It's not exactly a Christmas gift, but this year's legislature has given California homeowner association members much wider access to HOA records than they have had in the past. This is a result of Assembly Bill 1098 (Jones), which was approved by the Governor October 3. The new law takes effect July 1 of next year.

By way of background, the Assembly legislative analyst noted that there are approximately 36,000 common interest developments in California, comprising over 3 million housing units, roughly one-quarter of the state's housing stock. Moreover, the bill's author estimated that HOA's control between $6 and $7 billion. He cited a California Research Bureau report, "Common Interest Developments: Housing at Risk?", saying that insurance providers estimated that between 14 and 20 percent of lawsuits against HOA boards are for financial mismanagement.

It was the author's contention that the lack of disclosure by HOA boards and the lack of knowledge by homeowners represented a serious risk to the viability of common interest developments throughout the state. AB 1098 was meant to address this problem by giving homeowners much greater access to HOA financial records.

Current law had required that HOA members had access to "accounting books and records." Indeed, HOA members throughout the state receive, or are supposed to receive, annual financial statements. These records, however, at best show the "surface" of the association's financial transactions. Nor are they usually audited.

AB 1098 amends and adds to section 1365 of the Civil Code to provide that association members shall have access to "enhanced association records" meaning "invoices, receipts and canceled checks for payments made by the association, purchase orders approved by the association, credit card statements for credit cards issued in the name of the association, statements for services rendered, and reimbursement requests submitted to the association … ." In short, AB 1098 provides that members shall have access to the nitty gritty of association financial transactions, not just the surface documents.

Early opposition to AB 1098 had expressed concern that the requirements of the bill might lead to HOA liability for disclosing information that could result in identity theft or an invasion of privacy. Thus the final version of the bill allows associations to withhold or redact information that might lead to those results. Further, it provides that no HOA officer, director, employee, or agent shall be liable for such damages to a member, provided that the failure to withhold or redact information was neither intentional nor negligent.

The bill provides that requests to access records within the current fiscal year shall be honored within ten business days. Requests to see records prepared during the previous two fiscal years must be met within 30 calendar days.

If a requesting member wishes to have copies of the records requested the association may bill him for the "direct and actual cost of copying requested documents." The member is to be informed of the copying costs before the copying is done.

Association records "may not be sold, used for a commercial purpose, or used for any other purpose not reasonably related to a member's interest as a member." An association may bring judicial action against anyone who violates that provision.

Conversely, a member may bring an action to enforce his or her rights to inspect and copy association records for a legitimate purpose. Such actions may be brought in small claims court.

Disclosure, disclosure, disclosure. It's good for real estate, and it's good for associations.