Keeping Track of Paperwork Properly Managing Association Records

While keeping the records of the association is not the most fascinating part of serving on a board, it is in some ways the most important. In fact, the flow of paperwork is the lifeblood of the community.

The association’s declaration, master deed and bylaws, and the co-op’s articles of incorporation and proprietary lease are the foundation of the business that is your typical co-op, condominium or homeowners’ association. The voluminous documents produced day to day are the records of its operation and the correspondence among the board, owners and management create the tenor of life within the community. Keeping documents and records tidy and communications responsible and transparent are key to running a functional and harmonious community.

The Letters of the Law

While the rules and regulations regarding producing and distributing the documents of the association are largely determined by the association itself in its declaration and bylaws, there are specific record keeping requirements spelled out in the Illinois Condominium Property Act, according to Patricia A. O’Connor, an attorney and a partner with the Chicago-based law firm Levenfeld Pearlstein, LLC.

“Under Section 19 of the ICPA, the board must maintain; ‘the association’s declaration, bylaws and plats of survey, and all amendments of these; the rules and regulations of the association, if any; if the association is incorporated as a corporation, the articles of incorporation of the association and all amendments of incorporation; minutes of all meetings of the association and its board of managers for the immediately preceding seven years; all current policies of insurance of the association; all contracts, leases and other agreements then in effect to which the association is a party or under which the association or the unit owners have obligations or liabilities; a current listing of the names, addresses, and weighted vote of all members entitled to vote; ballots and proxies related to ballots for all matter voted on the members of the association during the immediately preceding 12 months, including but not limited to the board of managers; and the books and records of account for the association’s current and 10 immediately preceding fiscal years, including but not limited to itemized and detailed records of all receipts and expenditures,’” she says.

The Governing Documents

The most important document in the life of the condo community, subordinate only to U.S. and state laws, is the condominium declaration, or covenants, conditions and restrictions (CC&R) in the case of HOAs, written by the developer at its inception. The declaration contains a detailed breakdown of the property, including engineering sketches and each owner’s proportionate share of the property and portion of the monthly common expenses. It also describes the common areas of the complex.

The second record of importance is the bylaws, which lays out the rules for self-governance of the association, including how the board directs its affairs, enforces policies and oversees upkeep and administration. The bylaws also cover such matters as requirements for meetings, voting, the manner in which the budget should be prepared, the determination and handling of assessments, and the filing of assessment liens and restrictions on the use of the units and the common areas.

Third in the hierarchy of governing documents are the rules and regulations, which are specific policies the board writes to administer and enforce the declaration and the bylaws.

The rules and regulations are the most malleable of the documents of the association. While bylaws take a super-majority of the association to be amended, the rules can be rewritten by a majority of board members.

Co-op documents, however, are a bit different due to their inherent corporate nature. The articles of incorporation or organization are the most important, followed by the bylaws, rules and regulations and documents regarding stock shares and propriety leases, experts say.

O’Connor notes that requirements spelled out in the ICPA trumps any inconsistent provisions in an association’s declaration. Additionally, the declaration overrides any inconsistent provisions in the association’s bylaws, she says.

The Role of the Manager

It’s an association’s obligation to allow for the inspection, examination and copying of documents, O’Connor says. If an association is self-managed, the board maintains all records personally. Usually, the secretary member of the board is in charge of overseeing the books and records, Michael Kreibich, a principal attorney with the Buffalo Grove-based law firm of Kovitz Shifrin Nesbit, says. However, this position might be delegated to another member of the board.

Buildings large enough to afford a full-service management company typically have them provide a monthly report in advance of board meetings detailing the month’s activities and providing background on issues on the agenda.

Experts say the monthly report should include information such as budget data, bank statements and both accounts payable and receivable. The report should also contain any correspondence from and sent out to unit owners and shareholders, background information on any issues the board intends to discuss and proposals from contractors for any projects that are being considered.

Larger associations also employ managers to organize and store documentation. The extent to which the board relies on management to produce reports is laid out in the management contract. Managers might facilitate the release of documents to owners, but that is the extent of their involvement.

“Management has no duty to explain the meaning of any documents. In Illinois, managers are prohibited by law from providing legal advice, so they must exercise caution in what advice they are providing to owners,” O’Connor says.

