Here’s a common situation: Bob recently purchased a home in Green Acres, a new community in North Carolina . The Developer, pursuant to the Declaration of Covenants, Conditions, and Restrictions (“CCRs”) properly incorporated Green Acres Homeowners Association (the “HOA”) as a North Carolina Non-Profit Corporation. The Developer currently has control of the HOA. Bob is paying assessments, but the community is not being properly maintained. Bob does the math and knows, based on the current number of Green Acres homeowners, that the assessments total a sizable sum. Bob contacts the Developer to complain about the community’s condition and is told that the situation will be corrected, but weeks pass and the conditions worsen. Bob is upset. He purchased a home in Green Acres in part because he liked the importance given by planned communities to property values and the resulting attention paid to maintenance and upkeep of the property. Bob contacts the Developer again but is given the same routine of promises to perform maintenance. More time passes with no correction. Bob is ready for war and wants to know how his assessments are being allocated. Bob calls the Developer and requests financial records, but the Developer refuses to provide them. What should Bob do? 

• Bob first needs to be reasonably familiar with the applicable law regarding access to financial records. Two main statutes come into play in this scenario – the North Carolina Planned Community Act (“NCPCA”) and the North Carolina Non-Profit Corporations Act (“NCNPCA”) – along with the HOA’s bylaws. 
• Recent revisions to the NCPCA, §47F-1-101 et. seq. North Carolina General Statutes, took effect January 1, 2006 (Your association or property management company should be familiar with the entire Act, especially the recent revisions!) The section relating to a HOA records and a homeowner’s right of access to them, §47F-3-118, was expanded to broaden a homeowner’s access rights.

What records are required to be kept? 

NCPCA. In relevant part §47F-3-118(a) provides, “All financial and other records…shall be made reasonably available for examination by any lot owner…as required in the bylaws and Chapter 55A (Non-Profit Corporations Act) of the Gene ral Statutes.” If the bylaws do not note any specific records to be maintained, the HOA must maintain “accurate records of all cash receipts and expenditures and all assets and liabilities.” §47F-3-118(a). In addition to any information required by the bylaws, the association must produce an annual income and expense statement to be made available to all owners within 75 days of the close of the association’s fiscal year. Id. Since most HOAs run on a calendar year accounting system, the annual statement should likely be available by mid-March of the following year. 

NCNPCA. Non-profit corporations are not required to produce financial statements. However, the NCPCA requires their production and assuming the HOA does so, the NCNPCA requires that annual financial records for the past three years be kept at the association’s principal office. §55A-16-01(e)(5) North Carolina Gene ral Statutes. Bob can locate the principal office and the HOA’s corporate filings by visiting http://www.secretary.state.nc.us/Corporations. Similar to the NCPOCA, the NCNPCA provides that, “upon written demand…[the association] shall furnish that member its latest financial annual statements, if any…that include a balance sheet as of the end of the fiscal year and statement of operations for that year.” §55A-16-20. 

         Therefore, Bob should get started by familiarizing himself with the HOA’s bylaws and the foregoing statutes. He should be able to obtain a recorded copy of the bylaws from the local Clerk of Court or Register of Deeds and he needs to review them to determine what specific records are required to be maintained (in addition to the records required by the NCPCA and the NCNPCA). 

         To get access to annual statements, Bob should give the HOA a written demand at least 5 business days before the date he wants to inspect and copy them. See §55A-16-02(a). In addition, if Bob cannot locate the bylaws of public record, he can request a copy of the bylaws in the same manner. See §55A-16-01(e)(2). 

It is important to note that the foregoing statutes only provide for access to annual statements and not the corporation’s accounting records. Absent access to accounting records provided in the bylaws, Bob can still review such records, but (1) he must make his demand in good faith and for a proper purpose, (2) he must describe with “reasonable particularity” the purpose and the records he wants to inspect; (3) the records must be “directly connected” with his purpose; and (4) Bob must give the same 5-day time frame described above. See §55A-16-02(b) and (c). Bob needs to be careful in wording such a demand and may want to contact an attorney to assist. 

         Ultimately, by making a phone call for the records, Bob has not properly requested the documents under the applicable law. He needs to make a written demand and give the proper 5-day time period, and citing the applicable statutes would likely help get the process moving. Bob needs to understand that he will not have free reign to review all financial records, but the available records should suffice. If Bob’s initial efforts are unsuccessful or if he has any questions throughout the process, he should contact an attorney for help. 


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