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Books & Records
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Maintenance of Proper Books and Records

A homeowners association, acting through its board of directors and management personnel, must maintain proper books and records.  A secure location should be established by every association  for the storage of books and records. In a large development, there may separate office facilities for conducting the association's business and storing records. In smaller developments, a secure location for storing records and conducting association business is less likely to exist and association records and important documents often get passed from one set of officers to another.  This frequently results in inconsistent and poor record keeping - especially in homeowners associations that are not professionally managed. If possible, at a minimum, every association should establish a secure, locked room or closet for the storage, protection and maintenance of the association's records. If no such location exists in common area, arrangements should be made for  the use of space within an officer or director's separate interest property,  a property manager's facilities, or association legal counsel's offices.  Wherever the records are stored, the board of directors always has the ultimate responsibility for the proper maintenance of the association's books and records.

 

 

Criminal and Civil Sanctions for Improper Record Keeping

The laws of the state in which a homeowners association is located impose criminal and/or civil liability on officers and directors who engage in conduct such as the following with respect to the association's books and records:
 
  • Knowingly concur in making or publishing a materially false report or statement about the association's financial condition;
  • Willfully or fraudulently exaggerating the association's financial condition;
  • Acting with intent to defraud, destroy, alter, mutilate or falsify books and records;
  • Concurring in an intentional omission of material entries in books and records.

As a general rule, both the directors and the members of a homeowners association have a right, subject to various limitations, to inspect the association's books and records. The directors of a homeowners association have the absolute right, at any reasonable time, to inspect and copy all books, records, and documents of every kind that are maintained by the association, and to inspect the physical properties of the association. The scope of documents that a director may inspect is far broader than the documents that an association is obligated to make available to a member. Instead of  the accounting books and records and the minutes of proceedings that are typically made accessible to association members, a director  generally has access to all of an association's books, records and documents. of every kind.  

 

State laws contain provisions that are designed to protect the associations from an abusive exercise of inspection rights for improper purposes and to protect members from a board's improper refusal of a lawful inspection demand. Protective remedies are typically pursued in the superior court of the county where the association's principal office is located,  or the county where its books and records are maintained.  Courts can also order the appointment of inspectors or accountants to review an association's records. Generally, attorney fees that are incurred by the party seeking the order and the costs of an investigation or audit must be paid by the person applying for the order unless the court orders those expenses to be paid or shared by the association.  A determination of who shall bear the responsibility for the fees and expenses frequently depends on who is determined to be the prevailing party, or reasonableness of a party's conduct.