A key to success and functionality in any relationship is clear, consistent communication. In a residential community, part of achieving functionality is managing the information in the governing documents and records which detail the community’s finances, legal proceedings and correspondence between unit owners, the board, the management company and others.
Who gets to know what, and when they can know it can easily become a bone of contention pitting residents against each other—but it certainly doesn't have to. The differences between information that can be shared with members of the community and data that should be kept confidential are clearly marked by the law. This doesn’t mean all members of the community, or even every member of the board, understands what is legal or illegal to share. Unfortunately, misunderstandings in this area can lead not only lawsuits, which create legal fees that are paid by all members of the community, but mistrust and bad feeling among neighbors and their boards—and that in turn can rot an association from the inside out.
What’s Hidden, What's Open?
Experts say that keeping residents in the loop, while still maintaining appropriate levels of confidentiality, is the smartest and most economical course. Openness helps to prevent misunderstandings. That being said, just because something may be community business, doesn’t mean it’s your business. While it is the bailiwick of board members to know what records they can and cannot reveal, all unit owners should know what official records they legally have a right to see.
Traditionally, a co-op or condo board has on hand many resident records such as personal information, financial statements, delinquencies, complaints, comments, just to name a few. While certain members of the board and management are able to view this information, not all third parties have access to it. And for the most part, expert say, the amount of information owners are entitled to is very limited. They're entitled to the annual meeting minutes, the owner/shareholder list and the annual financial statements.
On the other hand, official records of condo associations include a copy of the plans, permits and warranties provided by the developer, a photocopy of the recorded Declaration of Condominium and recorded bylaws and amendments to both, a certified copy of the articles of incorporation, a photocopy of the cooperative documents and a copy of the current rules of the association. Other official records include minutes, a current roster of all unit owners and their mailing addresses, unit identifications, voting certifications and, if known, telephone numbers, current insurance policies and current copies of any management agreements, leases or other contracts.
According to the New Jersey Condominium Act, unit owners are not allowed complete access to all board documents. Mary Barrett, attorney at Stark & Stark in Princeton, lays out the parameters for unit owners under the law: “If the association is a nonprofit corporation, the members of the association have a right to inspect certain books and records, pursuant to the New Jersey Nonprofit Corporations Act,” she says. “Homeowners of all community associations have the right to review minutes of open board meetings pursuant to the New Jersey Condominium Act. An association's governing documents may give further rights of inspection by members. Boards and property managers who are unsure what records can be viewed should consult with the associations lawyer before permitting inspection by homeowners,” says Barrett.
Records exempt from scrutiny include those involving attorney-client privilege, unit owner medical and screening records, personnel records, security information or records pertaining to the operating system or software system of the association’s computer, says attorney Kenneth S. Direktor, Community Association Practice Group leader for Becker & Poliakoff, a law firm with offices in Florida, New York City, New Jersey, Washington, D.C, and Prague.
Many owners are not familiar with the process of acquiring records of the community, even though they are entitled access to some of the records. The proper way to do so is to write the board to ask for access to general categories of records and provide a proper reason for the request.
Adam Finkelstein, a partner with the New York City law firm of Kagan Lubic Lepper Finkelstein & Gold, LLP, says he is routinely inundated with complaints from owners about a perceived lack of transparency between the board and the community. A common complaint he hears is that decisions are made without owners being made aware of them in advance, or owners not being provided with enough information if they are provided notification. “When it comes to these hot topics, which are hallways, lobbies, a major project here or there, people who are being asked to pay for it, they don't have any say in it,” Finkelstein says. “So I get both sides of it. I don't know that is ever resolved, given how these organizations are structured.”
But even the clearest-written laws can't prevent every conflict or issue that arises around the major decisions and operations of a building. “I don't think you're ever going to make everyone happy about communication and transparency—the inherent nature of these organizations doesn't lend itself to that,” he says. “In these organizations that we're talking about, people are elected to serve as representatives for large numbers of people,” Finkelstein says. “If you're a unit owner in a 200-unit building and there's a board of seven people making your decisions, there are 193 people that do not have any say in the decision. And these are people's homes, this is something very personal to them, and people feel that on certain points, they have a right to know.”
A lack of state regulations regarding transparency should not stop communities from striving to promote openness between the board and its owners. Board members must be mindful that they are not keepers of golden secrets, but rather, administrators of a community made up of many individuals. That’s why there’s little need for secrecy.
“In communities, where there is turmoil, and they are trying to recall the board, a lot of that is tied to the belief that the board is hiding something,” says Donna DiMaggio Berger, a partner in the national community association law firm of Katzman Garfinkel & Berger, which has offices in Florida. “There is no such thing as connecting too much with your association members.”
Keeping Owners Involved
New technologies enable boards and management companies to publicize community information quickly, easily and cheaply via the Internet. Failing to do so, in this age of purported “full disclosure,” almost invites suspicion. That’s why it’s best for the managing members of the community to get into the practice of disclosing as much official information as possible, as quickly as possible. One way to do this is through regular email blasts to members, or through a periodic e-newsletter that provides information on board and management proceedings.
Experts say that transparency has less to do with actual distribution of making available books and records and is more in just keeping an open information flow—whether it be a newsletter, an informational meeting every six months, sometimes an informal email and Q&A's. The board, however, does have to remember that because it deals with so much confidential information, it needs to balance the requirement to maintain confidentiality with the desire for transparency.
While some experts suggest publishing all meeting minutes and sharing them with residents—others warn it can be a double-edged sword.
“A lot of times, if board members know that all of the minutes and disagreements—depending on the level of detail that minutes are kept—will be published, sometimes boards feel it may chill actual re-discussion because people are afraid to speak openly and freely because it may be published,” notes New York attorney Stewart Wurtzel, a partner with Tane Waterman & Wurtzel. "I'm not a big proponent of distributing the actual minutes after each of the meetings.”
Ultimately, the balance of protecting some documents for the interest of efficient governance versus the duty to include neighbors in the process is a difficult one with high stakes. “A lack of transparency by a community association board can certainly lead to distrust and suspicion by homeowners. A board should ensure that it makes all binding decisions, except those involving certain private or confidential matters, at an open board meeting and that the homeowners are given adequate notice of such meetings,” says Barrett. “On the other hand, communication is a two-way street. A homeowner has an obligation to make an effort to stay informed by attending open board meetings or reviewing minutes and reading communications provided by the association. Treating community volunteers respectfully will also go a long way toward facilitating communication and increasing transparency.” she says.
So what is the best way for co-ops and condos to be transparent without imposing on their productivity and efficiency?
“The thing I recommend most are committees,” Finkelstein says. “Boards do best when they are inclusive of non-board members. I find a lot of these things can be resolved—this us-versus-them mentality—if boards create committees and bring in non-board members to serve on the committees. That way they are a sounding board for the general community—that's an excellent way you negate some of the claims of a lack of transparency.”
Jonathan Barnes is a freelance writer and a frequent contributor to The Cooperator. Editorial Assistants Tom Lisi and Enjolie Esteve contributed to this article.