That’s Highway Robbery!

A reader asks: ”

“Can a Board charge a homeowner ($10/page) for records inspection without any inspection policy in the governing documents?  Our By-laws only state that the HOA shall adopt rules to enforce records inspection, which has never been done.” 

 California law allows for associations (board/management) to charge the “direct and actual costs” to provide records. Here is a passage taken directly from THE DAVIS STIRLING ACT IN PLAIN ENGLISH – a book that is available for sale on my website (author – yours truly!). In the book I set forth the language of the statute that applies, and then explain it. In this case, see below for the law as it is written, and then the explaining about the explaining comment

  “Civil Code 1365.2.5 (b)(1) The association shall make available association records and enhanced association records for the time periods and within the timeframes provided in subdivisions (i) and (j) for inspection and copying by a member of the association, or the member’s designated representative. The association may bill the requesting member for the direct and actual cost of copying requested documents. The association shall inform the member of the amount of the copying costs before copying the requested documents.

 Comment: The costs are limited to “direct and actual”, which is left to some interpretation (direct?). And collection of the charges is left up in the air. The association is to tell the owner the costs before the copies are made, and can bill the owner, but if the association attempts to withhold the records until payment is received, and misses a deadline for providing the records, it is subject to the $500 penalty if sued. It is a catch-22 situation. If the Association governing documents allow for collection of a reimbursement assessment, this is one possible way to collect if an owner does not pay.”

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When I say that the limitation of “direct and actual” is left to interpretation I mean that people interpret it differently. One common interpretation is that whatever the management company charges is an actual cost to the association so therefore its legit. However, there is a case in California that deals with records inspection issues and although it is not definitive on what can be charged, I believe it suggests that charging high costs for records retrieval for records that should be readily available, such as minutes from meetings of the past several years, would be frowned upon. The case is MORAN v. OSO VALLEY GREENBELT ASSOCIATION, 117 Cal.App.4th 1029, 12 Cal.Rptr.3d 435.

What is reasonable is always arguable. $10 a page seems like a lot for document retrieval; however, if certain factors are present, it might be very reasonable. Some of the factors I would say might justify higher costs:

1. The document sought is from old records and not one that would normally be kept in the current records, or is one that requires pulling together information or pages from various files so there is reasonable retrieval time involved. 

2. The owner who wants to see the records is untrustworthy or suspect or the board has simply adopted a prudent practice of carefully protecting the association records and the owner wants to go through lots of original records, and won’t settle for copies. So, the HOA or Condo Association feels it is necessary/prudent to have a someone (I fondly call that person a “babysitter”) present so records to not get left out of order or removed.

Whether or not an association has memorialized or adopted a formal policy, it is subject to the law and limitation stated above and found in Civil Code Section 1665.2.5, and/or is entitled to act within the limit of the statute, which ever way you want to look at it.

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2 Responses to That’s Highway Robbery!
  1. Chris Gardner
    February 7, 2010 | 1:10 am

    If an association or management company pays the costs of getting an association approved for HUD financing, would it be allowed to charge the fha buyers for whom the benefit of fha eligibility inures a reasonable fee to recover the costs of making this benefit available. Would this be a RESPA issue?

    • Beth Grimm
      February 20, 2010 | 3:30 am

      I honestly do not know if what you describe is a RESPA issue (maybe someone will develop this discussion by writing in). My question as an homeowners association law attorney (whether speaking for an HOA or Manager, or a homeowner trying to sell the property) would be on what authority the manager would be making these charges. There has to be some underlying authority to charge someone a fee. Some management agents do complete the forms and charge for filling out lender questionnaires – if someone is willing to pay the cost of it. (Others do not because of the liability problem.) I believe in some cases it is charged to the buyer and becomes a charge payable through escrow as the management company is doing it as a service to buyer. There may be something in the governing documents that allows this cost to be charged. I am sure there are those willing to argue that these costs are part of a viable “transfer fee” which generally does allow an HOA to recover actual “costs” involved in the transfer of records from one owner to another. People will be sure to argue over this. There is no legal obligation for an HOA manager to fill out any lender’s questionnaire, but obviously, doing it helps facilitate the transaction as many lenders would not consider underwriting a loan if they cannot get the information they need to satisfy the underwriters and, if necessary, FHA, FNMA and the like.

      For those who are lost, the issue that comes up now and I believe is more in line with what you are asking comes up because FHA, as I understand it, will no longer do “spot” certification (per loan, per lender) on sales in condo associations. So, in order to qualify for an FHA loan, a buyer has to either try and individually get the whole development certifed, or, as will probably happen, will expect the HOA to get itself certified, which of course could result in considerable costs (I am hearing $1500 to $5000 but I am sure someone will be charging more than that). So the question becomes, who should pay for the HOA certification process: all owners in the development (making this a budget item) or just those who need the benefit of it? And, another rub … the certification is not forever. The HOA’s certification, should one be willing to “go there”, as I understand it, comes with a shelf life, maybe two years? Maybe more or less – would be happy to get some firm number if there is one.

      Yes, the plot thickens. I am studying these issues so if anyone out there wants to add something [meaningful] to the discussion, please do. I will warn you though, I probably have more questions than answers! And no whining allowed. This is a real problem that cries out for a real solution.

      I am working on an E-newsletter on the topic as we speak. Sign up now at http://www.californiacondoguru.com to get the free monthly E-news called “What’s New in HOA Land?”