MEMBERS; MEMBERSHIP MEETINGS

CAN NON-AGENDA ITEMS BE HEARD AT A MEMBERSHIP MEETING?

IT DEPENDS. Generally, at an annual owner's meeting, the owners can vote on matters not mentioned in the meeting notice. Civil Code § 1363(e) provides:

Notwithstanding any other provision of law, notice of meetings of the members shall specify those matters the board intends to present for action by the members, but, except as otherwise provided by law, any proper matter may be presented at the meeting for action.

However, a statutory exception applies where the governing documents define a quorum to be less than 1/3 of the membership. In such cases, if less than 1/3 of the voting power is present (in person or by proxy), member action is limited to those matters described in the notice of the meeting.

Although the statute permits any proper matter to be presented at a membership meeting, caution is necessary when attempting to vote on certain matters which may not be within the auspices of the members or which may require a larger percentage of members voting than what is present (either by person or by proxy) at the meeting. For example, if the association's CC&Rs require the written consent of a super-majority of the entire voting membership (such as 55% or 66-2/3%) to amend the CC&Rs, a simple voice vote or hand vote at an annual meeting would not suffice to amend the CC&Rs. A written ballot would have to be sent out to all members of the association in order to obtain the required written consent.

Accordingly, the members at the meeting could not vote to amend the CC&Rs, but, rather, could vote on whether or not a written ballot should be sent to the members for the purpose of amending the CC&Rs.

Note that Civil Code § 1363(e) does not apply to a special meeting of the members. Corporations Code § 7511 specifically provides that notices of special meetings must include "the general nature of the business to be transacted, and no other business to be transacted". Therefore, only the matter set forth in the notice of the special meeting is proper fodder for discussion and possible action at the special meeting.

DO MEMBERS HAVE AN ABSOLUTE RIGHT TO A COPY OF THE MEMBERSHIP LIST? WHAT ABOUT COPIES OF ALL ASSOCIATION BOOKS AND RECORDS?

NO.

Membership Lists.

California Corporations Code grants the association the ability to reject a member's request for the membership list if it believes the list will be used for another purpose other than one related to the person's right as a member of the association. For example, if the board believes the list will be used for business solicitation, it can deny the member's request for the list.

Furthermore, California Corporations Code also allows the association to offer the requesting member an alternative to providing the membership list. This statute is particularly helpful for any association concerned about the privacy rights of its members. The relevant statute provides in pertinent part:

Corporations Code §8330. Demand for Member's Names, Addressed, and Voting Rights By Member.

...(b) The rights set forth in subdivision (a) may be exercised by:

(1) Any member, for a purpose reasonably related to such person's interest as a member. Where the corporation reasonably believes that the information will be used for another purpose, or where it provides a reasonable alternative pursuant to subdivision (c), it may deny the member access to the list. In any subsequent action brought by the member under Section 8336, the court shall enforce the rights set forth in subdivision (a) unless the corporation proves that the member will allow use of the information for purposes unrelated to the person's interest as a member or that the alternative method offered reasonably achieves the proper purpose set forth in the demand. ...

(c) The corporation may, within ten business days after receiving a demand under subdivision (a), deliver to the person or persons making the demand a written offer of an alternative method of achieving the purpose identified in said demand without providing access to or a copy of the membership list. An alternative method which reasonably and in a timely manner accomplishes the proper purpose set forth in a demand made under subdivision (a) shall be deemed a reasonable alternative, unless within a reasonable time after acceptance of the offer the corporation fails to do those things which it offered to do. Any rejection of the offer shall be in writing and shall indicate the reasons the alternative proposed by the corporation does not meet the proper purpose of the demand made pursuant to subdivision (a).

Based on these statutory provisions, the association need not provide a membership list based on an oral request. Rather, only upon receipt of a written demand for the membership list should the association take action. The association then has ten business days to deliver to the person making the demand a written offer of an alternative method of achieving the purpose identified in said demand without providing access to or a copy of the membership list.

Typically, if the member's purpose for requesting the membership list is for communication with fellow homeowners related to association business, the association can offer to do the mailing for the member at his/her cost. Costs would include postage, copy costs, envelopes and staff time to stuff envelopes. The association would have the right to require that these costs be paid in advance by the requesting homeowner. Additionally, the association has the right to review the intended mailing material to ensure it does not contain libelous information.

Accounting Books and Records

As it relates to a member's right to the accounting books and records of an Association, it is important to note that the relevant statute, Corporations Code §8333, states only that the members have a right of inspection, not a right to copy. This is often confused with a member's "right" to a copy of the membership list. Further, more confusion arises because accounting books and records are not specifically defined anywhere in the Corporations Code. The statute states:

The accounting books and records and minutes of proceedings of the members and the board and committees of the board shall be open to inspection upon the written demand on the corporation of any member at any reasonable time, for a purpose reasonably related to such person's interests as a member.

To understand what is meant by accounting books and records which are subject to inspection, the Corporations Code identifies what books and records each nonprofit mutual benefit corporation must maintain. Specifically, Corporations Code §8320 provides in pertinent part:

Each corporation shall keep:

(1) Adequate and correct books and records of account;

(2) Minutes of the proceedings of its members, board and committees of the board; and

(3) A record of its members giving their names and addresses and the class of membership held by each.

However, because the Corporations Code does not specifically define what constitutes "adequate and correct books and records of account", issues may arise regarding the association's obligation to provide sensitive information, such as supporting information to financial statements. In reviewing various treatises on this issue, Advising California Condominium & Homeowners Associations at 99, opines: If a particular body of requested information is the type of primary work product upon which the corporation's books and records of account are based, or if the information or records are relevant only to a particular lot and not to the operation of the corporation as a whole, the member's inspection demand may be denied. What the corporation is obligated to maintain (Corp C §8320), and thus to disclose upon demonstration of a purpose reasonably related to the member's interests in the corporation (Corp C §8333), are adequate and correct books and records of account.

As noted in 2 Marsh's California Corporations Law §15.11 at 1249 (3d ed 1990): "It is clear from this provision that the Legislature intended not to permit a [member] to inspect, for example, the contract files or the property files of the corporation or any files other than the accounting records." Marsh also expresses a conservative view of what constitutes a "purpose reasonably related" to a member's interest as a member of the association (§15.11 at 1251):

`Presumably, the person desiring to exercise the right of inspection would have to show that there was at least some reason to believe that the corporation had not been making full and accurate reports to the [members] of the financial condition and results of operation of the corporation. Certainly, if the corporation's financial statements have been audited by a reputable firm of independent public accountants and have been disseminated on a regular basis to the [members], there is no reason, in the absence of some special circumstances, to permit a [member] to attempt to duplicate that audit, with the consequence inevitable disruption of corporation operations...'"

In light of the foregoing authority, it is our opinion that the member's right to inspect "adequate and correct books and records of account" relate to the corporation's financial statements, proforma operating budget, and any other similar financial documentation. However, the association is under no obligation to provide any supporting materials such as general ledgers, accounts payable, accounts receivable or separate accounting entries.

As to minutes of the board of director's meetings, Civil Code §1363.05(d) is specifically on point and indicates that a member is entitled to copies of all minutes of board of director's meetings, other than executive session meetings, upon request and upon reimbursement of the Association's costs for making the copies. Thus, members are not only entitled to inspect minutes, but members are entitled to copies of minutes of all board meetings upon payment of the costs for same, other than executive session minutes. Executive session minutes should be maintained in a secure area in a separate minute book and open only to inspection by the board of directors, staff designated by the board of directors (such as the general manager/property manager) and its attorney or accountant.

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