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RIGHT TO INSPECT CONTRACTS

The Davis-Stirling Act states that associations shall make records available for inspection and copying. (Civ. Code §5205(a).) Those records include executed contracts not otherwise privileged under law. (Civ. Code §5200(a)(4).) That means once contracts have been approved by the board, they can be reviewed by the membership. (Civ. Code §5200(a)(4).)

Executed Contracts. The statute states that executed contracts must be produced. (Civ. Code §5200(a)(4).) The Civil Code defines an executed contract as one where "the object of which is fully performed. All others are executory.” (Civ. Code §1661.) That means members cannot review contracts until the contracted work has been fully completed. It is more likely the legislature intended executed contracts to mean "signed." This is the generally accepted view in the HOA industry and the safer approach to follow.

Third-Party Formation. The statute refers to "the formation of contracts with third parties." The term third party is generally understood to mean anyone who is not a party to a contract. Vendors bidding on a contact are not yet parties to a contact. Once the board approves a vendor's proposal and enters into an agreement with that vendor, the vendor ceases being a third party and becomes a second party to the contract, with the association being the first party. When that happens, the membership has a right to know the vendor's identity and can review the contract.

Member Review of Bids. Bids submitted by contractors are not covered by Civil Code §5200. Accordingly, members do not have a legal right to review bids. The Board should carefully weigh the pros and cons of disclosing unaccepted contractor bids to the membership.

Law Firm Fee Agreements. Fee agreements with law firms are not exempt. They can be inspected by members. Civil Code §5215(a)(5)(D) specifically states “Privileged contracts shall not include contracts for maintenance, management, or legal services.”

Labor Union Contracts. Contracts with labor unions are not privileged. Accordingly, association members have the right to review and copy labor agreements. Even if the union contract had a confidentiality provision, it does not trump the membership's right to review the agreement. (Corp. Code §8313.)   

Employment Agreements. There is a split of opinion when it comes to employment contracts.

ASSISTANCE: Associations needing legal assistance can contact us. To stay current with issues affecting community associations, subscribe to the Davis-Stirling Newsletter.

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