Right to inspect HOA Contracts in Georgia, USA

Question

I would like to inspect a contract that the HOA has signed and is in effect.

The HOA is in Fulton County GA, USA.

I have asked for a copy and they have declined my request.

Here is the law that I think applies:

Section 14-3-1602 - Members' right to copy and inspect records

(a) A corporation shall keep a copy of the following records:

(a1) Its articles or restated articles of incorporation and all amendments to them currently in effect;

(a2) Its bylaws or restated bylaws and all amendments to them currently in effect;

(a3) Resolutions adopted by either its members or board of directors increasing or decreasing the number of directors or the classification of directors, or relating to the characteristics, qualifications, rights, limitations, and obligations of members or any class or category of members;

(a4) Resolutions adopted by either its members or board of directors relating to the characteristics, qualifications, rights, limitations, and obligations of members or any class or category of members;

(a5) The minutes of all meetings of members, executed waivers of notice of meetings, and executed consents, delivered in writing or by electronic transmission, evidencing all actions taken or approved by the members without a meeting, for the past three years;

(a6) All communications in writing or by electronic transmission to members generally within the past three years, including the financial statements furnished for the past three years under Code Section 14-3-1620;

(a7) A list of the names and business or home addresses of its current directors and officers; and

(a8) Its most recent annual registration delivered to the Secretary of State under Code Section 14-3-1622.

(b) A member is entitled to inspect and copy, at a reasonable time and location specified by the corporation, any of the records of the corporation described in subsection (a) of this Code section if the member gives the corporation written notice or a written demand at least five business days before the date on which the member wishes to inspect and copy.

(c) A member is entitled to inspect and copy, at a reasonable time and reasonable location specified by the corporation, any of the following records of the corporation if the member meets the requirements of subsection (d) of this Code section and gives the corporation written notice at least five business days before the date on which the member wishes to inspect and copy:

(c1) Excerpts from minutes of any meeting of the board of directors, records of any action of a committee of the board of directors while acting in place of the board of directors on behalf of the corporation, minutes of any meeting of the members, and records of action taken by the members or the board of directors without a meeting, to the extent not subject to inspection under subsection (a) of this Code section;

(c2) Accounting records of the corporation; and

(c3) Subject to Code Section 14-3-1605, the membership list.

(d) A member may inspect and copy the records identified in subsection (c) of this Code section only if:

(d1) The member's demand is made in good faith and for a proper purpose that is reasonably relevant to the member's legitimate interest as a member;

(d2) The member describes with reasonable particularity the purpose and the records the member desires to inspect;

(d3) The records are directly connected with this purpose; and

(d4) The records are to be used only for the stated purpose.

(e) This Code section does not affect:

(e1) The right of a member to inspect records under Code Section 14-3-720 or, if the member is in litigation with the corporation, to the same extent as any other litigant; or

(e2) The power of a court, independently of this chapter, to compel the production of corporate records for examination.

Note that c.2. refers to accounting records.

Is the case law that would lump contracts into accounting records so I could demand to see it?

[EDIT] I am a member. The contract is with a service provider that is very subjective on the value of the service.

Answer 1

No pertinent case law or commentary squarely addresses the scope of the inspection right for nonprofit corporations, but interpretation of the parallel provision of the for profit corporation act in Georgia (Section 14-1-1602) with essentially identical language is informative.

An official comment to that statute states:

the right of inspection granted by Section 14-2-1602 is an independent right of inspection that is not a substitute for or in derogation of rights of inspection that may exist (1) under Section 14-2-720, to inspect the shareholders' list at a meeting; (2) as part of a right of discovery that exists in connection with litigation; and (3) as a “common law” right of inspection, if any is found to exist by a court, to examine corporate records

The common law right which the statute does not abrogate provides that

A bona fide stockholder has right to inspect books and records, where examination is asked for in good faith and for specific and honest purpose, but not to gratify curiosity or for speculating or for vexatious purposes, provided that purpose is germane to his interest as stockholder, proper and lawful in character, and not inimical to interests of corporation itself, and inspection is made during reasonable business hours;  demands for material not relevant to these purposes should not be granted.

Master Mortg. Corp. v. Craven, 193 S.E.2d 567 (Ga. App. 1972).

This common law right of inspection could very well extend to copies of material contracts that are not strictly speaking accounting records, and many other states interpret the phrase "books and records" of a corporation to include a right to examine its material contracts (a right also present with respect to publicly held companies under the 1934 Securities Exchange Act).

In one case, a court properly required a corporation to reveal to its minority shareholder invoices showing types of products sold, with only names and addresses of customers redacted, even though minority shareholder was competitor of corporation, because product type information was needed to allow minority shareholder to value its shares. G.I.R. Systems, Inc. v. Lance, 491 S.E.2d 530 (Ga. App. 1997).

The most comprehensive review of what is included in the inspection right can be found in Riser v. Genuine Parts Co., 258 S.E.2d 184 (Ga. App. 1979). In that case, the appellate court reasoned:

[I]t is apparent that although shareholders have some rights to corporate information not available to the general public, shareholder status does not in and of itself entitle an individual to unfettered access to corporate confidences and secrets . . . shareholders have less right to acquire corporate information than do directors. This proposition is also supported by the interpretations governing the scope of attorney-client privilege.” And the right does not, at least in the absence of other considerations, extend automatically to the obtention of income tax returns, and general demands which are overly broad in their scope. Master Mtg. Corp. v. Craven, 127 Ga.App. 367(2), 193 S.E.2d 567 (1972). The term “books and records of account” has been held not to apply to a file on a proposed merger. State ex rel. Armour & Co. v. Gulf Sulphur (Del.), 231 A.2d 470 (1967).

