Must vendor contracts be disclosed to HOA members?

newsQ: I am on my HOA’s board of directors. From time to time HOA members request HOA information, and I know under N.C. laws that nonprofit corporations must maintain certain records and make them available for inspection by HOA members. Do executed contracts between the HOA and vendors fall under this right to inspection? I am all for openness and transparency in HOA affairs, but I also have a duty to properly manage the affairs of the HOA. I want to be sure before allowing a member to inspect a contract.

A: Most HOAs are organized as nonprofit corporations under the N.C. Non-Profit Corporations Act, Chapter 55A of the N.C. General Statutes (which can be found here: http://www.ncga.state.nc.us/gascripts/Statutes/Statutes.asp). The laws require corporations to maintain the following records:

• Minutes of all meetings of its members and board of directors;

• A record of all actions taken by the members or directors without a meeting;

• A record of all actions taken by committees;

• Appropriate accounting records (an income statement and balance sheet must be made available to members each year);

• A record of its members, in alphabetical order by class, showing the number of votes each member is entitled to cast;

• Its articles of incorporation and bylaws, and all amendments to them currently in effect;

• Certain resolutions adopted by its members or board of directors relating to directors and members;

• All written communications to members and financial statements for the past three years; and

• A list of the names and business or home addresses of its current directors and officers.

Members are entitled to inspect and copy, at a reasonable time and location specified by the corporation, the records described above and the membership list, if the member gives the corporation written notice at least five business days before the date on which he wishes to inspect and copy.

A member can inspect and copy the accounting records and membership list only if his demand is made in good faith and for a proper purpose; if he describes with reasonable particularity his purpose and the records he desires to inspect; and if the records are directly connected with this purpose.

Note that vendor contracts are not listed among the records that nonprofit corporations are required to disclose to members.

In fact, such contracts are not even listed among the records that the corporations are required to maintain, though sound business practice and common sense certainly would require it.

I agree that HOA board should strive for transparency in their affairs. However, there are many factors that go into selecting contractors or vendors that might not be apparent to someone who was not involved in the process.

Disclosing this information might invite unnecessary scrutiny by homeowners not wielding the information necessary to adequately understand the vendor-selection process.

Charlotte attorney Michael Hunter represents community and condominium associations for the firm of Horack Talley.

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“Ask The Experts” Articles have been Reprinted with permission from the Charlotte Observer

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