Requests for Records
Hey Dennis,
We’ve talked about this before. In March of this year a couple of people made a records request for the entire year of 2022. They wanted 2 days to examine the records with THEIR CPA. Because the board wanted to prove to these two women that we’re doing nothing wrong, we complied. Our records are impeccably kept and it took them 3 hours to go through.
Now, we have another request from the same to wanting to see the first 6 months of this year. Following it their request:
I am requesting to see any/all of the financial records for Velda Rose Estates from January 2023 thru June 2023. This request includes every invoice, charge account statements with receipts, checks register and checking account statements, savings account statements, etc. We would expect the information you provide to be in the same format as it was last time. I do not want copies but would like to review the originals in person. It would be beneficial for the treasurer to be available to answer any questions. You can have other board members present if you so choose. Colby clubhouse would be my suggested location. It worked well the last time. The date we would like to have this happen is Wednesday, September 20, 2023. This will give you the full 10 days to get the information together. We could start at 9am. We don’t anticipate it taking more than 2-3 hrs.
These two are former board members, one of whom resigned when we dumped the management company and the other was removed by a vote of the community.
I consider this request to be unreasonable, burdensome, abusive and a fishing expedition. I don’t see any reason why we should comply and I fully intend to deny their request. I’m also reasonably sure they’ll either file a complaint with AZDRE or get their lawyer involved (Dessaules).
Financials are published every month the newsletter is published and it’s published every month with the exception of June thru August.
Any advice?
Thanks,
Dave
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Dave,
While I’ve always been an advocate for homeowners right to reasonable records request, this is clearly excessive. While they may have engaged Jonathan as their attorney I would bet that he would inform them that this request is unreasonable. Without any credible reason requiring such a detailed review of all association transactions there is no way that any judge would not see this as nothing but an unreasonable and overly burdensome request and fishing expedition. The financial responsibility to manage the association is the board’s and while any reasonable request to view any specific transaction is the right of any homeowner, they have no right to conduct financial audits on their own without justification. The HOA industry has already attempted legislation last session to restrict the access of association records for homeowners and we were fortunate to be able to kill that legislation. I fully expect the industry to try again this coming session based on unreasonable request like these. These people have a vendetta and are abusing their right to access and in doing so risking everyone’s right to access of association records. I’ve never questioned Jonathan’s advice to any of his clients but if he goes along with this request than he and his client will lose before the ALJ. While they may have better success if they choose to pursue this matter in Superior court, there is still sufficient court precedent that your attorney can use to clearly establish that this request is unreasonable and overly burdensome. If they pursue that venue, then you would be able to request the award of your legal fees when you prevail.
All of this is based on the premise that there was in fact no past experience that warrants a detailed scrutiny and review of all financial transactions of the association, based on malfeasance by the association or its agents. If there is than all bets are off and the request for detailed review would be warranted. I true forensic audit would take days by a trained CPA in forensic accounting. A few hours to review all detailed records of the association would be nothing but superficial and simply a power move to abuse their right. There is no way that a trained forensic accountant would be able to review all association records in a few hours, especially when they reviewed a years’ worth of records in 3 hours. This was a superficial exercise to make you jump through hoops for their entertainment pleasure. Call their bluff.
Dennis
To set the record straight on this string. I’m not an attorney and have never claimed to be. The advice I give in e-mail or in post on this web site is based on my experience and knowledge of previous court decisions on the issues presented. I however cannot read minds and can respond based only on the facts as presented to me. There are always two sides to every issue, and I’m mostly asked based on only one side of the problem. For example, in this string the initiating individual claimed that the previous record request was supplied by the association, but the homeowner was not satisfied and repeated the request for 2023. What was not stated is that the association left out in their submittal the vital piece of information actually requested by the homeowner. So, in fact the original request was never actually complied with.
I run into this problem all the time. The homeowner submits a records request, and the association only provides half the information requested. When the homeowner pursues the request over and over again the association cuts of communication with the homeowner claiming harassment. The homeowner gets a cease-and-desist letter from the attorney and the threats fly. The problem is caused by the resistance of the association to provide access to the financial records requested in the first place.
Let me be perfectly clear in these communities the normal corporation rules for records access do not apply. These are not normal corporations that earn their income from the sale of their goods or services. The communities get every dime of their income from the homeowners and as such the laws governing records request assure access to those financial records to provide the transparency on the financial transactions of the association using the homeowner’s money. You have an unequivocal right to access to any financial record of the community. The association does not have to create a report or summary document but if a report existed and was used at any time by the association board it is a record of the community subject to records request without reason or justification.
While I stand on my prior guidance that homeowner need to be reasonable on these requests so that the association support staff is not consumed with detailed compellation and assembly of the minute details of every check or payment made over extended periods of time. I will always recommend to homeowners to first look to monthly financial reports provided by the community manager, CPA or board treasurer to the board for their review and approval along with corresponding monthly bank statements. From there, if you would like to see details of individual expenditures for a particular month or category than a supplemental request could be added. Every single homeowner has the right to request to see each of these reports at any time. If the association is being inundated with individual request, they can always post those reports on their secure web site that every homeowner has access to. With full transparent Trust will be developed and request will diminish. If board spent more time doing the right thing less time trying to work around the law and providing the transparency to their financial actions their overall job will become easier and the community will become a better place to live.
I fully understand that while some board purposefully deny access to records, some homeowner purposely also harasses the boards and community manager with endless records request for no reason other than harassment. I will oppose the abuse of power by the boards and homeowners equally, to protect the fundamental right or the majority of both that try to comply with the law.
Dennis