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Access to Records and Document Retention
Homeowner associations in Colorado are generally legal entities set up as Colorado nonprofit corporations. Accordingly, associations are responsible for generating and managing many corporate documents and records, such as financial records, legal documents, governing documents, correspondence and business documents. Association members frequently ask to review and copy such documents. Therefore, it is important that associations be aware of the legal requirements pertaining to record availability and have such records organized and retained in a manner that makes them easy to locate and access.
Inspection of Records
The right to access association records is governed by the Colorado Common Interest Ownership Act (“CCIOA”) and the Colorado Revised Nonprofit Corporations Act (the “Act”). Specifically, CCIOA provides “all financial and other records shall be made reasonably available for examination by any unit owner and such owner’s authorized agents.” Additionally, the Act provides that members are entitled to inspect and copy any records of a nonprofit corporation under the following circumstances:
1. Inspection is conducted during reasonable business hours;
2. Inspection is conducted at the nonprofit corporation’s principal place of business or at a reasonable location specified by the nonprofit corporation;
3. Written demand for inspection must be provided at least five business days before the inspection date;
4. Member has been member of community for at least three months or is a member holding at least 5% of the voting power;
5. Demand is made in good faith and for a proper purpose;
6. Member describes with reasonable particularity the purpose of inspection; and
7. Records are directly connected with the described purpose. Based on the foregoing, association records must be made available for inspection and copying to members and their agents under certain circumstances. Therefore, associations should review any requests for document inspection to make sure all of the above enumerated requirements have been met.
If the request does not contain enough information as to a particular element (for example, the purpose of the request is not stated), the board of directors may request more information. If, after inquiry, it remains unclear whether the request complies with a particular requirement of the statute (for example: the board is unsure whether the stated purpose of review qualifies as a “proper purpose”), the association should consult with its legal counsel for further guidance.
Although, CCIOA and the Act require that records be made available to members and their agents, some records are excepted from this requirement because they are considered “privileged” or private. Examples of such records include attorney-client communications (such as letters from or to the association’s legal counsel), medical records and credit history reports. To avoid exposing such records to members of the community, it is recommended that associations adopt a “confidentiality policy” describing in detail which records will be considered confidential and unavailable for inspection and that these records be kept separate from other records of the association.
Organization of Records
It is often the case that records are requested for inspection, or are necessary for some other purpose (such as pending litigation) which are old. This poses a difficulty for many associations because it is unclear whether these records are still in existence, and if so, where they are located. Adopting a document retention policy will assist associations with this problem.
A document retention policy should set forth a list of association records and organize such records by category (i.e. correspondence, financial documents, contracts, tax returns, insurance policies, legal documents, etc.). The policy should also provide how long each record will be kept by the association, and may additionally provide when such record will be moved from the current file to storage. The time that association records will be kept may vary from community to community and should be based on the political nature of the community, IRS guidelines, legal guidelines, practical considerations (such as storage space) or any other relevant consideration. To view the various statutes dealing with access to and inspection of records click here.
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