Q: I asked permission to review my homeowners’ association’s financial records for the past three years. I literally had to show the board where in the North Carolina statutes it said I had that right to these records before they would provide them to me. I understand that the law allows the HOA to impose a “reasonable charge” for producing and/or copying the HOA’s records for my review. However, there is nothing specific in the statutes nor our bylaws as to what constitutes a “reasonable cost,” and the HOA charged me more than $200. Is that legal?
A: If your HOA falls under the North Carolina Planned Community Act (the “PCA”), that law allows HOA members the right to inspect and copy certain records of the association. The PCA states that “[a]ll financial and other records, including records of meetings of the association and executive board, shall be made reasonably available for examination by any lot owner and the lot owner’s authorized agents as required in the bylaws and Chapter 55A of the General Statutes.”
As you can see, the PCA refers us to Chapter 55A, which is the North Carolina Nonprofit Corporation Act (the “Act”). The Act defines and places limits on what records are subject to inspection by a member of an HOA, notwithstanding the broad language of the PCA.
One section of the Act, N.C.G.S. § 55A-16-02 (“Inspection of records by members”), provides that a member is entitled to inspect and copy the “accounting records of the corporation” (and a limited category of other records), but only if the member gives the corporation at least five days’ notice and:
(1) The member’s demand is made in good faith and for a proper purpose;
(2) The member describes with reasonable particularity the purpose and the records the member desires to inspect; and
(3) The records are directly connected with this purpose.
Finally, the Act provides that “the corporation may impose a reasonable charge, covering the costs of labor and material, for producing for inspection or copying any records provided to the member.” Under the Act, the charge cannot exceed the estimated cost to produce or reproduce the records in question.
Therefore, in the typical case, if the board is satisfied that a lot owner’s request for records is made “in good faith and for a proper purpose,” the board will ask its management company (if the HOA is professionally managed) to estimate how much time it will take a staff member to compile the requested records. The board will then calculate the cost to the lot owner based on an hourly rate, and require the lot owner to pay that cost in advance before providing the records. Whether $200 is a reasonable charge depends on how long it took someone to gather and copy the records for you.
This column was originally published in the Charlotte Observer on June 9, 2018. © All rights reserved.