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Association board withholds documents, fails to maintain property

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Question: We have more than 190 units in our desert-area homeowner association. The board and the management company have not provided owners with the 2010 year-end financial statements and reserve study. They claim the books are so bad that they can't be audited. None of the financials, rules and regulations, reserve account information, bank statements or minutes are made available to owners. Any requests for such records must be in writing, but the board does not respond to owner requests to view these items. How do I impress upon the board that it must provide these records?

Also, our swimming pools, common streets, landscaping and paint are deteriorating, but the board does not address these issues at the board meetings because it wants to keep the monthly dues and fees low because of tough economic times. How do we get the board to perform the necessary upkeep?

Answer: Management companies work at behest of the board, and it is the board's duty to supervise all third-party vendors. It is the board's duty also to ensure that year-end financial statements and all other documents mandated by the law are distributed in a timely manner to all titleholders.

Although keeping dues low might address these tough economic times, it is still the board's obligation to maintain, repair and replace the common area elements as needed. It is also the board's duty to respond to owners' queries and to follow the law with regard to making the association's books and records available for owners to view and access.

It may be necessary to go to court to force an audit and to force the removal of the current board for dereliction of duty. Not keeping financial records could mean anything — maybe there are no problems at all; maybe there has been theft of association funds by current or former board directors or third-party vendors. Unless a forensic audit is conducted, you may never know.

Civil Code section 1365.2 in the Davis-Stirling Act requires that boards provide various documents, including financial statements, to all titleholders on an annual basis. Failure to provide these items is a breach of duty for which the board members in office at the time could be held liable.

What can you do? Start by requesting to inspect association records as permitted in Civil Code section 1365.2. If the board fails to respond within the time limits provided in that section, you are entitled to bring an action against the association in Small Claims Court for an order to have the board produce records and to pay the plaintiff $500 for failing to comply with the statutes on request. Every titleholder is entitled to make the request.

Rotting wood trim, peeling stucco, chipped paint or cracked concrete reduce overall values, hurting all owners. Even with low monthly assessment fees, watchful directors still can maintain a property through proper preventive maintenance, careful selection of vendors and good business practices with regard to expenditures.

The late Stephen Glassman, an attorney specializing in corporate and business law, co-wrote this column. Vanitzian is an arbitrator and mediator. Send questions to P.O. Box 10490, Marina del Rey, CA 90295 or email noexit@mindspring.com.

Copyright © 2014, Los Angeles Times
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