f you want to track the processes of this new law, go to www.ca.gov and find your way to the legislative reports. Look for AB 104. This new section adds Civil Code Section 1365.2 but you may not be able to find the new law at the local library for awhile. The Civil Codes of California are in most county libraries, but the new versions can't be updated until the law is signed by the Governor, published by the publishers, and sent to the libraries, where they need to be inserted into the volumes at the appropriate spot. You can track any law in California through the above site - and it's the only way to keep ahead of the 8-ball with regard to CID (common interest development) legislation.

Now, on to the basics: Owners of property in homeowner associations generally have the right to request inspection and copying of "accounting books and records and minutes of the proceedings of members and the board and committees of the board" of their association, under Corporations Code Section 8333. This is not new. However, a law (AB 104) now appears in the Davis-Stirling Act (at Civil Code Sections 1350 and following); it applies to all homeowner associations; and although it in some ways reflects existing law, it adds some interesting (and possibly difficult) conditions and some costs for HOAs, and expands current thinking.

Generally, the new law provides as follows, and I have included some commentary about the new law interspersed with its requirements to help you understand the concerns that may arise.

The association is required to make the "accounting books and records and proceedings of the association" available for inspection and copying by a member of the association, or the member's designated representative

Note: There is no definition of "accounting books and records" (even though the industry groups like ECHO begged for clarification). This is one aspect of the current law that has been vehemently disputed. It is anticipated there will be continuing battles over this lack of clarity. Some attorneys (including me) will take the position that accounting books and records generally include the general journals and ledgers and financial reports that are commonly generated in required accounting practices. When it comes to questions about whether the Association has to provide checkbooks, registers, invoices, personnel records about employees, etc., a Board should get legal advice. It is common that other issues appear when an owner is demanding onerous amounts of records and information that carries a privacy aspect to it, and it is important for legal counsel to get the "whole picture" before ruling on a records request that potentially invades someone's privacy or seeks contracts, or involves an inordinate amount of time and results in substantial costs, to provide records that exceed what could reasonably serve as the definition of "accounting books and records."

The member of the association may "designate another person to inspect and copy the records on the members behalf. The member shall make this designation in writing."

"Designated representative" would generally be the Owner's attorney, accountant or financial advisor, but I believe an Association would have to accept others as well. If an Owner has designated power of attorney to another with regard to the property, that will most likely qualify that person as a "designated representative." I have in the past dealt with requests for review by the Owner's realtor, their business partner, their life partner, their minister, or a relative of the Owner. The "writing" is a critical component in my view. Having the Owner make the designation in writing provides protection so that the Association is not stuck with an issue of disclosure of private association information to outsiders.

The association must make these records available for inspection and copying "in the association's business office within the common interest development. If the association does not have a business office within the development, the association must make these records available "at a place that the requesting member and the association agree upon."

Some attorneys (including me) have, in the past advised some Associations to require that the Owner bring their own copy service if they want copies of records in a case where the records request is extensive and it will take a lot of time to make the copies, or where an Association does not have a business office or copier available, or where the Owner refuses to pay for copies. I am not suggesting this is a viable option anymore if the Owner requests copies by mail (see below). If the Owner or his or her representative is an offensive, rude or difficult person, the Manager might prefer to copy the records and send or have them delivered to the party, rather than invite them onto the premises, even if they demand a visit. If the items requested are items that are required to be kept in the records or routinely provided to Owners (like minutes, or financial records or reports that must be sent out on an annual basis), I believe the Association could run into difficulty if it forced a process where charges for copying get exorbitant or the process required is unduly difficult for the Owner in question.

If the association and member cannot agree upon a place, or if the requesting member submits a written request directly for copies, the association "may satisfy the requirement to make the records available by mailing copies of the requested records to the member by first-class mail within 10 days of receiving the member's request".

NOTE this very short timeline that needs to be honored. There are no specifics as to how much an association may bill the requesting member for the requested documents. However, read on...

The association "shall inform the member of the amount of copying and mailing costs before sending the requested documents."

