Homeowners Association Records Retention

A homeowners association is (generally) organized as a nonprofit corporation, pursuant to the laws of the state that it is located in. Just like any other corporation, it needs to follow the applicable corporate code and the folks that run it have duties to the corporation.

That includes keeping records to show that they performed those duties, as well as any obligations imposed on the corporation/association by the “Declaration of Covenants, Conditions, and Restrictions” (or whatever else it may be called). Let’s call that document the “CCRs” for short.

Those records must be kept to show that the association is doing its job, in compliance with the law and with the CCRs. Of course, if you are keeping records, it makes sense that those records would be available (at least in part) to the members of the association, doesn’t it?

But it’s great to tell you that you need to keep “records”. What the heck are “records”? Who keeps them, as we are all volunteers, we have no office, the secretary moved out of the subdivision, my dog might eat them? How long do we have to keep them, whatever they are?

Again, the association is a corporation. Like any other corporation, there’s some flexibility to decide what the parameters of “records” and how those records will be retained, although the Georgia Non-Profit Corporation Code provides some requirements. The best advice I can give is to tell you that you should not have an ad hoc policy (the “we will figure it out as we go” plan) and you should not keep everything. The association’s board of directors should sit down and decide what needs to be kept, where it will be kept (so that it is accessible), and how long it will be kept.

Of course, it is always helpful to turn to someone who has done this before, like an experienced association manager or association attorney, to get some guidance on what can work for your association. There are some minimum legal standards that apply and you may want to consider the “what,” “how,” and “how long” questions as it relates to those times where members want to access the records. By the same token, do not throw the full weight of retaining records on your management company, if you have one. At the end of the day the obligation is the board of directors and the associations’.

Do not try to create a complex system or keep absolutely everything. As the saying goes “keep it simple”. . . divide records into a couple categories. For example: (1) permanent records, (2) medium term (keep for 10 years after the expiration of the item, like a pool maintenance contract), (3) general (destroy after 10 years).

A permanent record category would include information such as tax records, financial statements, insurance policies, and pretty much anything your attorney tells you to keep. Owner records should be stored by lot, containing all correspondence regarding what’s gone on with the lot (assessment payments, correspondence, liens, deeds, and permits). Dispose of the information for a particular owner 10 years after the owner sells the property. Medium term records are things like long term contracts or fixed-asset purchases. When keeping these records, be sure to keep them separate from the permanent records.

Keep your records in a fireproof file cabinet some where you can access it easily. Hopefully there is an office space for the association for this purpose, but if not, try a secure location in the association’s common areas. Try to avoid locating records in someone’s home. People move and have other issues arise that may make accessing the records difficult when they are needed. Having a copy of the permanent records held by an association manager or your attorney is a good redundancy to have in place, too. If there is a disaster (like the floods of this past fall ’09) there is a greater likelihood that those records will survive.

Of course, there are only suggestions and you can modify them to suit your neighborhood. When you have a plan, run it by your attorney and have him or her put it in a policy format for the board to adopt. Then run with it and impose the retention policy for current-year records immediately. Then look back and try to get old records in compliance with the policy. This may be an overwhelming task or it may be just plain scary (especially if there is nothing there to organize). Just work with what you have and chip away at organizing it.

All this work will pay off the next time one of your association members wants to look at the records. Which brings me to the next article, which will be “Homeowners Association Records Inspection Rights”. Stay tuned for more.

By: Amy H. Bray, a partner in our Commercial Real Estate department.