Proper Record-Keeping Keeping a Paper Trail

Proper Record-Keeping

Like any company, a multifamily residential community generates a lot of paperwork in the course of doing business, from employment records to tenant records and more. It can be an enormous amount of stuff to manage, and knowing what to keep—as well as what can be tossed —isn’t always obvious. In operating a multifamily community, though, it’s important to know what records must be discarded or kept, and for how long. Best practices and some laws dictate treatment of certain documents, and a building’s management-board team should at least be familiar with what goes where. 

Filing Paperwork

Understanding the difference between documents that should be destroyed immediately after their use at a board meeting, for example, and those that should be secured and saved for years to come is the responsibility of both the board and the property manager. Of course such decisions can be made with the help of their attorney, but all of these parties have a fiduciary responsibility to run the community as a business, which includes keeping records as long as needed. Keeping those records or disposing of them can not only keep administrators and community alike on the right side of the law, it can also help shield a building or association from some kinds of litigation. 

Some of the documents generated in the course of running a condo/co-op building or HOA include attorney correspondence, vendor contracts, blueprints, maintenance schematics and other equipment or operations and maintenance (O&M) manuals, floor plans, and more. A building’s governing documents, meeting minutes, tax information, and proofs of inspections str typically also retained, says Patti Harris, special counsel for Zetlin & De Chiara LLP, a New York City law firm.

Some records that are kept are leasing documents, emergency evacuation plans, shut-off valve maps, and a schematic of the building’s fire suppression system, says David Trask, business development representative for ARC Document Solutions, a document management and cloud-based hosting company headquartered in Walnut Creek, California, with more than 150 offices across the country, including a distributor in Addison, Illinois.

“Oftentimes this stuff is in the construction documents and could also be in the tenant improvement documents,” Trask says. 

Other building documents that should be kept by management include water testing reports, asbestos reports, environmental plans, and warranties on equipment, Trask says. “All of that documentation has to live somewhere—often it’s on paper, in a storage room and not safe; though it would be safer in cloud storage,” he says.

Retaining building documents for the requisite period is more than a legal requirement; it's also just good business. It covers the building’s bases, so to speak. “There can be federal, state or city laws on how long the record must be kept,” Harris says. Typically, tax records are kept for seven years, and employment records in many states for three. 

But what about records that may not be mandated by law, which best practices suggest should be kept by management for a time? One unwritten rule of thumb pertains to the record’s ability to affect litigation. The board and manager always want to consider the statute of limitations on litigation that could pertain to the document, Harris says. 

Illinois, for example, has specifics about record-keeping and what documents need to be retained and where. Attorney Ryan Shpritz, principal at the law firm of Kovitz Shifrin Nesbit, in Munderlin, notes that the board needs to be compliant, and this means following the Illinois Condo Act, for one. The Illinois Condominium Property Act (ICPA) is a comprehensive and detailed prescription for running a condominium. 

These requirements are spelled out in Section 19 of the ICPA, which details the records the board needs to keep on file and details where they must be stored. The records include the association’s declaration and bylaws; the rules and regulations; the minutes of all board and association meetings (for seven years); all current insurance policies; all contracts, leases and other agreements; names and addresses of the board members; and ballots and proxies related to board elections and any other matters (for 12 months). They should be held at a designated “principal” office, commonly the property manager or managing agent’s office or, for self-managed properties, with the board’s secretary.

Certain items need not be shared, Shpritz says. Every member of the association has the right to examine and even copy almost all of the records on file, but there are a few exceptions. They include: those relating to association employees, pending litigation, monies owed by individual members and the details of the sale of units by other owners. “At the end of the day,” after all, explains Shpritz, “it is a business, sometimes a multimillion dollar business, and in all businesses certain information has to be protected.”

Other experts say that managing such records is simplified if they are organized in part based upon how long they will be retained.

“Some of the most common documents and paperwork generated in co-ops and condos are owner financial statements, payment receipts, inspection reports, violation reports, condo association charter/governing documents, covenants, conditions and restrictions, bylaws, articles of incorporation, the operating budget, and insurance policies,” says Sam Driver, director of product management for Buildium, a property management software firm based in Boston. “Think about these documents as fixed or rarely changing, like articles of incorporation; or dynamic, like groupings of monthly expenses or budget forecasts over time.”

Where to Put It? 

Certain areas of the country, like New York City, are vulnerable to things like terrorism and man-made disasters. Illinois boards and associations should prepare for more routine emergencies like fire, flood and natural disasters. Part of any good preparation begins with an evacuation plan and a shelter-in-place plan in case flooding or another disaster dictates that residents leave—or stay put in their units for weeks or days. For a building’s management, preparing for the worst also means having immediate access to all the information available on the building community that could be helpful.

Given such necessities, where should important records and documents be physically stored in a residential building? And where should they not be kept? Industry pros say a majority of these records should not actually be kept in the building. 

“You’re best off storing any records you have related to a condo association—from financial statements to maintenance records to inspection reports—in the cloud,” says Driver. “There’s no limit to how much you can store, and you can do so without taking up any physical space.”

Some might wonder if electronic storage is safe for storing crucial documents and potentially sensitive personal information. Most experts agree that if stored in the cloud, it’s probably safer than storing paper copies, which can be ruined by fire or flooding, or compromised by prying eyes. 

“One best practice is to file all documents and communication electronically—where you can find and share them more easily, where they don’t clutter your office, and where they’re safer than they are in physical form,” Driver says. “Electronic storage in the cloud is much safer than filing in cabinets or on a personal computer.” 

