Record retention for condos and HOAs

Date Published : Jul-21-2022

Written By : Kim Brown

How would you rate your condo or HOA’s record-keeping practices?

0 to 3 – We have a lot to work to do

3 to 7 – We keep every record, but it’s hard to find items/stay organized

8 to 9 – We keep records and back up our documents, but there’s still room for improvement

A perfect 10 – There is nothing I would change about our record-keeping system

If your community has a perfect system in place, then congratulations! You are the envy of many association managers. If you’ve got a system, but it doesn’t operate as smoothly as it could, then read on.

  

Download our free record retention policy template

  

Record retention can be challenging for any organization. If you keep every single document indefinitely, then it becomes very challenging to find the space to store it all. And locating a document could take hours. 

Conversely, if you don’t keep important records for long enough, then that can lead to legal troubles if the association must defend itself in court. A judge won’t be lenient with a condo or HOA that cannot explain why it failed to keep proper records. 

  

How long do associations need to keep records?

So, what’s the right balance? As with most things, boards and property managers should always check local or state laws, as well as governing documents, to see if there are association-specific rules about record retention. If there are no rules and no policies about this, then consider using this general guideline from Davis-Stirling. Associations are also encouraged to work with legal counsel and a certified public accountant to establish a sound record retention policy. Keep in mind that this is just a guideline; different associations will have different needs and expectations.

  

 Permanent records

These documents need to be maintained by the association for as long as it’s operating. There should be at least two copies of these documents (one hard copy and one digital copy).

  • Governing Documents (CC&Rs, Bylaws, Articles of Incorporation, Condominium Plan, Parcel Map)
  • Minutes (board and membership meetings, committee meetings where decisions are made)
  •  Deeds to property owned by the association
  •  Architectural plans

  

  Records that should be retained for 10 years or less

These records can be disposed of every decade.

  • Maintenance records (kept for the first 10 years of an association’s existence. They may be needed in potential litigation against the developer). Thereafter, maintenance records older than five years can be safely destroyed

  

Records that should be retained for 7 years or less

Many financial records need to be maintained for 7 years. That includes:

  • Budgets
  • General ledgers, journals and charts of account
  • Year-end financials
  • Accounts payable
  • Accounts receivable
  • Canceled checks and bank statements
  • Expense analysis and expense distribution schedules
  • Invoices from vendors
  • Deposit slips
  • Reconciliations
  • Petty cash vouchers
  • Purchase orders

Property management and human resource records also need to be saved for a significant time. Those items can include:

  • Expired contracts
  • Insurance records
  • General correspondence
  • Closed litigation files
  •  Newsletters
  • Expired warranties
  • Tax returns
  • Owner architectural submissions

Records that should be retained for 3 years or less

  • Election materials (the inspector of elections must save them for 1 year. After that, the statute of limitations for challenging an election expires and the materials should be transferred to the association. The association may keep them for up to 3 years

  

How to dispose of documents

Whenever an association disposes of any type of record, it must ensure that the document is completely destroyed. That means shredding, incinerating, or permanently deleting the items. Simply throwing records into the trash is not only irresponsible, but doing so could result in potential liability if confidential records end up in the wrong hands.

The exception

There is one key exception to remember before destroying a record; if a board member or manager believes that the record is relevant to a current litigation matter, or potential litigation, then the association must preserve the record until the association’s lawyer determines that the record is not needed. Failure to retain these types of records could place the association at a significant disadvantage if the issue is presented before a judge.

  

Should all records be digitized?

This depends on your association’s preferences, but not all records need to be digitized. Having an online record-keeping system is highly recommended though, especially for large associations. That’s because it is generally easier to organize documents in digital folders, and for things like correspondence, you don’t have to waste paper by printing out emails.

Furthermore, you don’t have to worry about finding physical space to keep all of your records. And finally, it’s easier to share items like newsletters or minutes with owners when there is an accessible digital database available. With a platform like Condo Control’s digital library, management can control who has access to files. CC&Rs, budgets and old notices can be shared in “open” folders, while more sensitive information can be stored in folders that only board and staff members have authorization to view. 

The downside is that the person responsible for maintaining and deleting records may have a lot of tedious work to do if the files are not properly organized. That’s one good reason to create new files every year.

Board members should also consider what would happen if their relationship with their property manager ended. Would they still maintain control of the digital database, or could years of records leave with the manager? When possible, boards should purchase their own platforms/software, or ensure that documents will be transferred to them in the event that the manager no longer works for the association.

  

Recommendations for smoother record management

Associations are encouraged to have a designated information officer who takes care of records. This person can implement a document retention system, promote the organization of the data, and ensure the association is only holding on to the information it needs.

When it comes to physical documents, keep them in a dry, secure space such as a filing cabinet. If possible, keep association documents in the same vicinity, and make sure that more than one person has a key to access the records. Add tabs or labels so that it’s easier to find what you are looking for.

A strong document retention policy may include:

  • A requirement for staff and board members to file documents within certain time limits and/or use specific folders
  • A list or guide to help staff and board members understand which documents to save, and which items can be discarded
  • A structure that facilitates efficient retrieval of records
  • An obligation for board members to give certain records to the officer so that they can properly archive items
  • A requirement for the information officer to discard sensitive information, like former residents’ credit card information, as soon as it is no longer required

The workload to maintain an effective document retention system is manageable when everyone understands what items need to be saved and what can be disposed of. 

  

Conclusion

As with almost anything related to operating a condominium or HOA, there’s no “one size fits all” answer for record keeping. Processes may need to be revised or updated to better serve the community. If in doubt about how long to keep certain documents, don’t hesitate to contact your attorney.

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