Keeping an Often Digital Paper Trail Best Practices For Maintaining HOA Records

Keeping an Often Digital Paper Trail

It is essential that a community association keep thorough records of its financials, rules and regulations, meeting minutes, and so on. Not solely because the law often requires it—although following the law is certainly advisable—but also because an association that fails to maintain a ledger of its history is doomed to repeat its past mistakes. This is not to say that every association needs to have a cavernous records room on-site—we are living in a digital era, after all—but having definitive guidelines as to who holds on to what information, where, and for how long is a must.

Legal Obligations

While there are certainly broad guiding principles pertaining to record-keeping in a community association, specifics can vary based on state law. Below, several attorneys from different markets discuss the particular nuances therein. 

(It’s worth stating that simply following the law is not always adequate. Even if a certain practice is not necessarily required in your state, it may be a practice worth adopting in your association.)

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

“Vermont has adopted much of the Uniform Common Interest Ownership Act (UCIOA)—and specifically has adopted the sections thereof relating to the keeping of association records. Sections 3–118 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 formed—must comply with the requirements of 3–118.

“Perhaps more important to condominium owners is that there is now a provision that requires that all records both required to be retained by an association and 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 may 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’s no specific provision in Vermont’s version of UCIOA that sets 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 were 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, a partner with Levine & Montana in Peekskill, New York

“Section 624 of the New York Business Corporation Law 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 shareholder has both statutory and common-law rights to inspect books and records of the corporation if 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 an 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 the managing agent’s office during convenient weekday hours included a right to create paper copies or electronic copies at her own expense during her 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 an electronic copy, and 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. It’s useful to have a searchable version, and one that exists in the event of some disaster, like a fire. 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 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 wherein documents were not backed up and are then lost, depending on the contours of the management agreement, this could constitute a breach of contract or negligence. We do see cases wherein managers did not keep records to the extent that 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, then 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 all of this may sound daunting to an inexperienced board, it should be par for the course for an effective manager. In fact, many managerial companies now utilize various digital apps and services that can help streamline record-keeping in a way that allows boards to access pertinent information with a few simple clicks.

Bonita Vandall, vice president of management services with The Vanguard Management Group, Inc. in Tampa, Florida, discusses how her company navigates the digital landscape:

“We consider ourselves to be mostly paperless, and as such store all of the documents for our communities in an eBridge filing system. We honestly do not even have physical filing cabinets in our offices. Everything from lease and sale applications, to drivers’ licenses, to social security numbers, we save in the eBridge, and we consider that to be quite secure.

“In Florida, statutes 718, 719, and 720 dictate what can be saved and discarded and in what time frame. We provide this information to our boards to allow them to get rid of any old records they want to—and can legally—discard. 

“If an association were to sever ties with us for whatever reason, we would provide them or their new management company with a flash drive of all official records. If a board changes over, we hold board orientation classes to go over the documents, policies, and statutes governing their communities.”

Whether an association prefers an extensive digital catalog of records—like the eBridge interface used by Vanguard—or something more old-fashioned, the hardships and headaches that can ensue when a board FAILS to adequately maintain its files are extensive. Properly collecting, storing, and passing along data are imperative to an association’s functionality; it is not an area where costs should be cut, whenever possible.

Michael Odenthal is a freelance writer/reporter with The Western Florida Cooperator.