It is also recognized that requests for certain documents are to be granted as a matter of course, while more peripheral documents may be produced or not dependent on circumstances. The “law looks more favorably upon requests for access to the stock register than for access to other company records.” NVF Co. v. Sharon Steel Corp., 294 F.Supp. 1091, 1093.

As to these more peripheral requests, the Georgia statute has structured a summary decision-making process leaving much to the discretion of the trial judge. . . . when documents called for by a shareholder who has demonstrated a proper purpose are refused and he establishes that he is qualified and entitled to an inspection, it shall be ordered “subject to any limitations which the court may prescribe.”

The common law right of a shareholder to inspect the books and records of the company has long been recognized in Georgia. Winter v. Southern Securities Co., 155 Ga. 590(1), 118 S.E. 214; G. S. & M. Co. v. Dixon, 220 Ga. 329, 138 S.E.2d 662 (1964); Southern Acceptance Corp. v. Nally, 222 Ga. 534, 150 S.E.2d 653 (1966). While the statutory language is frequently enlarged over that of its common law ancestry (see 15 ALR2d, Anno., p. 11 et seq.) it also places much discretion in the trial judge to determine whether the purpose named is a proper one, whether the request is vexatious or arising from idle curiosity, whether the documents called for are relevant, material, and not over burdensome, whether granting the requests would violate principles of confidentiality, lead to legal difficulties with federal agencies, or give an unfair advantage to the petitioning stockholders in all such matters the Unbridled right which attaches to stockholders lists does not apply.

As the trial judge stated, the burden of showing a proper purpose as to specific materials is on the plaintiff and “this burden should become somewhat heavier as the information sought becomes increasingly remote from the statutory objects of ‘books and records of account, minutes and record of shareholders,’ ” the language cannot be enlarged to include “every document generated by or received by Genuine Parts, even including confidential management date, confidential legal opinions and personnel evaluation” in the absence of a more compelling reason than the plaintiff has shown.

Riser v. Genuine Parts Co., 258 S.E.2d at 186–87.

Also, keep in mind that HOA specific statutes such as Georgia Statutes § 44-3-220, et seq., may be relevant. For example, Section 44-3-231 provides for a slightly broader duty to maintain records than other non-profit corporations.

If the HOA is a condominium and not just a property owner's association, then Section 44-3-70 et seq. applies and provides more regulation, although the additional requirements related to records at Section 44-3-106 aren't that different than for other property owner's associations.

Both of these statutes require HOAs to keep and make available for inspection: "Any books and records as may be required by law or be necessary to reflect accurately the affairs and activities of the association." This is quite a bit broader than mere "accounting records", at least prior to considering the common law right of inspection in Georgia.

Likewise, the governing documents of the HOA frequently independently provide inspection rights and obligations for the HOA and are often drafted in a less one-sided manner than business contracts. Additional remedies are also provided to HOA members for governing document violations at § 4-3-223 (for Property Owner's Associations, and under a parallel section for Condominiums).

The "proper purpose" condition to the inspection right in the context of for profit corporations is likely to be applied in the context of an HOA to involve matters relevant to carrying out one's right to vote on matters and exercise your other rights in the HOA.

A specific request for a relevant contract for a specific purpose is much more likely to be granted than an omnibus request for all contracts of the HOA, for example, since it is less burdensome and is highly relevant to the member participating in HOA governance.

Also, even if there isn't a firm legal right to pre-litigation disclosure of the contract, the fact that it would have to be disclosed if there was litigation related to it could also influence an HOA to disclose it even if it wasn't strictly required to do so yet, to keep down future litigation costs.

Answer 2

Is the case law that would lump contracts into accounting records so I could demand to see it?

That is unlikely as well unavailing because accounting records might not reflect all the rights and duties pursuant to the contracts. Although you did not specify the HOA's reason(s) for denying your request, your request seems within the scope of (c)(1).

Item (c)(1) encompasses "records of any action of a committee of the board of directors [...] and records of action taken by the members or the board of directors without a meeting [...]". The details of the contract(s) in which you are interested necessarily qualify as records of any action by the committee [or] board. By contrast, records or minutes that barely mention that the HOA entered some contract or purport to describe those contracts would be meaningless or of questionable reliability, respectively.

Answer 3

To inspect and copy the record of action that documents the contract signed with a 3rd party. This means that you can request to see the actual document or a copy of it, as long as it falls under the category of "records of action taken by the members or the board of directors without a meeting."

Answer 4

I am a member. The contract is with a service provider that is very subjective on the value of the service.

You don't have any special entitlement to view a contract you are not a party to; unless the contract/agreement you have with the HOA, or HOA bylaws, give you that right.

Assuming this question was inspired by some particular lack of performance on the contractor's part, you may have rights to hold the HOA accountable for providing adequate service. At that point it's up to the HOA whether they want to hold the contractor accountable or meet their obligations to you in some other way.