Maintaining Proper Records Keeping a Digital Paper Trail

Maintaining Proper Records

It is essential that a community association keep careful records of its financials, rules, and meeting minutes, just to name a few of the kinds of records boards and managers must stay on top of. Not solely because the law often requires it – although of course that’s important – but because an association that fails to maintain a complete, orderly ledger of its business is doomed to repeat past mistakes. This is not to say that every association or building needs to have a cavernous archive on-site – we’re living in a digital era, after all. But knowing who needs to hold on to what information, where, and for how long is a must.

Legal Obligations

While there are certainly broad guiding principles when it comes to record-keeping in a co-op, condo, or community association, specifics can vary based on state laws. We asked a sampling of co-op and condo attorneys from across the country to weigh in on what boards and managers should be doing to make sure their community records are properly kept and secured. While some of the requirements discussed may not be strictly required in your state, they may be worth considering adopting to help your building or HOA run more smoothly. 

Jack Facey, partner with Facey Goss & McPhee P.C. in Rutland, Vermont

“Vermont has adopted much of the Uniform Common Interest Ownership Act – and specifically has adopted the sections relating to the keeping of association records. Sections 3 through 118 deal with the records of the association which must be kept. The provisions were made applicable to pre-1999 condominiums, so all associations in Vermont – no matter when they were formed – must comply with the requirements of 3 through 118.

“Perhaps more important to condominium owners is that there is now a provision that all records –  both required to be retained by an association or otherwise kept by the association – must be available for examination and copying by a unit owner or the owner’s authorized agent during reasonable business hours, or at a mutually convenient time and location after five days’ notice. The statute provides for the association to charge a reasonable fee.

“Vermont’s version of UCIOA also sets forth those records that can be withheld from inspection and copying. The protected records include:

• personnel salary and medical records relating to specific individuals;

• contracts and transactions currently being negotiated;

• existing or potential matters in litigation, mediation or arbitration;

• declaration, bylaw or rule enforcement actions currently proceeding;

• association-attorney communications;

• records of an executive session of the executive board;

• individual unit files other than those of the requesting owner.

“There are no specific provisions in Vermont’s version of UCIOA that set forth what can happen if an association fails to comply with these sections. An owner would be able to go to the appropriate Superior Court and get a judge to order the dissemination of the requested documents if they’re not otherwise protected by statute. An owner might be able to have the Superior Court judge award fees and costs, and perhaps even attorney’s fees if a showing could be made that the association unreasonably withheld the documents.”

Lewis Montana, partner with Levine & Montana in Peekskill, New York

“Section 624 of the New York Business Corporation Law (BCL) addresses books and records, right of inspection and prima facie evidence as follows:

“‘Each corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its shareholders, board and executive committee, if any, and shall keep at the office of the corporation in this state or at the office of its transfer agent or registrar in this state, a record containing the names and addresses of all shareholders, the number and class of shares held by each and the dates when they respectively became the owners of record thereof. Any of the foregoing books, minutes or records may be in written form or in any other form capable of being converted into written form within a reasonable time.’

“The bylaws of an association may also provide requirements to maintain records and indicate inspection rights of its membership. Also, a [co-op] shareholder has both a statutory and common-law right to inspect books and records of their corporation if that inspection is sought in good faith and for valid purpose.

“Courts indicate that a condominium owner has similar inspection rights under common law. In one case, Pomerance v. McGrath, the court instructs that, although a condominium association’s board did not have obligation to mail or email copies of monthly financial reports, building invoices, redacted legal invoices, or board meeting minutes to unit owners, an owner’s right to examine those records at their managing agent’s office during convenient weekday hours included a right to create paper or electronic copies at their own expense during that inspection; confidentiality concerns were sufficiently accommodated by requiring the owner to sign a confidentiality agreement.”

Katherine G. Brady, an associate with Moriarty Troyer & Malloy LLC in Boston and Braintree, Massachusetts

“In Massachusetts, it’s statutory that there’s a list of certain categories of items that must be kept for seven years, which makes for a nice checklist that should be incorporated into anyone’s management policies for record-keeping. These are things like condo documents, financial records, contracts, insurance, meeting minutes, things like that.

