Question: If Civil Code section 4525(a)(10) authorizes only 12 months of board meeting minutes, why are prospective buyers advised by some to ask for 24 months? And what should buyers do when the seller declines to provide more than the required 12 months of minutes?
Answer: Civil Code section 4525 provides for a minimum amount of information to be disclosed to prospective purchasers of property in a common interest development. Some disclosures are automatic, and some require a buyer to make a request. Section 4525 outlines the bare minimum amount of information that should be required to make an informed purchase; however, absolutely nothing prevents prospective buyers from asking for whatever documents they feel they need to complete a transaction. Titleholders wanting to sell their properties should be prepared with these and other documents well in advance of listing their property and should also have these documents on hand for themselves even if they never plan to sell. Protecting one's assets means being prepared.
Nothing in that code section states "only" 12 months of board meeting minutes. Civil Code section 4525(a)(10) refers to the seller providing, "if requested by the prospective purchaser, a copy of the minutes of board meetings, excluding meetings held in executive session, conducted over the previous 12 months, that were approved by the board."
At the same time, Civil Code section 4525(a)(10) does not require sellers to be forthcoming with prospective purchasers. The statute's built-in contingency by the use of the word "if" is that the buyer must unequivocally request these documents.
Additionally, the code section itself qualifies the request to those "previous 12 months, that were approved by the board." However, requested minutes may or may not state the words "approved by the board," and some directors complain that in the literal sense there is no per se process for approving said minutes, and the fact that they have the minutes at all means they were approved by default. Not so, but it doesn't mean it doesn't happen.
Civil Code section 4525(a)(10) does not state whether those so-called minutes are to be in "summary" or "draft" or "final" form. Civil Code section 4950(a) sets forth that "the minutes, minutes proposed for adoption that are marked to indicate draft status, or a summary of the minutes of any board meeting, other than an executive session, shall be available to members within 30 days of the meeting. The minutes, proposed minutes, or summary minutes shall be distributed to any member upon request and upon reimbursement of the association's costs for making that distribution."
Some boards believe that once the minutes — no matter the form — are made available to the owners within the 30-day time frame for distribution, without more, the act itself amounts to approval. Not so, but it doesn't mean it doesn't happen.
Whether approved or not, without a legal definition set forth in the common interest development act for the statutory term "summary," as it pertains to board meeting minutes, 12 months of "summary" minutes are meaningless to buyers.
There is a vital distinction between "draft" and "final" minutes. Pursuant to Corporations Code section 7215, such committee and/or board meeting minutes signed by the board secretary is prima facie evidence of the adoption of such minutes, the due holding of that meeting, and of the matters stated therein. Homeowner association board meeting minutes in their "final" executed form are therefore evidentiary in nature once signed by the association's secretary. If the minutes are merely labeled "final" but unsigned, they are not prima facie.
Buyers who ask for only 12 months of minutes, as the statute suggests, take the luck of the draw in that all 12 months may amount only to minutes still in a "draft" status. Since no laws prevent boards from assigning "draft" status to their meeting minutes, and no laws put an expiration date on "draft" minutes, they are subject to ongoing change forever. Some refer to this constant rewriting of draft minutes as "revisionist history."
For those associations that have only one or two board meetings in a fiscal year, the prospective buyer may receive only one or two sets of board meeting minutes for the statutory 12 months. That's simply not adequate.
In requesting at least 24 months of board meeting minutes, the buyer has a greater chance of getting a better picture of what goes on (or doesn't) in that development even if the majority of minutes are "unsigned," or in "draft" mode.
It takes a lot more due diligence for prospective purchasers who can't get the documents they need to make an informed purchase. Sometimes the best deal you make is the deal you never make.
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.