Document Requests Are Rising and Your Board Needs a Plan

Every board dreads that moment when a shareholder demands to see corporate documents, contracts, or financial records. But ignoring the request isn't an option. Evan Gitter, partner at Cohen Warren Meyer & Gitter, breaks down the shifting landscape of transparency laws and reveals why boards without proper procedures are setting themselves up for trouble. From repeat requesters with hidden agendas, to legitimate residents seeking information, Gitter explains how smart boards protect sensitive data while staying compliant. You'll learn surprising tactics for reducing these demands and discover legal tools most boards don't know they have. If you've ever wondered where to draw the line between transparency and privacy, this conversation is essential. Habitat's Carol Ott conducts the interview. 

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The business of running a building is demanding work that requires making endless decisions — some that can quickly lead your board into a quagmire of legal difficulties. Legal Talk interviews New York's leading co-op/condo attorneys to find solutions, and get some guidance, on these challenges. For more co-op and condo insights, sign up to receive Habitat's free newsletters or become a Habitat subscriber today!

Transcript

Carol Ott: Welcome to Legal Talk, a conversation about governance issues that New York's co-op and condo boards are tackling today. I'm Carol Ott with Habitat, the New York City magazine for co-op and condo board directors. My guest today is Evan Gitter, a partner in the law firm of Cohen, Warren Meyer, and Gitter.

If a shareholder or a unit owner asked to see certain corporate documents, you can pretty much assume that trouble is brewing. Maybe they don't like a vendor the board is using and want to see its contract. Maybe they want to contact everyone in the community to protest some board decision.

The possibilities are endless. Evan, the key question here is, does a shareholder or unit owner have the right to see these corporate documents? 

Evan Gitter: Oh, that's a very good question. And the purposes for which they're seeking these documents could also be extend to, it could be a landscaper who wants proprietary information from another landscaper's contract that the board has.

And the question of whether they have the right, the broad answer is in most cases, yes. The trend in the law, the trend in the case law recently has been to greater transparency. But what the board has to do is a measuring or balancing of transparency and openness on one hand, versus giving shareholders or condo unit owners or homeowners association members access to documents that they might not be entitled to.

And what I would really strongly suggest is that the board have a procedure in place for when this happens. And that's why I feel this is such an important topic. 

Carol Ott: I'm just gonna jump in here. What documents are residents entitled to, and are there any documents that they are not entitled to?

Evan Gitter: Sure. So there are three types of community associations that we would have to deal with. Condominiums, cooperative corporations and homeowners associations, and the right to review. These documents are found in two places actually three. The first is the bylaws or proprietary lease of the community.

Now, these generally use defined books and records. Use that terminology with a specific definition. For the definition we look to statute. For co-ops, it would be the Business Corporation Law. For homeowners associations, the not-for-profit corporation law, and for condos, the Condominium Act. And what these collectively and generically pretty much state are that the owners are entitled to copies of the financial documents, balance sheets, profit and loss statements, a shareholder or a membership roster and minutes.

There's been a recent trend in case law since about 2016, which was the seminal case, which really expanded this to not only minutes of the annual meetings, but board minutes, contracts, invoices, payments. So it's really a very broad array of what these shareholders or the members or the unit owners are entitled to inspect.

There are certain conditions as well. For example, the statute for homeowners associations, you have to be a member for at least six months. For co-ops and homeowners associations, the entity can require an affidavit stating the purpose for which it is being sought, and also that it's in the interest of the co-op or the homeowners association.

So a board would have the legal ability to deny if it's an improper purpose. For example, what I had stated earlier, someone seeking proprietary information in a specific contract or things that are personal and confidential to the other shareholders or members such as arrears reports, maybe architectural requests by other homeowners to see what they did and how the board responded.

And certainly documents that are covered by the attorney-client privilege. Those they are not entitled to review. 

Carol Ott: If a unit owner or a resident or a shareholder wants, let's say the names, addresses, and email addresses of everybody else because they want to communicate their views. Would they be allowed to get that information?

Evan Gitter: Some of it. As far as the names and the association or cooperative corporation apartment number or address? Yes. Email addresses, phone numbers. I believe that goes beyond what they're entitled to. 

Carol Ott: So let's say the board or the managing agent gets a request for records or for something, what should happen?

Evan Gitter: Sure. And this dove details with what I had opened about with respect to creating a procedure in advance. I think that the board or the manager agent should immediately review the request. Do not wanna let it languish. If necessary, bringing counsel to review it as well and have a procedure in place that it was reviewed.

Number one, let's determine if the person has standing, if they have the legal ability under the bylaws, under the proprietary release, or under statute to review these documents. If they do, what is the purpose? Is it a proper purpose? If it's a co-op or a homeowner's association, you might wanna require that affidavit that I was referring to earlier.

Once you get to that point, we can arrange for the inspection. And what I would suggest that the manager agent or the board do is comb through the responsive documents. Make sure in there that there's nothing that's privileged or confidential. If there is, we're able to redact it. And under the new case law, the request was also entitled to copies.

