The Attorney Client Privilege in Community Associations

Few legal concepts rival the complexities surrounding the attorney‑client privilege in community association matters.  The confusion about these complexities, and the resulting misunderstandings, do not discriminate, roping in attorneys, board members, members, and managers alike.  This article will shed some light on this complicated topic in the hopes that those involved with community associations will have a clearer understanding of the nature of the privilege. 

What is the Attorney‑Client Privilege?

The attorney‑client privilege protects certain communications between an attorney and the attorney's client from disclosure to others.  The attorney-client privilege is crucial to our legal system because it allows attorneys and their clients to engage in candid communication, either oral or written, about the merits and strategy of a matter without fear that an opposing party will discover or use the substance of the communication.  In addition, in the context of community associations, the privilege allows board members to have candid conversations with the association's attorney free of the interference of the membership of the association. 

The basic legal test for whether a communication is privileged is an analysis of whether:

• The relationship of attorney and client exists at the time the communication was made;
• The communication is made with the expectation that it will be held in confidence;
• The communication relates to a matter about which the attorney is being professionally consulted;
• The communication is made in the course of giving or seeking legal advice; and,
• The client has or has not waived the privilege.

While communication between attorney and client, as a default, is usually considered privileged (although the person claiming that the communication is privileged has the burden of proving the existence of the privilege), the protection can be waived.  Thus, this valuable privilege should be the primary focus of the board's policy regarding attorney‑client communications.

What Do You Mean, My Association is a Corporation?

In order to understand how the attorney‑client privilege applies in the community association context, it is crucial to understand the existence, role, and function of the community association. 

A common misconception is that a community association simply is a big grouping of its members, like an informal club.  This is a misconception because a community association is a corporate entity that is legally separate from, and should not be confused with the membership as a whole.  In fact, in almost all cases under North Carolina law, a community association must be incorporated as a nonprofit corporation. 

As a corporation, a community association has a board of directors that makes business decisions regarding the administration of the association, rather than everything being a referendum vote of the members.  Additionally, the vendors to the association, such as the landscaper, roof repairman, management company, accountant, and attorney, all work for the community association and not the members collectively. 

Hello to the Privileged Few

A corporation, being a legal fiction, must act through its board of directors.  Therefore, as a general rule, the attorney‑client relationship in a North Carolina nonprofit corporation, such as a property owners association, exists between the attorney and the collective members of the board of directors.  However, in certain circumstances, the privilege can extend to the corporate officers, employees, and agents, including the property manager. 

"Waiving" Goodbye to the Privilege

The attorney‑client privilege is based on the clients' reasonable expectation of privacy with regard to both the issue and the communication.  However, caution must be exercised to preserve the privilege.  As noted earlier, the privilege can be waived. 

For example,  the privilege can be destroyed if a third party, who is not an agent of the association, is present when the communication is made, or if a communication made in confidence is subsequently shared with such a third party.  It is essential for the board members to realize that the communication to a third party that destroys the privilege can indeed be a communication to a member of the association!

Even where the third party is an agent of the association, depending on the nature of the relationship between the parties and the agent's role with regard to the issue and the communication, the privilege could be waived, making this an even more complex analysis.  The association's attorney should be consulted regarding the structure and best practices for communications that involve agents of the association. 

Conclusion

The attorney‑client privilege is a topic that already consumes numerous legal treatises.  Yet, the complexity of the issue invites and justifies regular attention, strong policy and practice, and frequent reminders.  Properly utilized and protected, the attorney-client privilege is a liberating tool that fosters the effective and objective management of the property owners association.  But, poor planning or flippant disregard for the convolutions of its protections can altogether remove the protections and create scenarios that involve more backfire than progress.

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© 2024 Ward and Smith, P.A. For further information regarding the issues described above, please contact Allen N. Trask, III.

This article is not intended to give, and should not be relied upon for, legal advice in any particular circumstance or fact situation. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.

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