A Virginia Beach jury found a condominium association liable for failing to permit unit owners an opportunity to inspect and copy association records. Not only must the condo board allow inspection and copying, they must pay for an audit of the association records and pay $50,000 for the unit owners’ attorneys’ fees.
These questions arise frequently. This blog post reviews the various Virginia statutes that address the right to inspect and copy records for companies, HOAs and condominium associations.
There are five different statutes that address a right to inspect and copy company records.
1. Virginia Condominium Act. A unit owner in good standing has the right to examine and copy association records “so long as the request is for a proper purpose related to his membership in the unit owners’ association, and not for pecuniary gain or commercial solicitation.” This statute was applied in a case in which the Virginia Supreme Court permitted a unit owner to inspect and copy salary information which identified the precise compensation paid to certain employees. Generally, an association can withhold records relating to
- Personnel matters;
- Contracts, leases, and other commercial transactions to purchase or provide goods or services, currently in or under negotiation;
- Pending or probable litigation.
- Matters involving state or local administrative or other formal proceedings before a government tribunal for enforcement of the condominium instruments or rules and regulations promulgated by the executive organ;
- Communications with legal counsel;
- Disclosure of information in violation of law;
- Meeting minutes or other confidential records of an executive session;
- Documentation compiled for consideration by the executive organ in executive session; or
- Individual unit owner or member files.
2. Virginia Property Owners Association Act. A member in good standing can examine and copy certain HOA records “so long as the request is for a proper purpose related to his membership in the association.” This right is limited similarly as set forth in the Virginia Condominium Act.
3. Virginia Stock Corporation Act. A shareholder of a corporation is entitled to inspect and copy certain records of the corporation. However, this right is limited to when
- The shareholder has been a shareholder for at least six months immediately preceding the shareholder’s demand or is the holder of record or beneficial owner of at least five percent of all of the outstanding shares;
- The shareholder’s demand is made in good faith and for a proper purpose;
- The shareholder describes with reasonable particularity the shareholder’s purpose and the records the shareholder desires to inspect; and
- The records are directly connected with the shareholder’s purpose.
4. Virginia Nonstock Corporation Act. Under this act, a member is entitled to inspect and copy certain records of the corporation. However, this right is limited to when
- She has been a member of record for at least six months immediately preceding the demand;
- The demand is made in good faith and for a proper purpose;
- She describes with reasonable particularity his purpose and the records to inspect; and
- The records are directly connected with the purpose.
5. Virginia Limited Liability Act. Finally, under this Act, a member has the right, upon reasonable request, to inspect and copy any of the limited liability company records required to be maintained by the Act. However, even that right is qualified. If the information demanded is unreasonable or otherwise improper under the circumstances, inspection can be limited. Further, access can be limited by the company’s operating agreement.
Depending upon the entity, access to records for inspection and copying can be confusing. Generally, we would expect a court to rule expansively on a member or shareholder’s right to access. Make sure your company, homeowner’s association, or condominium association is well advised on its obligations to maintain records and provide access to those records.
Tarley Robinson, PLC, Attorneys and Counsellors at Law
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