Now, one thing that the board may wanna consider and I strongly recommend is a confidentiality agreement. The case that has expanded the right of shareholders or members to view books and records also provides the board with the tool in its toolbox to require a confidentiality agreement. That confidentiality agreement be prepared by the attorney of the community association.

It would provide that the shareholder or a member should not be providing or communicating what's contained within those documents to third persons. I typically, restrict it to outside of the community, outside the shareholders, outside the members. It should also provide for what can happen, what is the punishment or result if they do.

Now, the truth is these confidentiality agreements really do not hold that much teeth as far as monetary damages, although we always put in a liquidated sum. What it would entitle the board to do is seek injunctive relief from a court, which would be a court order, preventing them from further disseminating some of the information that was contained within these documents.

What I truly believe is the confidentiality agreement will serve as a deterrent to unlawfully disseminating the documents or the materials or the information in violation of what the board is willing to permit. 

Carol Ott: And now you mentioned that the person who has requested the documents that the board can give them copies?

 It isn't that, that person has to go to the management office to review or to look at these documents. The board can email them? 

Evan Gitter: The board can, it does not have to. What it used to be in prior to 2016, the person was entitled to an inspection. They were not allowed to make any extracts.

They could take notes. That was it. Since the 2016 case law, they're allowed to make copies while inspecting the documents. If the board wants to, it can just provide copies. I've had boards that have just provided a flash drive or have emailed the copies. I have other boards I represent that say, no, you have to come to this physical location, review it, and if you want, we can arrange to have copies made.

Carol Ott: So the board could say, you have to come to this physical location. I would think it would be fairly, no matter what anybody signs, it would be fairly dangerous to be putting documents on a flash drive or emailing these documents to somebody who clearly has an agenda because they want the documents.

Evan Gitter: Agreed. 

Carol Ott: Okay, so agreed. But you can't say come to our office-- 

Evan Gitter: Often it's the managing agent's office, and it would be, during regular business hours, you can also set a time limitation. You have three hours to review these documents. We were speaking earlier about the purpose of the requesting, and sometimes it's to harass and serve as a nuisance to the board and management.

And I have certain bylaws and we've amended bylaws that have restricted the right to inspect books and records once a month. We've had communities where someone's once a week is making requests. 

Carol Ott: That restriction , can you talk to me a little bit about that? Is that restricting a person can only request once a month?

Just the community in general? 

Evan Gitter: This is very often found in co-ops and that the shareholder, the specific shareholder is restricted to once a month, requesting books and records once a month. That way it's not too much of a burden on the co-op or the managing agent. 

Carol Ott: Okay. In your experience, and certainly today, do you find that many residents are requesting documents? 

Evan Gitter: Yes. I feel everything now is more toward transparency, sunshine laws, things of that nature. And many of the residents requesting them are really just to find out information about their community and what's happening.

So sometimes, it's a negative reason or it's get ready for an election, an annual meeting, and a proxy contest. But a lot of times it's just to know what's happening. But I do find it's often, and I find that my communities that have a procedure in place are better equipped to deal with it timely and properly. 

Carol Ott: If a community actually had residents requesting fairly frequently, would your advice be to the board to change how they communicate to their residents? So that they are perhaps more transparent, more open? It seems weird. 

Evan Gitter: It may be a community that only has their one annual meeting a year and does not have a newsletter or, and so yes if that's the reason and people truly do not know what's happening within the community.

A good idea can be a newsletter, can be semi-annual informational meetings. Just to open it up a little bit. I have some boards that allow homeowners to attend the first half hour of a board meeting to see what's happening, and then they'll go into executive session. There are different tools that the board can use to bring homeowners more into the community and more up to date with what's happening and the decisions and challenges facing the board. 

Carol Ott: When you said there are tools, can you just go over some of those tools again because I think actually that's very useful information for boards to employ. 

Evan Gitter: Sure. What I hear a lot is homeowners, shareholders want more open transparency.

They don't wanna serve on the board, but they wanna know what the board is doing. And, so what the board can do, as I mentioned earlier, is have informational meetings, maybe a quarterly informational meeting. A semi-annual informational meeting, where they bring everyone up to date. The board can have a newsletter that goes out, on a certain time interval that advises the shareholders and the homeowners as to what's happening.

The board can make parts of the board meetings open, that people can sit in and listen before the board goes into executive session. And of course decisions regarding specific homeowners, arrears, things of that nature would be an executive session not open to the public. 

Carol Ott: It would seem that if a board embraced some of these tactics in general, you would probably diminish the resident's need to ask for books and records.

Am I right? Wrong? 

Evan Gitter: To a certain extent. I think there are certain residents who, again, are going to use it the right for nefarious purposes. To either second guess the board, try to find a, we got you, to try to obtain proprietary information for themselves or to try to find ammunition to use against the board of the next election.

There are those who truly use this right just to educate themselves, become more familiar, and see what's happening. But there are always going to be those who abuse the right as well. 

Carol Ott: Alright, we'll end on that sort of sad note. Thank you so much. This has been really useful. 

Evan Gitter: Thank you.