Courts Open the Vault to Co-op and Condo Documents

Brenda Pomerance, a patent lawyer and unit-owner at Link condominium at 310 W. 52nd  Street, has been in court since 2011 fighting to gain access to board documents. Pomerance, who suspected the board of serious mismanagement, wanted to get the contact information of all unit-owners in the building and extensive access to condo records, including monthly financial statements. Shareholders and unit-owners at other buildings have filed similar lawsuits. Pomerance also sought the right to share such information electronically with other unit-owners. She pursued the case alone, serving as her own lawyer.

In Pomerance v McGrath, the First Department of the Appellate Division has awarded co-op shareholders and condo unit-owners expanded rights to examine board records, including monthly financial statements, board minutes, receipts, invoices and legal documents. Legal documents may be redacted to protect client confidentiality, the court ruled, but contact information for unit-owners and shareholders are now available for inspection.

“Unit-owners and shareholders have the right to inform themselves, but that doesn’t mean that they can involve themselves in day-to-day management,” says attorney Jesse Schwartz of Kagan Lubic Lepper Finkelstein & Gold, who represented the condo board in Pomerance v McGrath.

The appellate court’s ruling allows shareholders and unit-owners to make hard copies of records and take them out of the management office. “This raises privacy concerns,” says attorney Tracy Peterson, partner at Braverman Greenspun, who is general counsel to the Link condominium. “Let’s say a shareholder or unit-owner asks the board to not share an email address or an alternate mailing address? Or a resident is in arrears and it would be harmful or at the least embarrassing to disseminate this information? How should the board comply without breaching its obligation?”

In December 2015, a state Supreme Court judgment granted Pomerance wide-ranging access to all the condominium documents that she sought, “to the extent that her demand for them was made in good faith and for a proper purpose.” The court specified that the board had to give her all the relevant documents.

The board appealed and the appellate court only slightly diminished unit-owners’ rights to access documents by changing  give into get. But in practice this small difference turned out to be quite significant. To give meant one could ask for the records, and board or management would have to comply and hand over any records requested in hard copy or electronically, according to both Pomerance and Schwartz. The appellate court said that unit-owners now have to get those documents. They have to make an appointment at the office where those documents are located, inspect those documents, and make a hard copy. The simple difference between give and get protects boards, to some degree, against just simply handing over records to any unit-owner who wants them.

The court also allows for a confidentially agreement. “Such confidentially agreements,” says Schwartz. “could be very broad or they can be extremely limited to an extent that no information whatsoever can be shared under any circumstances.” But, Peterson asks, “What if the confidentiality agreement is breached? Then it’s too late to do anything about it. The harm is done.”

Both courts ruled that the person demanding copies of such records has to demonstrate good faith and a legitimate purpose. But the courts did not provide a guideline as to what would be a “legitimate purpose.”

“We were concerned about the possibility of unit-owners who want to inspect documents to hurt the condominium or the board,” say Schwartz. “The board can still deny inspection when they suspect improper purpose. And it is the board and ultimately again the court who will decide if there is ill intent.”

And so the contentious issue of access to board documents remains in legal limbo. But co-op and condo boards now face a clear challenge: how to comply with the law while keeping confidential records from getting into the hands of someone who is not acting in good faith.