Data privacy is a widely discussed topic among planned communities and condominiums today. But, is an HOA legally required to protect member information? How do you strike the right balance between records inspection and data security in HOAs?
How Important Is Data Security in HOAs?
Homeowners associations are organizations that have members, i.e. the homeowners. In managing the community and dealing with owners, an HOA naturally comes across and even collects private information. For instance, dues collection will often require an HOA to handle bank details and other financial information. Sending out newsletters and notices — a normal part of HOA operations — also involves the use of contact information, such as emails, phone numbers, and physical addresses. And then there’s a general membership list that a majority of associations maintain.
Handling a mountain of homeowner information will inevitably bring up the issue of data security and privacy. Homeowners will understandably worry that their information may end up in the wrong hands. But, it is rare that an HOA would give away private details to a third party without the consent of the owners. Associations that do this will very well face claims of breaches in both privacy and fiduciary duty on the board members’ part.
Where State Laws Come Into Play
Many states have existing laws that are designed to protect personal information. This is mostly in an effort to reduce cases of identity theft and fraud. That said, most of these statutes can be found within state codes that deal with consumer protection. Not a lot of states have privacy laws built into statutes that govern homeowners associations and condominiums.
One example of a privacy law quickly comes to mind: Florida’s Information Protection Act, which covers all entities that obtains, uses, or keeps personal information. Homeowners associations, as well as HOA management companies, are usually covered by this Act if they keep data that falls under the law. These include but are not limited to driver’s license numbers, social security numbers, bank account details, and credit card numbers.
One state that has explicit laws that expressly prohibit an HOA board from disclosing homeowner information to third parties is Nevada. Nevada law also prohibits management companies from disclosing homeowner information without a court order. But, there are more states that have similar laws to Florida than there are ones to Nevada. Typically, responsibilities for data security in HOAs are implied than explicitly stated.
Records Inspection and Data Protection for Homeowners
In a majority of states, members of an HOA have a legal right to request association records for review. Since it is a statutory requirement, associations usually can’t just ignore or deny a member’s request. These records, though, often contain personal information. And an HOA may be forced to disclose such information due to the records inspection request.
Most of the time, state laws do not specifically identify which records members have the right to inspect. Statutes usually use broad terms, and records can include a variety of documents such as the governing documents, the HOA’s financial records, member lists, and meeting minutes. Thus, it is quite challenging to strike a balance between satisfying an owner’s request for records and protecting the privacy of members.
Of course, there are some states that are aware of this struggle. For this reason, these states have written their laws in such a way that excludes any records that would result in a disclosure of private information. Texas Property Code Section 209.005(k), for instance, states that confidential information concerning a member or employee may not be inspected by members. Florida Homeowners Association Act Section 720.303(4)(c) also lists down the information not subject to inspection.
Other states, such as California, allow associations to redact information considered confidential, sensitive, or privileged. California HOAs can also withhold information that could potentially lead to identity theft, fraud, or a breach in the privacy rights of a member.
Most other states, though, don’t have laws that are as comprehensive. As such, associations should turn to data privacy laws that have a more general applicability for greater protection.
Protecting Privacy Rights of Homeowners
As you can see, state laws that protect the private information of members do exist. Even if they don’t, associations should act with caution and develop their own policy when it comes to the disclosure of privileged details. Such a policy should allow an HOA to comply with members’ requests for records inspection while simultaneously preserving the privacy of residents. When drafting this policy, it is best to seek help from a lawyer and formally include the written policy in the association’s governing documents.
But, what should these rules generally include to support data security in HOAs?
Physical Protection of Information
First of all, HOA boards should take the necessary steps to protect the physical records of an association. Hard copies of documents that contain privileged information should be kept locked in a drawer or safe, which is then kept within a locked office. The same goes for any soft copies of such documents that are contained in hard drives, thumb drives, and CDs. If there are any documents kept in computers or the cloud, password-encrypted access must be given to only essential personnel.
Disposal of Outdated Documents
Should any records or documents become outdated or no longer useful, an HOA must dispose of them properly. This includes shredding physical documents and permanently deleting data from storage. The Federal Trade Commission even goes so far as to recommend burning, shredding, and pulverizing paper documents to avoid any traces or chances of reconstruction. This way, no one else will have the ability to access them.
Limiting Access and Use
Not all board members need to have unbridled access to important documents and private information. For instance, any records containing bank information or credit card numbers can be reserved for the treasurer’s eyes only. This way, it is easy to trace the source in case there is a breach.
As for digital copies of documents or documents stored in HOA software, limiting access is equally imperative. Such programs and files should be password-protected, with only select people able to log in and view them. If third-party access is necessary, they must abide by strict security and privacy controls that meet the association’s standards.
Liability Protection for the HOA
Even with the most stringent of policies, there is always a risk of a privacy breach. Therefore, HOA boards should make sure that their liability insurance extends to data breaches and cyber liability as well. Liability insurance should cover any loss, damage, or injury that members or third parties may experience in case of a privacy breach. With such protections in place, both the HOA and the board can limit the costs of compensation for injuries and any related legal fees.
Data Is Power
Data security in HOAs is a serious concern, especially in the age of the Internet and hyperconnectivity. Information spreads fast nowadays, and it is almost impossible to contain a breach once it happens. To limit liability and protect homeowners, associations should come up with an ironclad data security policy with the help of a lawyer or management company.
If you need an HOA management company to help your board draft and enforce policies, we’ve got the answer to your problems. Start browsing our online directory today!
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