Because managers are not generally qualified to explain complicated documents, Kreibich suggests owners consider contacting personal attorneys to protect their individual interests.

Access to Records

Members of the board essentially have full access to an association’s important documents. Each member has the right to examine all books and records related or pertaining to a matter the board is considering, Kreibich explains. But, there is no such thing as completely unfettered access to records—there are limitations to even what the board can see.

“The law does indicate that a seat on the board of directors does not necessarily give that individual a completely unrestricted right of access to all of the books and records of the association under certain circumstances,” Kreibich says. “For example, if a member of the board of directors has a desire to view books and records out of mere idle curiosity, for personal benefit, or is simply on a ‘fishing expedition,’ they should be treated like any other association owner and a proper request should be made.”

For the most part, all owners have the same access to records as board members.

Illinois law states all owners are entitled to certain financial documents annually. Boards must send budget proposals to owners at least 30 days prior to the board voting on the annual budget. This document should include income and projected expenses for the coming year. Additionally, boards are required to provide owners an itemized report of expenses and revenue for the prior year.

An owner must give a written request to the board explaining what records he or she would like to access and why. Per Section 19 of the ICPA, a board has 30 days to respond to a request, says Lara Anderson, an attorney and shareholder with the law firm of Fullett Rosenlund Anderson, PC in Lake Zurich. However, under a city of Chicago ordinance, Chicago proper-based associations have three days to provide records from an indefinite amount of time.

A unit owner can sue an association for not adhering to this deadline and for failure to produce properly requested records, O’Connor says. Furthermore, “The owner may recover attorney fees and court costs if the court determines that the association’s denial of the owner’s examination request was in bad faith,” she warns.

There are certain privileged documents that only board members can see, and the board has the right to deny access to such records.

“There is some information that the board can withhold from members of the association, in particular, any information and anything that would be detrimental to the association,” Anderson says. “Pending litigation is generally what a board can keep from the members of the association because they need to protect the sanctity of the attorney-client relationship and make sure their legal strategies aren’t divulged to the other side of the litigation. It’s in the best interest of the association as a whole that it’s withheld, but it would not be withheld indefinitely.”

Legal information isn’t the only data off limits to unit owners. Residents don’t have access to information regarding delinquencies, collections or sales of units by other owners.

Sharing the Minutes

Associations must by law produce and keep in the official records the minutes of all meetings of the board of directors and members. The details of this law are spelled out in the ICPA, O’Connor says.

“In Illinois, condominium boards are obligated to operate in a transparent manner. Decisions made and actions taken by the board must be done at an open board meeting,” she says. “This means that all condominium owners are entitled to attend board meetings and observe the operations of the board.”

While Illinois law requires transparency, there are some topics not up for public consumption, Kreibich says. “Commonly there are three exceptions to the open meeting requirement: discussion of probable or current litigation, consideration of information regarding appointment, employment or dismissal of an association employee, or discussion of violations of the association’s governing documents,” he explains. “With the above constraints in mind,” Kreibich continues, “the board of directors, and any of an association’s agents, such as a property manager, must be very mindful of the legal and contractual obligations imposed upon them when determining what information should and should not be shared with association owners.”

The pros suggest publishing all meeting minutes via an accessible platform such as a community newsletter or website. Beyond fostering an atmosphere of transparency, regular newsletters or mass emails on specific topics prepare members for any new actions the board is considering, like the enforcement of rules on the books about which previous boards have been lax.

Keeping Organized

“By law, generally all association books and records must be maintained at the association’s principal place of business,” Kreibich says. “That location can range from the location of their registered agent with the Illinois Secretary of State, to an on-site office if one exists, or even possibly the association’s management office.”

Sure, storing all building documentation is not only legally required, it holds associations accountable for all decisions made—from financial to legal. However, this best practice of storing all records can turn a board’s office into a scene straight out of “Hoarders.”

To avoid drowning in a sea of paperwork, the board can have management scan everything. Digitizing files makes them easy to reference and electronic records are easily transported from the management office to a building’s computer hard drives.

Enjolie Esteve is an editorial assistant at The Chicagoland Cooperator. Freelance writer Steven Cutler contributed to this article.

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