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E-Mail And HB12-1237: What Board Members Need To Know

A Revised Records Policy is Required

House Bill 12-1237 (“HB1237”) will take effect on January 1, 2013. The new bill attempts to clear up ambiguity about association records, retention periods, and disclosure and inspection requirements. We have been working closely with boards and property managers to make sure that our clients are compliant as of January 1st.

If your association still does not have a revised, HB1237-compliant records policy in place, please e-mail me directly at cgray@westernlawgroup.com. Assuming that you do have a policy, what now? Unfortunately, a board member’s duties relating to records and record retention are not satisfied by merely adopting the policy. Rather, the bill creates policy requirements with which both board members and property managers must be familiar.

Email and Board Members

Perhaps the change most relevant to board members is that certain electronic mail explicitly forms part of the formal records of the association. As such, it is discoverable upon homeowner request. C.R.S. 38-33.3-317(1)(d) states, in part, “Written communications among, and the votes cast by, executive board members that are…directly related to an action taken by the board without a meeting” are part of the association’s records and are discoverable.

The legislature has been clear that e-mail constitutes a written correspondence. Therefore, any e-mails which are “directly related” to an “action” taken by the board “without a meeting” MUST be preserved as part of the association records. The bill does not define or propose a test for what is “directly related.” Likewise, as the law has not gone into effect, we do not have on-point case law to help us determine what relationship is sufficient to be considered “direct”. There is similar ambiguity with what might be considered a board “action”.

Remaining Trouble Free

Until we have more clarity on the above terms, I encourage board members to be over-inclusive in deciding which e-mails they choose to retain. Failure to properly maintain association records will result in bitter homeowner disputes and lost cases at the trial level. Here are three tips to help associations avoid that outcome.

  • Take actions and make decisions in a meeting. The goal of this section of the bill is transparency. The legislature believes that, for any board action, a homeowner should be able to trace the conversation leading to that action. If the action is taken without a meeting, Colorado law will now permit a homeowner to follow the conversation through retained e-mails. Where the action is taken at a meeting, meeting minutes will reflect discussion leading to the action. NOTE: I recommend that, even where the board takes an action at a meeting, a member summarize any prior e-mails relating to that action. This only improves the board’s appearance of transparency and increases the likelihood of relevant and timely homeowner comment.
  • Create HOA-specific e-mail accounts (e.g. director02anyHOA@gmail.com). I suggest Gmail, which offers sufficient storage, and is both archivable and searchable. I am sure many other e-mail providers offer similar benefits. A designated e-mail account should decrease or eliminate comingling board business with personal correspondence. A designated e-mail account is also transferable from one board member to the next, ensuring continuity between elections, resignations, etc. WesternLaw Group LLC would be happy to manage a password database on our server so that the accounts can be accessed in case of a board member’s death or incapacitation.
  • Consider appointing your property manager to maintain emails related to board decisions taken without a meeting. In this case, board members shall remain vigilant that their property manager is copied on all such emails.

WesternLaw Group LLC recommends incorporating all of the above tips into your board’s record retention plan.

Active Enforcement is on the Horizon

Currently, the Colorado Common-Interest Ownership Act (or CCIOA, which includes revisions from SB100 and SB89) is without an enforcement mechanism. For instance, an association faces no penalty or punishment for failing to implement a conflict of interest policy, though that policy is required under SB100. (I might argue that losing a case due to the association failing to properly maintain records is enforcement enough.) However, the legislature continues to discuss implementing proactive enforcement tools, such as fining associations for not enacting required policies; this type of enforcement appears increasingly likely. If enforcement mechanisms are implemented, associations that are already following the law will have a much easier time, and be less prone to penalty, than those that continue to ignore policy requirements.

The General Idea

Before the prevalence of personal computers, most association business was completed at formal meetings of the board members. Computers have allowed board members to quickly deal with association business via e-mail outside of meetings. However, for each benefit that email brings, there is an offset which negatively affects homeowners.

(+) Sending and responding to email is quick

……………………….. (-) The HOA has more data to manage

(+) Email comes directly to me

……………………….. (-) A homeowner cannot follow board decision-making

(+) I don’t have to attend a meeting

……………………….. (-) There is no opportunity for homeowner comment

(+) I see HOA business when I log into my personal email account

……………………….. (-) Board business should be kept separate from personal items

Computers and e-mail have allowed many boards to conduct themselves with increasing informality. Informality creates poor record-keeping habits and reduces the transparency of the actions taken by board members. In turn, this makes it more difficult for homeowners to verify that the board members are fulfilling their duties to the community in an efficient and effective manner. Parts of recent HOA legislation – including SB100, SB89 and HB1237 – all can be seen to help increase transparency, allowing homeowners a real opportunity to be aware of, or comment on, ongoing board business. The board may find it helpful to keep these goals in mind when determining which emails to retain as association records. Indeed, these goals may help guide board members in much of their association activity.

John HoltComment