Can HOA Members Inspect Contracts Made By Its Board?

Can HOA members inspect the contracts of an association? It is normal for homeowners to question the things their association does. After all, they are the ones paying regular dues to the association. One of the ways they can settle their doubts and questions is to review the details of the HOA’s agreements with vendors, but this may not always be permissible.

Can HOA Members Inspect Contracts?

Homeowners associations are responsible for many things, including cleaning common areas, ensuring proper landscaping, and providing other valuable services. While a few HOAs employ in-house personnel for these tasks, most seek help from a third-party vendor. Hiring vendors, though, means having to enter contracts with them.

It is the board’s duty to solicit bids, vet candidates, and negotiate contracts. There are times, however, when owners may wonder what these agreements specifically involve. For instance, owners may want to know what services vendors have to perform and how much the HOA is paying for these services.

While owners generally don’t get a say in the bidding and selection process, they may be able to examine contracts once they have been executed. This, of course, may vary from one association to another. State laws and the association’s governing documents can dictate whether or not owners have a right to inspect association records.

Furthermore, a vendor contract may contain a confidentiality clause. Such a clause usually states that neither party — the association nor the vendor — may disclose contract details to third parties. In this case, a homeowner may not have the right to review the contract. If an owner insists, the HOA should consult a lawyer to know how to proceed.

Right to Inspect Records of an HOA

In many states, the law gives owners a right to examine and copy the association’s records. However, which records are available for inspection will depend on state laws and even the association’s governing documents.

For instance, in California, the law requires HOAs to make association records available for inspection and copying (Civil Code Section 5205). These association records include executed contracts not otherwise privileged under law, as per Civil Code Section 5200(a)(4). Generally, in the HOA industry, an executed contract is a contract that has already been signed.

If the law remains silent on this matter, homeowners can turn to their governing documents. The CC&Rs and bylaws of an association should indicate whether or not members have a right to inspect the association’s records. These documents should also list which records are available for examination.

Some records are off-limits, though. This is due to the confidential nature of the records. These records commonly include minutes of an executive session, medical records, and any records related to pending litigation. Again, which records are off-limits can vary from one community to another.

If the law requires associations to make records available and the board refuses to grant an owner their request for inspection, the owner may take legal action to force compliance. Of course, it is important to remember that there may be additional requirements that owners must fulfill, such as submitting a request in writing.

Should the Board Disclose Contracts?

If state laws and the governing documents are both silent, the decision generally lies with the HOA board. Board members should take the pros and cons into account.

Transparency and trust building are two key advantages of disclosing executed contracts to members. Homeowners will naturally question vendor contracts as they pay for the services. An HOA board can settle its qualms by allowing owners to examine executed contracts.

Allowing contract inspection also prevents conflicts of interest. When owners have access to such records, they can easily discover the vendor’s connection to the board, if any. Disclosing executed contracts keeps leaders in check and accountable because members can trace them back to the board.

A glaring disadvantage of disclosing executed contracts is that it may open the HOA to unjustified criticism. Not all owners understand the intricacies of running an association. They are not privy to the deal’s details and the negotiation process. As such, owners may not agree with the board’s views as the best choice for the community.

Can HOA Members Inspect Contract Bids?

In general, members don’t have the legal right to inspect the contract bids of an association. In most states, the law does not require associations to maintain confidentiality regarding contract bids or proposals. However, this does not mean that owners have a right to review them.

That said, there are always exceptions to the rule. Florida law, for instance, allows members to inspect all official records, which includes bids that the association receives.

The HOA board is responsible for the operation and management of the association. The board takes on the task of soliciting proposals, reviewing bids, and negotiating contracts before choosing a vendor. Boards do this without the involvement of homeowners. Given that board members are the directors elected to lead the association, homeowners should put their trust in them.

Some boards may want to open contract bids and negotiations for homeowner input. Noble as this may seem, it is not always the best course of action. Giving homeowners significant influence over the selection process may only cause delays and confusion. It also opens the process to disputes. The board should instead do its best to select vendors according to the community’s best interests.

Board Member Rights to Inspect Contracts

While homeowners generally have a right to inspect association records, board members have an expanded right to do so. Board members cannot effectively manage the association if they don’t know all the details. Therefore, the HOA board typically has access to all association records, including relevant records that are usually considered off-limits to regular members.

This expanded right, though, is not absolute and limitless. An association may still deny a board member’s request to inspect records, especially protected records if the HOA believes the board member will use them for personal gain.

Additionally, once a board member’s term expires, they no longer have this expanded right. They can’t view confidential records even if those records were made during or related to the time they served on the board.

Addressing the Root Cause

In addition to asking “Can HOA members inspect contracts?,” it is important to ask why they would want to do so in the first place. More often than not, it boils down to a lack of trust in the board. Homeowners want to review contracts and other records to make sure their dues are being used appropriately.

There are a number of ways an HOA board can build trust, including but not limited to:

• Avoid conflicts of interest. If there is a conflict of interest, board members must make this conflict known and recuse themselves from all discussions and decisions related to the conflict.
• Be transparent. Boards must adopt a transparent approach to financials by presenting these reports for members to review. Many states require this by law.
• Be involved. Even with an HOA manager and attorney in place, board members should still be involved in the vendor selection process. Board members should review the contract bids and proposals themselves, relying only on the manager and attorney for guidance.

Can HOA Members Inspect Contracts? Answered!

In general, homeowners have a right to inspect and copy the records of an association. Whether or not these records include contracts, though, will depend on state laws and the association’s governing documents. Both homeowners and board members should familiarize themselves with these two things to understand their rights and obligations.

An HOA management company can help your association understand state laws and keep up with legal compliance. Find the best one in your area using our online directory!

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