What are the rights of shareholders and unit-owners to inspect the books and records of either the co-op corporation or the condo association? Over the past several years, courts have added numerous other documents and information that must be turned over if requested in good faith, beyond those found in the Business Corporation Law. In addition, co-ops and condos have been treated similarly, even though a condo is actually not covered by the statute. Courts have once again borrowed that statute to apply to condominiums, and this expansion of rights is applicable to both co-ops and condos.
In 2016, an appellate court in Manhattan held in favor of a condo unit-owner, Brenda Pomerance, who was seeking to inspect a broad range of files maintained by the Link Condominium at 310 West 52nd Street. The court in that case, Pomerance v. McGrath, found that a condo unit-owner had broad rights to review the condo’s books and records, similar to a shareholder’s rights with respect to a co-op, including “monthly financial reports, building invoices, minutes of board meetings, and appropriately redacted legal invoices.” There has been at least one similar case applying the Pomerance principles to co-ops.
In Musey v. 425 East 86th Street Apartments Corp. the court held the following records must be provided: minutes of annual meetings and board meetings; records of residents’ names, addresses, and dates they became the owner; information regarding beneficial owners of shares; and information about trusts. Additional records that must be turned over upon a good faith request include annual balance sheets, financial statements, receipts, and expenditures (such as bills, canceled checks, contracts having to do with such projects as new hallways, lobby, or roof).
A precondition to the right to inspect books and records is that the unit-owner or shareholder demonstrates a proper purpose and good faith, as has been the case for many years. If there is some nefarious or unlawful purpose, a board does not have to open its records. It is a lawful purpose if a shareholder or unitowner wants to obtain information to unseat the board or a board member in an election, or if he or she is preparing to sue the co-op or condo.
The courts have said that residents who examine records must treat certain records with confidentiality, such as a specific unit-owner’s information about arrears; identifiable private information, such as a Social Security number; and other confidential business records. Pomerance
is the first case to say that not only may these records be reviewed by unit-owners or their representatives, which until now could only be read in the manager’s office, but they may also be made available through email (if they are stored digitally). I recommend to clients that they make revisions to the proprietary lease or to the condominium bylaws, taking the above categories of documents into account and setting forth what the courts say can legally be reviewed.