Showing posts with label records. Show all posts
Showing posts with label records. Show all posts

September 28, 2011

Court Upholds Huge Penalty on State Agency for Failing to Disclose Records

The Washington Court of Appeals issued a published decision last week in the matter of Ken Bricker v. Washington State Department of Labor & Industries. In this case, Mr. Bricker sued a state agency after it failed to release public records to him. The trial court imposed a $90 per day penalty for the untimely disclosure of sixteen documents and a $15 per day penalty for the untimely disclosure of three additional documents based on the Washington Public Records Act. The total penalty was $29,445. It was upheld on appeal.

While the Washington Public Records Act does not apply to Washington condominium and homeowners associations, those entities are similarly required by other state laws (and frequently their own governing documents) to make their records reasonably accessible to owners. If those associations fail to promptly disclose records, then they are subject to court-imposed financial penalties. The Bricker decision demonstrates why boards should take owners’ requests to review association records seriously.

December 21, 2010

New Law Limits Scope of Red Flags Rule

A new federal law has significantly limited the scope of the Red Flags Rule, a federal law that requires many businesses and organizations to implement a written identity theft prevention program. There has recently been a substantial amount of confusion about whether the Rule imposes new obligations on various persons and organizations (including community associations), and this new law clarifies who must comply with the Rule. The Red Flags Rule now applies to financial institutions and creditors that:

1) obtain and use consumer reports in connection with a credit transaction,

2) furnish information to consumer reporting agencies in connection with a credit transaction, or

3) advance funds to or on behalf of a person, based on an obligation of the person to repay the funds or repayable from specific property pledged by or on behalf of the person.

The third category is apparently intended to cover businesses like payday loan companies that sometimes lend without using consumer reports. Creditors who advance funds on behalf of a person for expenses incidental to a service provided by the creditor to that person are specifically exempted from the Red Flags Rule. Other types of creditors may be required to comply with the Rule if an agency determines that they offer or maintain accounts that pose a reasonably foreseeable risk of identity theft.

The Red Flags Rule does not appear to apply to condominium and homeowners associations under the new law. However, such associations may still choose to adjust their record-keeping procedures to comply with the Rule if they are concerned that it might be interpreted or amended to apply to them or if they want to obtain a heightened measure of protection against identity theft. More information about the Red Flags Rule is available here.

July 15, 2010

Illinois Court Favors Owner in Dispute Over Access to Association Records

Requests to review association records should be taken seriously. In the recent case of Palm v. 2800 Lake Shore Drive Condominium Association, a condominium unit owner in Illinois believed that the board president and the board as a whole were exceeding their authority. The owner asked the association to provide him with records relating to those allegations. The association refused, and the owner responded with a lawsuit. The trial and appellate courts ordered the association to produce the records immediately and to pay the substantial attorney fees incurred by the owner.

Washington law imposes a broad requirement on condominium and homeowners associations to make their records reasonably available to owners and their agents. Homeowners associations also must provide their records to mortgage holders and their agents and avoid releasing the unlisted telephone numbers of owners. If you think that an owner’s request for records goes too far, contact the association’s attorney before refusing to grant it.

August 21, 2009

Electronic Media and Association Business

Electronic media like email, Facebook, and Twitter are becoming the primary way for condominium and homeowners association board members to communicate with one another. Board members should be careful when using those types of media to discuss association business. Electronic messages may eventually be considered association records subject to review by the owners.

According to the Washington Condominium Act, association records must be made reasonably available to owners for examination and copying. This law applies to older condominiums as well. According to the Washington Homeowners’ Associations Act, all records of the association, including the names and addresses of owners and other occupants of the lots, must be made available to owners for examination at the office of the association or its manager. Homeowners associations are prohibited from releasing the unlisted telephone number of any owner in response to a request to review association records. Those associations may impose a reasonable charge for copies and costs incurred in providing access to association records.

Washington courts have not yet decided if electronic communications between community association board members about official business are records of the association, and the relevant state statutes are also silent regarding this issue. It is a good practice for board members to assume that electronic messages are potentially subject to review by the owners and strive to communicate about sensitive matters over the phone or in person. This will reduce the odds that a rash message from a board member will come back to haunt the association in future litigation.

July 31, 2009

Association Records – The What, the When, and the Audit

A former Florida condominium association bookkeeper was arrested earlier this month on charges of stealing almost $500,000 from the association since 2005. The individual allegedly wrote checks to herself, transferred association funds into her personal account, and submitted fraudulent invoices. It was reported last week that an audit of a Virginia community association discovered nearly $700,000 missing from its accounts. The association’s treasurer disappeared at the end of June. Proper maintenance and evaluation of association records can help boards avoid problems of this magnitude.

The state laws that govern Washington condominium and homeowners associations do not specify what records should be maintained or how long they should be kept. It can be inferred that financial documents like bills and receipts should be kept at least the length of time necessary for them to be reviewed during the annual CPA audit (mandatory for Washington condominiums consisting of more than 50 units and mandatory subject to annual waiver for all other Washington condominiums and also Washington homeowners associations with annual assessments of $50,000 or more).

The state law governing Washington nonprofit corporations requires them to maintain, among other documents, financial statements and meeting minutes at their registered offices. Washington condominium and homeowners associations that are nonprofit corporations should comply with this law. The state law governing Washington profit corporations requires them to maintain meeting minutes on a permanent basis and states that they must keep, among other documents, shareholder meeting minutes, annual financial statements, and communications to shareholders at their registered offices for at least three years. Boards could decide to comply with those standards as an added safeguard. The governing documents of many associations contain specific record-keeping requirements that must be followed as well.

Diligent maintenance and evaluation of association records can help boards make more informed financial decisions, defend against owners’ claims of misconduct, and spot theft of association funds more quickly. Boards should ensure that their association records policies allow them to take advantage of those benefits.