Withholding Records - We Can Do That, Right?

 We all know that the Colorado legislature last year revised the records definitions and disclosure requirements under the Colorado Common Interest Ownership Act ("CCIOA") (we do all know that, right?).

Well, here is an example of what could happen if your community doesn’t take seriously the responsibility to provide records to its members when they request them.

On April 25, 2013, the Illinois Supreme Court decided the case of Palm v. 2800 Lake Shore Drive Condominium Association. The court determined that the association’s failure to provide records violated a Chicago ordinance that entitled members of a condominium association to have access to and inspect the association’s financial books and records without having to state a proper purpose. The Association contended that the city ordinance conflicted with the Illinois Condominium Property Act and the General Not For Profit Corporation Act of 1986, which did require a statement of proper purpose, and limited the number of years records that could be requested. When the association member requested records, the association denied the request. The member then filed suit.

Whether the Association had something to hide is certainly a question for pondering. The Illinois Supreme Court ruled that the ordinance was valid. The court goes into an extensive discussion about the authority of a home rule city to adopt its own ordinances that may be more restrictive than state statutes – all of which is not particularly relevant to this blog post. However, what is relevant is that, once the court determined that the ordinance was valid, it also awarded attorneys’ fees as provided for in the city’s ordinance. Anecdotally, I read that the attorneys’ fee award may have exceeded $1 million dollars (at $300 per hour) – that is a lot of money for failure to provide records, or take the gamble that a specific legal provision may not apply to the association!

So before too much more time passes, make sure that your association has adopted a proper records inspection policy that defines what records are (as defined in Colorado) and when you need to provide them to members, and under what conditions. Then, the next time your association has a records inspection request, make sure to follow your policy, and think hard about whether you have a legitimate reason to withhold records.