s financial records for the last 15 years. Or he wants to see all of the e-mails between the Board members related to a controversial assessment increase. Or he wants to see all of the bids submitted for the landscaping contract before the Board has selected the winning bid. In such cases, our office would often get the call asking, “Do we have to give the owner access to these records?” Unless there was some attorney-client privilege issue or the request was not for a proper purpose, the answer was usually yes.
Then, along came HB1237, adopted by the Colorado legislature in 2012, and effective as of January 1, 2013. HB1237 may go down in history as a bill that has had one of the biggest impacts on the functioning of community associations in the State of Colorado since SB100 was passed in 2005. The intent of the bill was to delineate and clarify what records of an association owners are entitled to inspect. Pursuant to HB1237, the following are the sole records of an association for purposes of inspection by owners:
- Records of receipts and expenditures affecting the operation and administration of the Association
- Records of claims for construction defects and amounts received pursuant to settlement of any such claims
- Minutes of all meetings of owners
- Minutes of all meetings of board members
- Records of actions taken by the owners without a meeting
- Records of actions taken by the board without a meeting, including written communications and e-mails among board members that are directly related to the action so taken
- Records of actions taken by any committee of the board without a meeting
- A list of the names of the owners in a form that permits preparation of a list of the names and mailing addresses of all owners, as well as the number of votes of each owner is entitled to vote
- The Association’s governing documents which are comprised of:
- The declaration
- The bylaws
- The articles of incorporation
- Any rules and regulations and/or design guidelines
- Any policies adopted by the board, including the association’s responsible governance policies.
- Financial statements for the last three years, which at a minimum shall include the balance sheet, the income/expense statement, and the amount held in reserves for the prior fiscal year
- Tax returns for the last seven years, to the extent available
- The operating budget for the current fiscal year
- A list, by unit type, of the association’s current assessments, including both regular and special assessments
- The result of the association’s most recent available financial audit or review, if any
- A list of the association’s insurance policies, which shall include the company names, policy limits, policy deductibles, additional named insured, and expiration dates of the policies listed
- A list of the names, e-mail addresses and mailing addresses of the current board members and officers
- The most recent annual report delivered to the Secretary of State
- A ledger of each owner’s assessment account
- The most recent reserve study, if any
- Current written contracts and contracts for work performed for the association within the prior two years
- Records of board or committee actions to approve or deny any requests for design or architectural approval from owners
- Ballots, proxies and other records related to voting by owners for one year after the election, vote or action to which they relate
- Resolutions adopted by the board
- All written communications sent to all owners generally within the past three years
- A record showing the date on which the association’s fiscal year begins
- Any other records specifically defined in the declaration or bylaws
At first blush, that seems simple enough and relatively straight forward, right? But, there’s more. The statute then goes on to list those records an association MAY or SHALL withhold from inspection by owners.
Associations MAY withhold the following:
- Architectural drawings, plans and designs, unless released upon the written consent of the owner of such drawings, plans or designs
- Contracts, leases, bids or records related to transactions currently under negotiation
- Communications with legal counsel that are otherwise protected by the attorney-client privilege or the attorney work product doctrine
- Records of executive sessions of the board
- Individual unit files other than those of the requesting owner
Associations MUST withhold the following:
- Personnel, salary or medical records relating to individuals
- Personal identification and account information of owners, including bank account information, telephone numbers, e-mail addresses, driver’s license numbers, and social security numbers
It is the list of exclusions that have caused most of the confusion and questions that we have seen coming through our office from clients. The following is a discussion of the most prevalent concerns regarding HB1237.
HB1237 attempts to protect the privacy of owners’ information by specifically stating that associations MUST withhold personal information about members, including telephone numbers and e-mail addresses.
Many associations, in an effort to build community, publish membership directories so that neighbors can contact each other and get to know one another. However, under HB1237, if your association currently has a membership directory that identifies email addresses and telephone numbers, this information can no longer be disclosed by the association.
The question then arises whether that information can be included in the directory for those owners who have consented to having that information disclosed. Unfortunately, the answer is no. HB1237 clearly states that the information MUST not be disclosed. Couple that with another provision of the Colorado Common Interest Ownership Act which prohibits varying the terms of CCIOA by agreement, and the end result is that an association cannot include owners’ e-mail addresses and telephone numbers in a directory and disclose the directory, regardless of whether or not the owner consents.
If owners within the community desire to have a membership directory, it should be produced by individual owners obtaining the information from the owners directly and not from the association. Seems an odd result in this day of transparency and access to information, but it is a result dictated by a strict reading of the statute.
Covenant Violation Complaints
Not an uncommon scene. An owner gets a violation letter for some transgression, such as failing to pick up after his dog on the common area. The owner is unhappy and demands to know who snitched on him and wants to see the written complaint received by the association from the tattle-tale neighbor. Can or must the association allow the alleged violator to see the complaint?
There is a tension in the statute in relation to this issue. The list of documents that an owner gets to inspect does not include covenant violation complaints. However, the statute says that associations can deny an owner’s request to inspect the file related to another owner. That could imply, therefore, that an owner does get to inspect his or her own file, including everything that is in it. But, the bottom line is that the violation complaint is not on “the list”, so an owner should not be able to inspect that complaint as part of a records inspection request.
This creates an odd result in terms of covenant enforcement as we will end up with a situation where an owner could be faced with a fine, but cannot know the identity of the “accuser”. A covenant enforcement fine hearing is not the same as a trial, of course, but if an association were to bring a lawsuit against an owner for a covenant violation, a judge may consider what kind of notice and due process was given to the owner prior to the initiation of the lawsuit.
Covenant Violation Notices
On the flip side of the scenario above, what if the complaining owner wants to see copies of the violation letters that were sent to the owner who didn’t pick up after his dog? Again, such letters are not on “the list”. In such a case, even if they were, the association could withhold them from inspection under the exemption for records in the files of other owners.
We have also seen this played out in relation to owners wanting to challenge enforcement decisions of the Board viewed as unfair by the requesting owner (although not subject to fine himself, necessarily) by asking to see copies of violation letters and other documents related to fines imposed by the board on other owners. Again, the answer to that owner has been, “No, the documents are not on “the list”, so you don’t get to see them.”
Another scenario – your neighbor is building a gigantic covered deck, complete with a built-in gas grill, lights, fans and screens, which takes up half of his backyard. You want to know if he got approval for that and you want to review the plans he submitted. Based on the list above, you clearly get to see the record of the decision of the architectural review committee approving (or denying that request).
But, what about the plans themselves? Unless your declaration or bylaws state that such plans are part of the records of the association, they are not on “the list”, and you cannot inspect them. Again, there is a tension in the statute because the statute says an association MAY withhold architectural plans, unless authorized to disclose them by the owner of the plans. Why have an exemption from disclosure if the documents are not on the list of documents that can be shared in the first place? One answer would be if your bylaws or declaration state that the plans themselves are part of the records of the association. In that case, owners would get to inspect the plans, subject to discretionary withholding right of the association. But, on the other hand, if the plans are not defined in your bylaws or declaration as records of the association, the association cannot allow inspection of them because, again, they are not on “the list”.
As the above examples illustrate, HB1237, while drafted with good intentions, has some unintended consequences in its application. In recent years, the legislature has enacted many bills that move toward more transparency and sharing of information within community associations. However, HB1237, for better or for worse, doesn’t always achieve that goal. But, stay tuned. Who knows what may happen in the next legislative session.