Several recent Maryland appeals court decisions provide new guidance to condominium and homeowner associations on owner inspection of association books and records.
Legal Advice and Billing Records
The Maryland Court of Special Appeals supported a Baltimore condo association’s refusal to provide a unit owner with the written legal advice of condominium attorney. The court concluded, in 100 Harborview Drive Condominium v. Clark, that the common law and statutory attorney-client privilege — which recognizes the confidentiality of an attorney’s legal advice — pre-empts an owner’s right of inspection and copying the condominium “books and records” allowed by the Maryland Condominium Act, Section 11-116. Based on the text and legislative history of the Condo Act, the court determined that all written legal advice is protected from disclosure, even if the owner requesting such records is the subject of the legal advice.
However, the July 2015 court decision also ruled that an attorney’s detailed billing records submitted in support of an invoice for legal services must be provided to owners, except to the extent such records include confidential information protected by the attorney-client privilege or work product doctrine. For instance, billing records which reveal the reason for seeking legal advice, litigation strategy or the specific nature of services provided are protected from disclosure.
Financial Records and Delinquency Reports
Separately, in the May 2015 “unreported” case of Brown v. Commission on Common Ownership Communities, the Maryland Court of Special Appeals upheld the decision of the Montgomery County Commission on Common Ownership Communities (CCOC) that a condominium had complied with the books and records provisions of the Condominium Act by providing financial records as kept in the ordinary course of business and it did not have to create new documents which re-format its existing financial records. (An “unreported” appellate decision may not be relied on as precedent in other similar cases).
The CCOC decision upheld by the appeals court also ruled that the books and records provision of the Condo Act requires that, on request, condominium unit owners must be provided with assessment delinquency reports without redaction of the names of delinquent owners. That portion of the CCOC decision was not contested in the court appeal.
Completing the trilogy of recent rulings regarding access to books and records, the Court of Special Appeals ruled in August 2015 that a person entitled to inspect and copy corporate records may be required to sign a confidentiality agreement which prohibits disclosing the information to third parties.
Referring to a Maryland court case from 1898 regarding stockholder rights to inspect the books of a business corporation, the court interpreted the statutory right of inspection to allow use of a confidentiality agreement to protect against disclosure and misuse of confidential documents and information. Although the financial records in Hogans v. Hogans Agency, Inc. involved a business corporation, the ruling is also instructive with regard to providing access to the books and records of condominium and homeowner associations.
Based on this new judicial guidance regarding access to books and records, association boards and managers may be able to avoid inspection disputes by adopting, or amending, a written policy for owner inspection and copying of association records.