Homeowner’s Association Record Retention - Peter J. Smith IV

Introduction. Many of us do or have participated in some type of association. The following article specifically addresses some record retention basics for homeowner’s associations, but these guidelines can also serve to be guides for other types of associations and even some volunteer organizations.

A homeowner’s association is a business. As a business, it receives and creates a large number of documents. It is often difficult for the board of the association to determine what documents to retain forever and when to shred the rest. As a result, document management can be onerous.

The question of what documents are essential to keep does not have a clear answer. However, good business practice dictates how to handle the association’s records. When discussing the association’s records, it is helpful to put the records in two broad categories: financial and corporate.

Financial Records. Most financial records should be kept permanently. Financial records provide a financial history of the association. Financial records have information that can help the current members of the association make financial decisions. This is even more important when you consider the board of an association is often a group of volunteers that may change frequently.

The following documents should be retained permanently:

• general ledgers and journals
• year-end financial statements
• tax returns
• audit reports
• depreciation schedules

Any financial records that might be subject to an IRS audit or to an accounting-related challenge should be retained for at least seven years. These include:

• accounts payable and accounts receivable ledgers
• expense records
• canceled checks
• electronic payment records
• purchase orders and vendor invoices

Finally, the following financial documents should be kept for at least four years:

• bank statements
• deposit slips
• budgets
• petty cash vouchers.

If you are unsure about whether to keep a financial document, keep it. If you must destroy it, the default should be to wait seven years.

Corporate Records. There are certain association documents that relate to is organization and legal status. The following corporate records should be permanently retained:

• CC&Rs
• articles of incorporation
• bylaws
• rules and regulations
• deeds
• easements
• contracts
• board resolutions
• minutes of board meetings
• recommendations and actions of committees and records documenting complaints filed by homeowners and how they were resolved
• requests for architectural modifications, decisions on those requests and other documents related to them should remain permanent record to provide the background information to future owners

In most associations, the membership of a board changes at least annually. These corporate records provide a historical perspective and collective memory. New board members will look to these documents for policies and procedures established by former boards and long serving board members have a written record to remind them of the reasons for previous decisions.

If the association has employees, any employment records should be retained for at least seven years. If medical records of those employees are in the possession of the association, they should be kept for at least thirty years.

The following corporate records should be kept for at least seven years:

• expired contracts and old leases
• insurance records
• accident reports
• settled insurance claims

Individual member’s records should be retained in separate “member files.” In dealing with individual members, the following documents should be kept until an applicable statute of limitations as expired:

• correspondence with unit owners
• copies of work orders
• complaints and violation notices

Storage of Documents. The board should ensure it is properly storing its documents. Among other measures, boards should:

• centralize hard copy file storage for ease of access; individual members of the association should not be charged with retention of records as they may be tampered with or lost
• file storage facility should be weather and fire proof
• back up computer files regularly

Records Requests by Members. Members have a right to review and copy most of the association’s documents. However, generally certain records may be withheld. These include:

• privileged communication between the board and the association’s attorney
• pending litigation
• meeting minutes or other records of an executive session
• personal, health and financial records of a member or employee
• records relating to job performance, compensation or complaints against an employee

Any time you receive a request for records, you should consult counsel before turning documents over.

Litigation. If the association is currently in litigation or it reasonably anticipates it will be in litigation in the future, the law requires that all records be retained. Do not dump any records if you are about to be sued or you are being sued. If the association does destroy records, it may be subject to harsh penalties by the Court.

Conclusion. Properly managing homeowner association records is a tedious, but necessary task. However, if you know what to keep and how long to keep it, it will make the task easier.

Attorney Peter Smith works extensively with homeowners’ associations and would be happy to answer your questions. Click here to contact him.

Back to Publications Archive