by Beth Mulcahy, Esq.
Happy New Year! On behalf of everyone at Mulcahy Law Firm, P.C., I would like to wish you all the best in 2014.
Over the holidays, I was able to spend more time than usual at home and realized that I needed to do some editing and tossing of personal records, clothes that don’t fit our family and expired items in my pantry. It felt great to organize, toss and clean up.
One question that our firm frequently receives is “how long does an association have to keep it’s records?” Many board members have told me that they have boxes of records in their garages or attics that they would like to get rid of. Or, alternately, the board is frustrated that they are paying a monthly fee to store old records off-site. Set forth below is a great summary of what records associations must keep and what records can be tossed.
As a business, it is important for the association to maintain and organize the piles of paperwork and computer information generated by doing business. That oversight falls to the board of directors. Arizona law, the association’s governing documents and good business practices dictate which records the association must preserve and for how long.
Financial records should be kept permanently because they help chart the community’s financial history and because they could contain information that may have a bearing on current decisions. Records that might be subject to an IRS audit or to an accounting-related challenge should be kept at least seven years. Important financial documents, such as bank statements, deposit slips, budgets and petty cash vouchers should be held at least four years.
Corporate History is Important
Vital corporate records are part of the community’s infrastructure and should be permanently retained. The association’s governing documents — the CC&Rs (declaration of covenants, conditions and restrictions), articles of incorporation, bylaws, rules and regulations, deeds, architectural guidelines, easements, contracts and board resolutions fall into the retain forever” category. The historical perspective these documents provide is important because as the membership of a board changes, the association’s collective memory remains intact with these documents. Additionally, new board members need a basis for understanding the 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.
Additional Corporate Records
Keep for at least 7 years: 1. Records related to former employees, with the exception of their medical records, which, some experts say, should be retained for at least 30 years; 2. Expired contracts; 3. Old leases, 4. Insurance records; and 5. Accident reports and settled insurance claims.
Keep forever: 1. Minutes of board meetings should be retained as long as the policies and decisions they document can be challenged in court, if not forever; 2. Recommendations and actions of association committees and records documenting complaints filed by homeowners and how they were resolved; and 3. Emails that are association related.
Unit Owner Files: Corporate records relating to individual units or unit owners should be retained in separate unit owner’s files. Decisions on the following requests and other documents related to them should become part of each unit’s permanent record to provide the background information future owners will require: 1. General correspondence with unit owners; 2. Copies of work orders; 3. Complaints and violation notices; and 4. Requests and approvals/ disapprovals for architectural modification.
Storage and Recovery of Documents: Boards should establish and adhere to procedures for ensuring the safe storage and rapid recovery of all vital association documents. Among other measures, boards should: 1. Regularly back up information contained in computer files; 2. Maintain duplicates of paper records and back up computer files and store in a safe, off-site location; and 3. Require all board members to be familiar with and able to implement the association’s disaster recovery plan.
Records Requests by Members: Under Arizona law, all records of the association shall be made reasonably available for examination by any member or any person designated by the member in writing as the member’s representative. Books and records kept by or on behalf of the association and the board may be withheld from disclosure to the extent that the portion withheld relates to any of the following: 1. Privileged communication between an attorney for the association and the association; 2. Pending litigation; 3. Meeting minutes or other records of a session or an executive session board meeting; 4. Personal, health and financial records of an individual member of the association, an individual employee of the association or an individual employee of a contractor for the association; and 5. Records relating to the job performance of, compensation of, health records of, or specific complaints against an individual employee of a contractor of the association who works under the direction of the association.
A.R.S. 33-1805 / CONDO A.R.S. 33-1258: 1. Owners are entitled to see association books and records pertaining to “contemplated” litigation; 2. An association cannot charge a member for making books and records available for review; 3. An association has ten (10) business days from a request by an owner or an owner’s designated agent to make records available or copies of requested records; and 4. The association can only charge 15 cents per page for copies of records.
Good luck with your editing and tossing in 2014!