A Board's Secrecy Has Its Limits

Q: We live in a large community run by a homeowners association. Have you ever heard of a contract between the board of directors and the management company they hired that contains a confidentiality agreement whereby the homeowners are not privy to the contents of the contract? Our board and the management company refuse to allow any homeowners to see the contract. Also, if our bylaws state that the management contract can be for only two years, how can the management company have the board sign a five-year contract, which we understand is the case?

A: Access to community association information, books and records is a hotly debated issue. Many jurisdictions, including the District and Maryland, have laws that specifically require that all such documents be made available upon reasonable request by a homeowner. Some states, including Virginia, add the requirement that the person requesting this information demonstrate that the request "is for a proper purpose related to his membership in the [association] and not for pecuniary gain or commercial solicitation."

There are certain documents that should be available only to the elected board of directors. For example, Virginia law allows the association to decline to release information about such things as personnel matters relating to specific, identified persons; individual medical records; contracts that are being negotiated and have not yet been finalized; and pending or even probable litigation.

The latter is defined as "instances where there has been a specific threat of litigation." Clearly, to allow for a proper defense -- and to preserve the lawyer-client privilege -- homeowners other than the board should not have access to this information.

You should also review your association legal documents, because they may contain language addressing this issue.

Unfortunately, board members who want to preserve their own privacy have often used Virginia's "proper purpose" test as a shield to avoid releasing any documents, including in your case the management contract.

What is a "proper purpose?" As far as I am concerned, any document that the board signs -- or any money that the board spends -- is for the benefit of all owners. Thus, all owners have -- or should have -- the absolute right to review this material.

Several years ago, I represented a condominium unit owner who wanted to know the salaries for the staff members who worked in her building. The association balked at releasing this information, citing privacy concerns.

We told the judge that we did not want to know the addresses, Social Security numbers or even home telephone numbers of these employees. We further explained that these salaries were paid from association funds, and that my client had the right to this information.

After a bitter court battle, the judge ruled in favor of my client.

Homeowners should not have to go to court to obtain documents to which they have a legal right. But too many boards and property managers have the mind-set that secrecy will avoid confrontation and challenges to their authority.

You have the absolute right to obtain a copy of the management contract. If, as you suspect, it is for a five-year term, and the bylaws of your association limit such contracts to two years, that may be why your board is refusing to release the contract.

I suggest that you discuss this matter with the association lawyer. Although retained by the board, he or she is the lawyer for the entire association. In that capacity, the lawyer must act in the best interests of all unit owners, not just board members.

You may be in error. The management contract may be for only two years and in full compliance with your bylaws. But because this document is secret, rumors thrive and grow wilder with time.

Association directors and management companies must understand that communication and disclosure generally solve most -- if not all -- homeowner concerns. Your board was elected by the membership. That membership has the right to "throw the rascals out" if they do not behave responsibly.

If your efforts with the board fail, then I recommend that you organize a group of owners who share your concerns and retain a lawyer to assist you. A lawsuit (or even the threat of a lawsuit) can pry open that management contract.

Benny L. Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, 1050 17th St. NW, Suite 1100, Washington, D.C. 20036. Readers may also send questions to him at that address or contact him through his Web site, http://www.kmklawyers.com.