Question: I'm a board director of my homeowner association, with over 500 units. Our management company has been removing association files from our on-site office and storing them in the manager's garage at his residence. There's no official "office" for the management company listed in our records, only a P.O. Box. While our management contract names the company as "custodian" of our association records, management has removed our records from the very safe, gate-guarded location of our complex to a rented residence. The manager is not forthcoming with allowing access to our records. This company manages two other associations besides ours and the other associations insist their files stay in their on-site office. Can I legally make this management company return our records to our on-site office?
Answer: Whether your common interest development is composed of single-family homes or condominium units, you can, and should, make this management company return your records to the on-site office.
A post office box does not entirely fulfill the requirement goals of Civil Code section 1367.1(b) wherein the association shall provide an address for overnight payment of assessments.
Association documents do not belong to anyone except the association. The board of directors is obligated to safeguard those documents and to demand their return.
Although the board secretary is the official "custodian of records," that title doesn't mean the officeholder must take actual physical record possession, though he or she may. As custodian, the secretary ensures records remain intact and are not tampered with, knows the location of all records, provides them when asked and adds new records as they become available. Monthly, the secretary is obligated to demand, and the management company is obligated to produce, a detailed list of all records and documents in its possession belonging to the association.
Removing association files may constitute a breach of the secretary's fiduciary duty to owners and the association, especially if any records are lost, destroyed or altered, exposing the association to liability.
Even if your association does not have a designated office, it ought to maintain all its records in one location, under lock and key controlled by the board. With no official office listed for the management company, the board is allowing the association's records to be kept in an unknown and potentially unsecured location.
Generally, no original association records and documents should ever be removed from an on-site designated office by anyone for any reason; nor should they be given to a management company for safekeeping because lost records remain the board's responsibility. Worse, upon termination of the management company, many boards report management's destruction of documents, and being forced to leave their records behind because management had no incentive to cooperate in their return, culminating in litigation, and in some cases criminal charges being filed against management. Other boards report that they paid a small ransom to get their records back, and some report that if and when such records were finally returned, vital documents were missing as were the majority of their records.
Directors and titleholders have a right to regularly inspect and copy the association's records "at any reasonable time, for a purpose reasonably related to such person's interests as a member," according to Corporations Code sections 8330, 8333, and 8334 and Civil Code sections 1363(e) and 1365.2. That right is absolute for directors. Directors and owners who are denied reasonable access to these records may bring an action in Superior Court to postpone all member meetings and association activities until the records are produced, as well as to compel the disclosure of those records. Directors and owners who are forced to bring such an action are also entitled to their costs associated with enforcing their rights, including attorney's fees, under Corporations Code sections 8336 and 8337. Regardless of what the management contract states about custodianship of the association records, the records belong to the association and the board has the right, and obligation, to supervise and direct the activities of the management company to ensure compliance with the law.
As an association director, you are vested with the duty and responsibility of knowing the contents of the official records, as determined by a case known as Wood vs. Carpenter, 101 U.S. 135 (1879). Aside from being the ongoing "knowledge base" for association operations, these documents also constitute evidence in the event of litigation. Without control of its records, boards will find themselves compromised in the event of litigation, responding to discovery requests and production of documents, let alone providing a defense. As a director, you may face personal liability if those records are lost or unavailable or do not adequately reflect actions taken by the board. For those reasons you should require an ongoing ability to monitor documents over which the management company acts as "custodian."
Zachary Levine, partner at Wolk & Levine, a business and intellectual property law firm, co-wrote this column. Vanitzian is an arbitrator and mediator. Send questions to Donie Vanitzian JD, P.O. Box 10490, Marina del Rey, CA 90295 or email@example.com.