“It’s not specified that these need to be kept within the Commonwealth. While I would say that an association should have some physical records, it’s best to back those up and have electronic copies. It’s useful to have a searchable version, and one that exists in event of some disaster, like a fire. It’s usually pretty easy for sophisticated management companies armed with resources like cloud computing to keep track of everything in a way that’s not terribly expensive. You can really optimize your own business operation via digital record-keeping. 

“Sometimes the management contract itself includes protocol for turning over documents from one managing agent to a replacement, or from one board to the next. Certainly the expectation in Massachusetts is that you’re statutorily required to maintain these categories of documents for seven years, so an incoming managing company can expect that you’ve kept all these records physically or electronically. Many times, management contracts themselves will specify that upon termination, you must turn over the documents within 30 days – and sometimes they’ll specify who is responsible for the cost of doing so.

“In a hypothetical situation in which documents were not backed up and were then lost, depending on the contours of the management agreement, this could constitute negligence or a breach of contract. We do see cases in which managers didn’t keep records to the extent they were supposed to, and that absolutely can lead to breach of contract or negligence. At that point, you can go to court to force them to turn over information, but if they had never kept it in the first place, you have to recreate it. The condo documents will be recorded at the registry, so you have to go and pull those offline. You’ll know what bank was used, so you’ll be able to regain some financial records. But you’ll have a lot of things still missing: general ledgers for unit owners, vendor information... There are many pieces you’d have to put together, which would be really tough for a new management company, and even worse for an association attempting to self-manage.”

(Avoiding) Anger (via) Management

While keeping all this important paperwork and documentation straight and appropriately accessible may sound daunting to an inexperienced board, it should be business as usual for an effective manager. In fact, many management companies now use an array of mobile apps and services to help streamline record-keeping in a way that allows boards to access information with a few simple clicks.

Robert Arnone, managing principal with RCA Management  in New York City and Bayonne, New Jersey discusses how his firm navigates the digital landscape:

“Nothing really gets discarded now that everything – any document we receive – is electronic,” he says. “Let’s say that a building is buying supplies. Our maintenance staff will take a photo of every invoice – even if it’s only a $2 screw – and that invoice will get sent to us. 

“The boards of our associations all have access to an online portal where all of their documents – financials, vendor contracts, legal documents, government documents, insurance contracts, pending applications, newsletters, tax returns, meeting minutes, you name it – are stored. As soon as we upload the relevant document to the portal, the board will get an email telling them it’s available. 

“Should a board decide to leave us for another management company, or to self-manage for whatever reason, we can just download the documents to a thumb drive and send that to the new company. But you hope that never happens, but there’s always a chance that someone will come along and offer to do this for less. One of the challenges in maintaining this portal is the cost. When we figure the cost into our management agreement, we describe the various functions of the portal [to a prospective client], explain how extensive it is, and how it’s only one of the ways we monitor association business. We have another portal that tracks time worked by maintenance staff, for example. But in the end, it comes down to how thorough a manager a given association wants to have.”

Whether an association prefers to have an extensive digital catalog of records, or something more old-fashioned, the hardships and headaches that can ensue when a board fails to adequately maintain its files are nothing anybody wants to deal with. Properly collecting, storing, and passing along data is imperative to an association’s functionality, and deciding what the best fit is for your particular community is part and parcel of your duty as a board. 

Mike Odenthal is a staff writer/reporter for The Cooperator. 

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  • forgetting the legal requirement which may or may not be there in each state, to send the minutes each month to the unit owners, wouldn't it make sense for a board and its property manager to do this to promote interaction, transparency, and increase involvement by the unit owners? If they don't, all that crates is a question by the unit owners; "Why not?", "what is going on that you don't want us to see?". With email there is no cost involved and of course, sensitive information is redacted but, specific discussions should be made public.