Data kept on a single PC could be irretrievable if that computer is damaged. But cloud storage means that the information stored is backed up by multiple servers that may be scattered around the world. Even if one goes down, there are always backups to protect the data stored on them. The same cannot be said of a single piece of paper locked in a metal filing cabinet or in a box on a storage unit shelf. 

Getting Help

Many residential buildings in larger, older cities have been around for a while, and records for them could have significant gaps. While nobody is perfect and a few holes in the record here and there are not cause for great alarm, buildings and HOAs that chronically fail to keep proper records can perhaps find themselves facing serious legal ramifications.

“Let’s take a simple example,” says Driver. “Arguments over association bylaws and violations. If you consistently do inspections from a mobile app and store the reports (and the pictures you take) in the cloud, you’ve got a visual record of what things looked like. Having records and visual proof tends to immediately reduce the intensity of those arguments. Good records reduce risk at tax time, and make audits smoother. Good records will minimize risk of errors-and-omissions lawsuits, eviction proceedings and other legal challenges.”

The companies that help residential buildings manage their documents vary in how they approach records management. The management team can choose the best one for their building by doing some research, which should begin with knowing what they hope to achieve with the company’s software tool. 

Are they looking mainly for an accounting-type system that handles the daily business of running the building, such as sending invoices and organizing other daily paperwork? Or do they want to ensure that all of their permanent building documents—construction documents like original blueprints and tenant improvement build-outs, O&M manuals, shut-off valve maps and more—are safe, and accessible by cell phone? Are those documents electronically stored or is their storage hodgepodge—either in hard copy in a storage room or backed up once on an office computer? And what format are they stored in—are the documents all in the same formats, and do employees and contractors have all of those formats? Can users switch from one batch of information, such as evacuation plans, to another?  Can the documents be electronically searched easily, with tags? 

There are many questions to ask, that very few or perhaps just one employee knows the answers to, but which will be clear after a new system is implemented. The management team should know if it wants property management software or construction document software or conversion of documents to electronic storage the building needs, or all of the above? Getting a handle on the task of properly storing and organizing a building’s documents can be a bit overwhelming, but it’s achievable with some thoughtful pre-research and cooperation between board and management. 

According to James Pidgeon, business development representative for Buildium, that company’s software provides a general ledger accounting system; a database for leases; a website/marketing feature; an integrated portal; a function enabling online rental payments; the ability to write checks from the system; and the ability to manage vendors and handle contracts from the system. 

Such a system might not fit well for some buildings that have other needs. Take for example legacy construction documents like the original blueprints for the building, which may have changed over time. Sometimes it’s important to access the originals, and in some cases, those original documents are being physically stored but not electronically saved. Or worse, some of those documents have been lost altogether. 

Other Considerations

Whose job is it to convert such documents to a standardized electronic format that is accessible to those who need to retrieve that info? If those documents are electronically saved but a manager or emergency responder can’t access them from his phone, it’s a lost opportunity. Even in the case of short-term lease information, where a renter sublets an apartment for just six months, the amount of paperwork generated can amount to a several-inches-thick stack of paper. But who will perform the time-consuming task of putting those or other documents into electronic format and all in one safe spot, well-organized for users? The job is ongoing, in some buildings.

A document storage and retrieval service may be of help here. Archiving and Information Management (AIM) software/service helps facilities managers in every sector, assisting multi-family buildings, mixed-use buildings, big box retailers, hospitals, local governments and other organizations that manage infrastructure like buildings or roads. The savings derived from properly managing documents can be huge—not just savings of employee work hours, but saving workers from frustration and mistakes that accompany that state.

When a contractor must run from one place to another for building plans or the latest equipment manuals, it wastes time and money. And when those documents are incomplete, or inaccurately show the state of a tenant space or building system, the results can be disastrous. In such cases, repairs can be started on an HVAC system that already has been upgraded and doesn’t need repairs the contractor thinks are necessary because he is working from old documents. Performing the repairs could cost the building owner a lot of money, because the documents were outdated.

While managing documents like revised blueprints from tenant build-outs, new equipment manuals, and plans showing recent building system alterations might seem like a simple task left to the superintendent or property manager, it can be more complex. Sometimes, documents showing the building’s current as-built state are not digitalized. Also, paper documents can get lost by contractors who don’t return them, and can quickly become outdated as a building changes with new tenants. So having all of those documents up to date and easily retrievable is crucial, since it saves employee hours and contractor fees. 

Though tenant build-outs, equipment upgrades, and other building alterations are commonplace in multi-family structures, consistency in managing and storing building documents isn’t always common. But updating and controlling such documents and making them accessible from mobile devices like smart phones can be simple, with professional help. Having such help could be a matter of life and death: when a fire or another building emergency happens, having the building documents accurately show the structure’s systems and layout, and having them easily retrieved by emergency responders, could save lives. And conversely, not having those documents readily available when a disaster happens could result in a lawsuit against a building whose management should have availed itself of such technology.

“Many building managers have problems accessing all their information in one spot,” Trask says. “We can remove this at any of our US offices, where employees can aid building managers in digitalizing their documents, storing them in ARC’s cloud-based storage system, and updating the documents whenever needed.”

Jonathan Barnes is a freelance writer and a frequent contributor to The Chicagoland Cooperator. Managing editor Debra A. Estock contributed to this article.

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