HABITAT

EXAMINING CONDO BOOKS/RECORDS

Examining Condo Books/Records

Oct 02, 2018

Rob Braverman, Principal & Managing Partner, Braverman Greenspun

Over the past couple of years, the rights of condominium unit-owners to inspect and obtain condominium records has been expanded. Historically that right was governed by Section 339-w of the Condominium Act. In essence, what that statute provides is that a condominium is required to keep records of receipts, expenditures, and vouchers, and the authorization of their payments. Condominium unit-owners have the right to review these documents.

 

However, in 2016 the Appellate Division First Department, which governs Manhattan and the Bronx, determined that, as with shareholders in a corporation, condominium unit-owners have a common-law right to inspect books and records that is far broader than the right they are granted under Section 339-w.

 

Examining Condo Books/Records 

Section 339-w of the Condominium Act provides, in pertinent part, that a condominium’s manager or board of managers shall keep detailed, accurate records, in chronological order, of the receipts and expenditures arising from the operation of the property. Such records and the vouchers authorizing the payments shall be available for examination by the unit-owners at convenient hours of weekdays.  However, any inquiry into the “full bundle” of rights afforded to condominium unit owners to review and obtain books and records must also take into account a Unit Owner’s common law rights to these documents and recent case law that has expanded these rights. (Real Property Law, Sec. 339-w)

 

What this involves is the common-law right, which has been held to encompass just about any condominium book or record, including monthly financial reports, invoices, minutes of board meetings, contracts, and even redacted legal bills. In 2016, the case Pomerance vs McGrath held that so long as the unit-owner has a good-faith purpose for reviewing the documents, the condominium unit-owner – like his co-op counterpart – has a common-law right, as well as the statutory right, to review documents.

 

The court went even further and said that not only is there the right to review the documents, but there's also a right to make both paper and electronic copies. So, historically, what would happen is when a unit-owner wanted to review books and records of the condominium he or she would make an appointment with the managing agent, indicating the material for review. That inspection would take place in the managing agent's office, and the unit-owner would be on his way.

 

Now, since the Pomerance ruling, after the unit-owner makes the request, he can be required to articulate the purpose for the request and sign a confidentiality agreement. The unit-owner agrees not to disclose or disseminate records to any third parties.
The court noted that this doesn't necessarily give unit-owners the right to participate in the day-to-day operation of the property. But certainly there has been a significant expansion of the unit-owner’s right to review a condominium’s books and records.

 

Why do boards need to be mindful of this? Often these types of requests are made around election season. They're made by unit-owners who want to take a deeper dive into what's been going on in the condominium. They want to be able to articulate what their opinion might be with respect to how the building is being operated in connection with their campaign and election.

 

For that reason, once the request to inspect records is made, boards should not delay in responding. Ignoring the request is a mistake that can come back to haunt the board in any number of ways. This could include the embarrassment of having a court find that a legitimate request was made and was ignored, or even an election result being overturned because a candidate for the board wasn't afforded the common-law right to inspect and review records.

 

In the end, what should a board do when a request for documents is made? Consult with your managing agent and your attorney. Discuss whether there's been a good-faith basis articulated, and discuss whether there ought to be a confidentiality agreement. Not every single document is available. Certain things – Social Security numbers and financial information – arguably does not fall into the orbit of the Pomerance decision. A board doesn't want to be in the situation of having to explain why it gave over documents that it didn't have to give, or perhaps shouldn't have given.

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