Note the law does not say that the Association can collect the costs before it sends out the documents, prohibiting boards (in my view) from holding records "hostage". I suspect there will be many fights over this as well. If a management company has to put staff to the task of copying records and it takes hours or the whole day, then the costs could be quite high, and someone will have to cover those costs (will it be the HOA or the HO?). If the Board ignores the 10-day deadline, it may be penalized quite severely (see below). However, once the documents are provided, there is no easy mechanism for the association to recover the costs, so it might be left without recourse to recover the costs. A small claims court action could be filed to recover the costs but who wants to go before a Judge or hearing officer and ask for money for association records (not many I imagine). If there is authority in the Association CC&Rs; for a "reimbursement assessment", this might be an avenue to recover unpaid costs. This, again, will probably require attorney advice, and at the least will require a hearing - per the statutory disciplinary guidelines mandated by legislation last year. And keep in mind that the 10 days is firm for providing copies by mail, and it may take some "scurrying around" within the management office of the association to comply, but it is important to do so. When assessing costs, keep in mind that case law in California last year contains language and guidance that could be construed to prohibit Associations from charging money to the Owner for the time it takes to dig up Association minutes buried in the storage boxes. The implication of the case was the Associations should not have to dig for records that should be easily accessed (and I believe it extends to financials and all documents that need to be regularly disbursed because of Association or Owner/Seller) disclosure requirements, meaning costs of copies and mailing may be the only remaining legitimate costs chargeable for some records. This will become a cost of "doing business" for associations. Some say management companies as agents for associations are held to the same standards and limitations but even if that is true, managers will take care of this by charging more for management or burying the contingency somewhere in their contracts. After all, they have to be able to be able to recover their own costs of doing business and make a profit too, if they are to remain viable business entities capable of providing services to HOAs.

The penalties for not providing this information (in a timely manner) are actual damages plus a fine of $500 for each occurrence, and reimbursement of attorney's fees (for enforcement).

Actual damages need to be proved, but an example might be someone needing information to satisfy a buyer, being unable to get it, and loss of sale. And the $500 penalty would require no proof other than to establish that the Board failed to provide requested records that are required by the statute to be provided. Need I say anything more about this other than "OUCH"!

The association may redact (cover up or black out) information from these records for any of the following reasons:

• "The release of the information is likely to lead to identify theft."
  
• "The release of the information is reasonably likely to lead to fraud in connection with the association."
  
• "The information is privileged under law."
  
• "Except as provided by the attorney-client privilege, the association may not withhold or redact information concerning the compensation paid to employees, vendors, or contractors."

If the Board is asked to provide any financial documents that contain confidential, executive session privileged records, or the type of information that if disclosed puts another party at risk or breaches their privacy, then there are some protections built by these bulleted items. These protections are very important. Association executive session documents need to remain confidential for the protection of the Association (which is all of the Owners). "Identify theft" is a big concern these days and is defined as "the unauthorized use of another person's personal identifying information to obtain credit, goods, services, money, or property." Since the law states that compensation information for individual employees is to be set forth by job classification and title, not the employee's name, social security, or other personalized information, there is a clear message that this information needs to be available to members, through the financial records. The language seems to suggest that the Association may have to provide some personnel records reflecting compensation at least; however, it would be fair to say some attorneys (including me) will adopt the position that to the extent payment or compensation for employees or vendors are indicated in the financial income and expenses documents and reports with enough specificity about job class, etc., that no other information needs to be provided about employees. Walking this fine line will, of course, require Associations to seek more legal help in determining what records to disclose and what to refuse, or risk the civil fines or litigation.

The records may not be sold or used for a commercial purpose, or for any other purpose that is not reasonably related to a member's interest as a member. The association may bring a legal action against a person who violates this section. (Action may be "for injunctive relief and for actual damages to the association caused by the violation.")

Legal action or an injunction may become a necessity in the most egregious abuses of information gathered by Owners because of the mandates on Associations found in this new law. However, it seems an unlikely event under any normal circumstances. The same goes for the following.

The association may also seek injunctive relief to stop the misuse of information given to an owner.

The association is entitled to recover reasonable costs and expenses, including reasonable attorney's fees, if successful in an action to stop misuse of the information.

The member of the association may bring an action to enforce his or her right to inspect and copy the subject records. If a court finds an association unreasonably withheld access to these records, the court "shall award the member reasonable costs and expenses, including reasonable attorney's fees, and may assess a civil penalty of up to five-hundred (500) dollars for each violation."

This could become quite a fashionable thing to do - sue associations in small claims court for withholding of records, so handle these matters delicately and follow the law, and consult with knowledgeable legal counsel if issues arise, or to help set Board policy.

By Beth A. Grimm, Esq., an educator and an attorney who practices exclusively in the area of homeowner association law. She is an active member of two ECHO RESOURCE PANELS (EAST BAY AND LEGAL) and is a frequent contributor to the ECHO JOURNAL and other CID industry publications in California. She is also an author of additional publications, and offers lots of free information on her website at http://www.californiacondogurul.com.