A Guide to Association Records Retention: What You Need to Know
Your “Records Retention Policy” – What it is and why you need it.
Do you know where your association’s important documents are located and how to access them quickly if necessary? Keeping association records organized and safe can be an overwhelming task. When new members join the board, it is vital for associations to have a good set of records so that prior board actions can be reviewed when necessary. Condominium and homeowners associations are also obligated by law in many states, and often by their governing documents, to retain certain documents and make them available for owners to review upon request.
Maintaining records in an organized and safe manner is not only important to help preserve association history, it can also make it easier for an association to prove losses to its insurance company, prepare taxes and challenge contractor records if disputes arise. Association records are also essential in the event of litigation, as they provide information necessary to successfully defend claims against the association. In addition, if an association is audited, all financial records and employee payroll information will need to be produced.
Having a good records retention policy in place will let you find and retrieve important records quickly. And it should include a system so that documents are only kept for as long as they are needed, saving space and resources.
Key questions:
Associations should focus on the following factors when developing a records retention policy: a) who will be responsible for maintaining documents, b) what documents should be stored and for how long, c) where and how will the documents be stored, and d) how will documents be destroyed?
- Who will be responsible for maintaining documents?
It is important to establish who is responsible for implementing, monitoring, and updating an association’s records retention policy. The ultimate responsibility for keeping good records belongs to the association, even if the association has a management contract that stipulates otherwise. As a result, the Board should work together with management and legal counsel and consider how to best to maintain the necessary documents in a safe, organized and efficient manner.
- Which documents and information should be stored and for how long?
When it comes to association records, different documents should be kept for different lengths of time, sometimes indefinitely. Document retention needs will vary on a case-by-case basis, depending on the type and size of the association and where it is located.
Because laws vary from state to state, there is no one-size-fits-all standard. Instead, associations should discuss their document retention needs with legal counsel and the association’s accountant so that an informed decision can be made about each specific type of document based on state laws and standard practice. Here is a general list of documents that should be maintained and their recommended retention periods:
- Permanent - Current and past governing documents, including articles of incorporation, declarations and bylaws, and any amendments to them, should be maintained permanently. Minutes from board meetings and meetings of the membership should also be kept permanently, as well as tax returns and budgets.
- Varying - Other important documents should be kept for various lengths of time. Contracts including management, landscaping and insurance agreements, should be kept for at least seven years after they expire. Assessment information, employment, personnel, and bank records should also be kept for at least seven years. Election ballots should be kept for at least four years and association newsletters for three years.
- Legal Documents - Records relating to legal action or possible legal action should be reviewed on a case-by-case basis. For example, records of judgments and liens are kept on file at the courthouse and are easily replaceable. If there is ongoing or potential litigation, unless an association has received specific advice from legal counsel, no documents pertaining to the matter should be destroyed. Failure to properly retain documents may result in penalties or fines if the matter goes to court.
The general guidelines outlined above are the same for paper records and electronic documents, such as Word files, spreadsheets, e-mails, photos, databases and any backup files.
- How and where will documents be stored?
When considering how and where documents should be stored, it is important to consider the volume of documents and how often the documents will need to be accessed. For example, an association may want to keep current documents that are referred to frequently in paper form and use an electronic storage system for documents that are not currently in use and need to be stored for a long period of time. Using electronic storage reduces the physical space necessary to store documents and can make it easier to search for specific documents. However, associations must also keep in mind that as technology changes, it is important to keep up with current formats for electronic storage so that information can still be retrieved when it is needed.
When considering where to physically store both paper documents and electronic files, associations should always make sure records are kept in a secure area due to the confidential nature of many documents.
How will documents be destroyed?
After an association determines what documents need to be kept and for how long, there will be outdated documents that will need to be discarded. Documents and electronic devices that contain records, such as CD’s or flash drives, can be destroyed by shredding or incinerating. The method the board selects should preserve the confidentiality of the records, as association documents may include sensitive legal information or personal information relating to members of the association. If a third party is maintaining association documents, the association should ensure that they understand their obligations, and that they only destroy records with the association’s written consent.
Again, if litigation is ongoing or imminent, it is important to speak to an attorney prior to destroying any association documents, changing the association’s retention policy, or deleting e-mails or electronic files.
Developing a Retention Schedule
We recommend that all condominium and homeowners associations work with their managers and legal counsel to adopt a formal document retention and destruction policy. If you have questions about your association's records retention policy and activities please contact one of our attorneys.