It’s no secret that helping to run a board of directors or board of trustees for a condo association is a thankless task. There are a lot of issues to take care of, and board members are strictly volunteers. While there might be some unofficial perks for taking the job, one of the core responsibilities that can bog people down is keeping the records. It’s hard enough to produce them, read them closely, and make major decisions based on them at board meetings. But, even with the help of a property manager, the storage and guardianship of past records can be confusing and easily overlooked.
Many of us probably don’t put much stock in older records: our receipts from two months ago, or our bills from last year. Individuals more often than not make sure they or their accountant are ensuring that tax returns are kept somewhere and leave it at that. But associations have quite a bit more to keep track of to keep their noses clean. “You’ve got access issues under state law about certain private information that you’ve got to protect, and what plans you need to put to effect,” says Charlie Perkins, partner at the law firm of Perkins & Anctil in Westford, Massachusetts. “And then you’ve got the CPAs (certified public accountants) telling you what the IRS wants you to keep and for how long.”
Figuring out what documents fall under that classification—and what to do with them—can be a cumbersome process. Compared to other states in New England, Massachusetts law spells it out more, requiring a host of documents to stored and available for examination, including all bylaws, financial records, audits, reserve budgets, minutes, contracts and insurance policies. “To the extent these records exist, the association must by law retain them for a period of at least seven years, “ says Pamela Jonah, an attorney at the law firm of Goodman, Shapiro, & Lombardi in Dedham, Massachusetts. “All unit owners are entitled to access to review and inspect the association’s records upon reasonable notice and may upon payment of a reasonable fee receive a copy of any records.”
“There's no requirement that I'm aware of in New Hampshire, Rhode Island or Maine,” says Janet Aronson, an attorney at the law firm of Marcus, Errico, Emmer & Brooks in Braintree, Massachusetts. But Aronson recommends that associations in those states might as well keep their records for seven years or so, as the Massachusetts law prescribes. “I think seven years is probably reasonable, in terms of let’s say, there’s ever recourse. Contractually you’ve got a six-year statute of limitations. Seven years is probably a good rule of thumb, even though that’s what the Massachusetts law requires,” says Aronson.
The all-important first step is determining what files and records are considered sensitive, requiring secure storage. The second, equally-important, step is determining where and in what fashion the documents are to be stored. “It’s the association’s records, and a lot of management companies do not have the ability to keep them at their own offices, so they tell the boards to find a storage area to keep track of it themselves. Some management companies will keep them seven years, some will keep them for two years, and then tell you where else to keep them,” says Perkins. In Massachusetts, there are no specific restrictions on where the records need to be kept, just that they stay within the confines of the state.
But, for many associations in and outside of Massachusetts, the simple matter of finding the space for these files becomes a problem, and one that can also be costly. That’s why electronic files have been more useful, especially as huge amounts of digital memory continue to fit in smaller and smaller computers. On top of the ease of space, electronic files also can act as a backup to the real documents as well. “Things can be recreated today, and the law is more flexible in accepting documents other than originals. Ideally, they could scan the information and keep it on disk. There are different ways they can deal with it; it’s not like they have to save boxes anymore,” says Aronson.
Electronic filing is a streamlined approach to record-keeping, but for many associations the cost and time involved presents issues. When copies are requested, on an attorney’s advice, files are printed or copied and a minimal charge is levied. While there is a growing movement toward e-based recordkeeping, many associations still rely on hard copies. Still, many property management companies have made a full transition to going completely paperless in how they conduct their business.
Who Can Access Files?
Knowing what documents to file and where they are to be stored are critical to the successful running of an association. Once these two variables are in place, there are other considerations, such as how long they should be stored and who can access these sensitive files.
There are records that are not accessible by all board members and trustees. These include any record protected by lawyer-client privileges, medical records and any other confidential information.
“Every so often personal or what may be deemed confidential information, such as unit owners’ social security numbers, banking account numbers or minutes containing the identification of unit owners who may be delinquent in the payment of their common fees, may end up in a record that another unit owner is requesting to inspect and/or receive a copy,” says Jonah. “In these cases it may be necessary to redact such private information from the record in question prior to another unit owner’s inspection or their obtaining a photocopy of same, lest the association risk violating, for example, the Fair Debt Collection Practices Act,” she says.
But it’s not just unit owners’ privacy for the sake of protection and courtesy that boards have to worry about when it comes to showing records, according to Perkins. Some unit owners might have an agenda, and are looking for evidence in the records. On top of complications to regulations involving debt collection, and individuals’ rights to privacy in regard to those laws, “If you release that information, what if it’s not current? Someone’s made a payment and it hasn’t caught up with the ledger yet,” says Perkins.
“We find that most people who make record requests of the association, it’s sometimes not a good faith request. Sometimes it’s just to harass the management company or board, and a belief that someone’s stealing, and frankly, there are some boards that should be more transparent, and they bring that on themselves, and you have people saying they haven’t gotten a financial statement in five years, and they want to see what’s going on,” says Perkins. The best solution to not getting caught in these holes is to make sure the board is doing their job by releasing the appropriate records at meetings to unit owners. Unit owners will have much less of a propensity to get accusatory if the proper records are already for public view. Also, an attorney and CPA should be able to help in determining what personal information should be redacted before such records are shown to unit owners.
Boards and managers should be aware that ramifications do exist for the improper handling and/or disposal of files. If private information is thrown out but somehow recovered by a third party, the association may be liable. “One of the things they should do is talk to their accountant, and make a decision to go and destroy the older records. I would shred everything that you’re going to destroy,” says Perkins.
The benefits of electronic recordkeeping were discussed above, but when it comes to purging and destroying documents that are old enough to bite the dust, electronic files can pose a challenge. “Some could mistakenly believe that deleting an email means that it is gone forever. In reality, such emails could be discoverable by the opposition and technology has taught us that once out there in cyberspace, nothing is ever really gone,” says Jonah. “It may be a good idea to check with the association’s hired advisors, attorneys and accountants before destroying any records, as the seven-year period is just a minimum prescribed by the statute and not any guideline as to when a document may become obsolete.”
Due to the frequent turnover on most association boards, issues arise when an incoming president, for example, is seeking files from the outgoing president. In many cases, there might have been an ousting and perhaps the transition is considered hostile. The same can happen with property management companies. A board might have a falling-out with one company, and the succeeding management firm has to pull teeth to get the departing company to hand over all the appropriate files. “One of the things they might make sure they have in place is in their management agreements, something that indicates that they will get their records, including their electronic records, that they would be entitled to a disk or something of the old records — because that is really important,” says Aronson.
For new board members or trustees, or if questions arise from seasoned members, the Community Associations Institute (www.caionline.com) has information to guide boards and management companies about document-related issues. It only takes a few minutes to review and some features on the site tell you how best to store your files.
W.B. King is a freelance writer and a frequent contributor to New England Condominium. Editorial Assistant Tom Lisi contributed to this article.