In town and city government, elected officials and committee volunteers are duty-bound and legally required to maintain open meetings and treat every line item of taxpayer funds as public information. Condominium communities, and the way they’re operated, are often compared to municipal governments, but there’s nothing “public” about them, really. Homeowners choose to buy into a community association and agree, by private contract, to abide by rules and regulations and pay fees for services. Does that mean the condo boards that oversee the spending of these fees can be covert about certain operations, or less transparent than government agencies that spend taxpayer dollars?
Most New England states have addressed this very issue within the condo statutes, part of individual state laws, that evolved from consumer protection (see sidebar). But what, exactly, can and cannot be disclosed?
In Massachusetts, “the condo statute allows unit owners to view certain things, which are specifically listed in Section 10 of Chapter 183A,” explains attorney Frank Flynn, founder and managing partner of the Flynn Law Group in Boston. “Sometimes, managers and trustees don’t think owners are entitled to see finances but the law is very clear…and a community’s condo docs (rules and regulations) may even expand on Section 10.”
Typically, a request for information comes from residents who realize they don’t know enough about their association finances and are feeling left out of the information loop, or may be growing suspicious for some reason. Flynn notes, “I have drafted demand letters for a unit owner who wonders, ‘where did the money go?’ and I’ve had board members ask, ‘do we really have to show them?’ all the financial records.”
If suspicions rise, board members may become defensive and try to close channels of communication, but statutes mandate “open books” are maintained…literally. Flynn explains, “In an extreme case, you can file an injunctive action to see the association’s records. As an example, we took over a community recently in southeastern Massachusetts, where the property manager was terminated, new trustees were elected, and they asked (us) for legal help. We were able to get the bank accounts turned over and we had to hire a forensic accountant. We’ve had to recreate records and statements.”
“There are certain things that cannot be shared or disclosed, such as pending lawsuits or anything that trustees need in executive session” Flynn points out, all because of privacy protection. In states like Massachusetts, where the law is specific about what must be available to unit owners, he explains it conversely means that information not included on that list does not have to be disclosed; in essence, anything not defined is exempt.
Besides Section 10, Flynn continues, Massachusetts also has a “Fair Information Practices Act that requires collectors of personal data to withhold that information from third-party requests from outsiders, such as vendors. There are also federal laws…specifically the Fair Debt Collection Practices Act.” He explains that a debt collector, including board officers or managers collecting delinquent condo fees, is not permitted to discuss the individual’s debt (outside of executive session) with anyone other than the unit owner, his or her spouse, or their attorney, generally. “Basically, it’s illegal for trustees to publish who owes money…so at meetings they cannot announce (those) names.” Flynn states.
Information as Retribution
There may be unexpected reasons that unit owners seek information and demand to see association records. “More often than not, when I see unit owners demanding financial records from their condo board, it’s not because they suspect funds being mismanaged or embezzled…it’s a case of retaliation,” says Michael Merrill, an attorney at the Boston-based law firm of Merrill & McGeary. “They’re angry about being fined, or may have a dispute over some infraction, and they’re looking to burden the association—to make them work. They might demand records going back seven years, or whatever the time period that’s mandated for keeping these records.”
“It’s not practical,” Merrill continues, “if a unit owner expects delivery of years of paperwork, collected, copied, and sent in a day. As it happens, the statute spells out limits on how information is delivered. It outlines a specific period of time, and allows the trustees to ask that unit owners show up at a certain time and place where they can access the records, review documents, and pay the cost for copies. What I usually do is suggest some reasonable amount of time and have the property manager available.”
Despite cranky unit owners, Merrill insists, “I find associations and managers to be very transparent even though the perception, as driven by ever-stricter consumer protection,” may be otherwise. With public records laws as a guideline, he notes, “associations may withhold from disclosure things like employment matters, litigation, anything private to unit owners or those who are in collections.”
“But the most important thing in any association is the money,” he contends, “which is why management firms typically post financial reports as part of their contract, and now it’s all done online.”
A Two-Edged Sword
While online dissemination of association updates and finances is certainly a huge advance in speed and efficiency, it has spawned other issues. “Most communities, especially smaller ones, do almost all of their business by email; it may save time on one hand, but may take longer when you have more people chiming in and it may be more difficult to reach a consensus,” states Merrill.
The other downside with email is that computer records are notorious for “never going away.” Attorneys in the industry report that email messages are subject to discovery in a legal proceeding, and that fact should guide how boards and managers treat them. Most advise against conducting board business via e-mail.
A Request Too Far?
Just as Merrill described unit owners unreasonably demanding information out of retribution, Jerry Ragosa, president of The Niles Company management firm in Canton, has observed situations where unit owners demanded to see information that is exempt from the list in Section 10 of the Massachusetts condo law. “Sometimes a unit owner makes an unreasonable demand for something that’s beyond the disclosure requirements,” he says.
“We had a case recently in a large community,” he reports, “where a group of homeowners wanted to investigate whether they were getting the maximum ‘bang’ from their monthly fee payments. They requested all kinds of extra information about the association’s operating costs, but they weren’t satisfied with the balance sheets and the totals that were shown. They started demanding details about employees, work schedules, hourly reports, and travel timesheets…but that’s company information and private business, between employer and employee. After we explained it that way, they eventually were satisfied with the outcome. It would be the same thing if a unit owner requested information about a neighbor — that’s private too. It shows that, sometimes, you just have to layer the state statute with common sense.”
Make the Website a Go-To
Conducting email “meetings” online can be tricky, but when done properly, sharing information on community websites and social media can be a real boon, Ragosa insists. “We develop websites for clients and encourage trustees to load in their meeting minutes and budget updates along with standard information such as bylaws, rules and regs…. anything that will assist homeowners in getting information about their community,” he says. This includes executive committee minutes, which some boards don’t want to dispense. If boards are not completely forthcoming, owners start to suspect that something shady is going on.”
“Most boards understand that getting information out eliminates problems, and it’s also effective to keep channels open when the board needs to stress particular issues—seasonal regulations, for instance,” says Ragosa. Additionally, he points out that a management company can make Internet communications easy for associations if they are not keen on developing their own website; the community can put everything that unit owners need on the management firm’s site.
“For some of our clients, the unit owners can log onto the Niles Company website where their association’s information is posted,” continues Ragosa. “Some larger associations have maintained their own web presence right along…expanding on web sites that were an offshoot from marketing (the community’s units). Some of these might have an extensive newsletter or chat board. This is great because we’re always looking for ways to get homeowners more information.”
Throwing a web site online, however, is only half of the battle; maintaining it with fresh information is the real challenge. “We have arrangements as to who updates the web site. Sometimes, we do it, and some associations do it,” Ragosa says. “It’s essential that it’s kept topical with current information. Clients can dispense urgent news with email blasts or tweets, even, such as weather warnings or a missing child. We can coordinate with board members to provide any level of involvement they want. We keep an IT guy on board (at Niles) just to maintain this service.”
Ragosa emphasizes that disclosure laws, “protect managers and trustees as well as unit owners. I’m convinced that the more information we have out there the better off it is for everyone.” Another advantage to full disclosure is outlined by Flynn. “Providing open records and insisting on transparent operations will come in handy when the association is faced with a major project,” he says. “It’s the educational background that will make the process much smoother if you need homeowners’ support…or when you’re facing a special assessment.”
Marie Auger is a freelance writer and a frequent contributor to New England Condominium.