The battle for access to a co-op’s or a condominium’s books and records has been going on for many years. If a shareholder has a suspicion of wrongdoing, mismanagement or other problems, does that person have carte blanche access to the organization’s books? Even if there are no suspicions, but a shareholder wants to see how the building is spending its money, can they have access?
Co-ops and condos may have an obligation to turn over records.
A shareholder has a right to request access to a co-op’s financial records. Under the Business Corporation Law and New York case law, a board has an obligation to make corporate books and records available for inspection so long as the request is made in good faith and for a proper corporate purpose. This would include a shareholder’s claim that he or she wants to investigate a potential breach of duty or wrongdoing. Mere speculation of wrongdoing may not be enough. The co-op’s governing documents may also set forth an independent right for a review of certain records.
In one recent Supreme Court case, a shareholder was denied access to the corporation’s records when he did not provide non-speculative evidence of potential wrongdoing by the Board. As part of that case, the Court denied the shareholder access to the records when he alleged that the corporation wrongfully rejected a purchaser as a result of a vendetta and the shareholder wanted to review the purchaser’s application. The Court found that the rejection of a purchaser is within the business judgment of the board and the request to view the application was therefore not for a proper corporate purpose.
Condominium unit owners have a similar right to see certain financial records under the Condominium Act and the common law so long as those requests are also made in good faith and for a valid purpose.
Finally, the courts have been allowing shareholders and unit owners to see building unit rosters and make electronic copies of documents, as long as they sign non-disclosure agreements.
A complicated legal landscape
The law in this area is a complex mix of statutes, contractual rights and common law. It is difficult to know in advance the exact threshold shareholders and unit owners are required to meet before accessing co-op and condo board records so requests for records should be discussed with experienced co-op and condo counsel like those found at Tane Waterman & Wurtzel, P.C.