Dealing with Unit Owner Requests to Inspect Community Association Financial Documents – A Summary of the DCA Guidelines

July 11th, 2023 | Blog, Community Association Law Blog

By Eric F. Frizzell, Esq.

Community associations frequently receive requests to review their financial records from unit owners. How should your association respond to such a request?

The New Jersey Condominium Act provides that associations are responsible for “the maintenance of accounting records in accordance with generally accepted accounting principles open to inspection by unit owners at reasonable times.” These accounting records must include (1) a “record of all receipts and expenditures”; and (2) “an account for each unit setting forth any shares of common expenses or other charges due, the due dates thereof, the present balance due, and any interest in common surplus.”

In its “Access to Financial Records Guide for Owners in Community Interest Communities,” the New Jersey Department of Community Affairs (DCA) notes that courts have held that this right of access applies not only to condominium unit owners but also to owners in cooperatives and homeowners associations. The following summarizes key points in the DCA’s Guide:

– A unit owner’s right of access to financial records is unconditional and may not be denied because the owner owes past due common expenses to the association or has any outstanding violations.

– An association may require an owner to sign an acknowledgement that lists the records to which access is granted or confirms that the owner has received an information sheet from the association regarding the consequences for misuse.

– An association may not require an owner to agree to any confidentiality as a condition for access to records.

– An association cannot require an owner to provide justification for requesting access to records.

– Other than the records that the Condominium Act requires an association to make available, as quoted above, the law does not require other specific accounting records to be kept by an association, and the DCA recommends that an association confer with its accountant regarding what financial records are maintained “in accordance with generally accepted accounting principles” – and that therefore must be made available to unit owners for inspection.

– Owners should allow the association a reasonable time to comply with a request considering the factors involved, such as the size of the association, its resources, the number of records requested, the presence or absence of professional management, the number of other pending requests, the general workload and relevant circumstances.

– An association is not required to send copies of the records to the requesting unit owner, but is only required to give the unit owner access to review them (unless the association’s governing documents provide otherwise).

– An association may not charge the requesting unit owner a fee for access to inspect records, even if another party charges the association a production fee.

– “Circumstances” may require an owner to travel to an accountant’s or property manager’s office to review records (although the DCA does not explain what those circumstances might be).

– Owners can make their own copies of documents on site if their method does not harm them (ostensibly such as by taking photos on their cellphone, but not having a right to use the association’s management office photocopier). In the event an owner wishes the association to make copies, the association can charge a fee that must be reasonably related to its copying cost and “be consistent with the owner’s right” (a vague phrase that is not explained by the DCA).

– An owner has the right to determine which records he or she would like copied. The association is entitled to require advance payment if the list is extensive.

– An owner is allowed to bring a knowledgeable person with them, such as an accountant or one familiar with corporate financial records, to inspect the records.

– Unit owners are entitled only to “accounting records”, and therefore are not entitled to review analyses, internal financial reports (such as monthly financial reports prepared by the property manager for the board) or explanations of accounting terms or methodology.

– Unit owners are allowed access to accounting/payment records for other unit owners, but any legitimately confidential information contained in those records, such as social security numbers or unlisted telephone numbers, should be redacted.

– There is no set time period in which the association must make records available and therefore they must be provided in a reasonable time considering all the circumstances.

If legal issues arise regarding a unit owner’s request to inspect your association’s financial records, consult with your attorney for further guidance. And as always, please feel free to reach out to our law firm if you have any questions.

Eric F. Frizzell, Esq.

This article is for informational purposes only and does not constitute legal advice.