The Association’s Records
Knowing which records should be kept, where to keep them and how to store them can help an association maintain access to important historical data about itself. Association records should contain information that the board can use as a reference for future projects, or possible evidence in a lawsuit or audit. Records are useful when the board is negotiating contracts for landscaping or snow removal. Boards can refer to work records, financial records or even minutes from the meeting where the contractor was chosen to weigh future decisions.
What to Keep and Where to Keep it
First, you need to determine what types of records need to be kept. This includes a number of different records used in the normal course of an association’s operation, such as:
• financial records
• tax records
• unit files or lot files
• work records (including contracts with vendors, employee records, warranty documents, work logs, etc.)
Next, you need to determine for how long to keep each type of record. “The length of time that a record must be retained depends on the type of record,” said Guerra. Certain corporate records, according to Guerra, need to be held basically forever. These include:
• governing documents
• financial statements
• meeting minutes (from both board and association meetings)
According to Guerra, Michigan doesn’t mandate a given level of record retention by law. Record keeping mostly has to do with what the governing documents require. For example, some bylaws require that minutes be kept and other bylaws don’t mention minutes at all. Always consult your governing documents for specific instructions.
The fact is, Guerra said, “You need minutes and records to confirm and support what actions were taken.” So it is in an association’s best interest to keep accurate and thorough records.
How detailed do board meeting minutes need to be? “Meeting minutes should only be a record of what was done at a meeting, and should merely contain a statement of the particular proposal and whether the proposal was adopted or rejected,” said Guerra. That is what a proper set of minutes does. Some associations make the mistake of noteing in the minutes every person who had a question and every discussion that took place. “None of that is required or recommended to be included in the minutes,” Guerra said. When compiling your meeting minutes, list only what the board specifically resolves to do at the meeting — in other words, the specific motions or actions taken. “They should include only the detail necessary to reflect the actions taken,” he said.
Are there any requirements as to what form records are kept in? More and more people are keeping documents in an electronic format. “Maintaining records in electronic format is fine,” said Guerra, “as long as they’re backed-up somewhere, there is more than one copy, and the record can be reproduced in paper.” He said there is no statute in the State of Michigan on record keeping or how long you need to keep records.
Where may the association records be stored? Can they be stored in the home of a board member? “There is nothing prohibiting this and sometimes the home of a board member is all that’s available for storage,” said Guerra. Sometimes management companies store the records, sometimes they’re stored electronically, and sometimes they’re stored off-site — sometimes in the Cloud. “There are a numerous ways and locations to actually keep the association’s records,” he said. There is no particular method of storage that is specified in any statute.
Are there any restrictions on putting records online? According to Guerra, there are privacy restrictions that relate to personal information. The same things that can get you into trouble with defamation can get you in trouble for making them public on a website. “The board needs to make sure private and privileged information is not disseminated to the public,” he said.
For How Long Do We Need to Keep Records?
Certain documents have requirements outside association governing documents that need to be met. “For instance, tax returns and records related to tax returns should be kept for at least seven years as the IRS has the right to audit the association during this seven-year period,” said Guerra.
Your corporate records are the only things the association should keep forever because they are the association’s corporate history. “Most other documents have a shelf life of some time, with length of ownership, contract terms, warranty periods, statute of limitations, and good business judgment helping guide how long the record should be retained” he said.
Access to Association Records
Who has access to records? According to Guerra, only members of the organization and their advisors have access to records. The association is entitled to put a process in place for fulfilling residents’ requests to view association records. Guerra noted that the process must be reasonable and must comply with any response time frame mandated by statute. “A board can’t make it it an onerous situation because the members have a statutory right to review,” he said. For instance, the association can’t require payment to merely see the records.
However, Guerra said that if a resident requests copies of documents, and the association incurs expenses making those copies, the association may ask for reimbursement for those copying expenses..
Even still, some records need to remain private, or at least until a court order says they’re no longer private. “Certain records have legal privileges attached to them, like communications from an attorney. Certain records have liability attached to them if you disseminate them, like potential breach of privacy issues and defamation issues,” he said. The board needs to adopt a policy requiring that certain information remain private and not subject to member review, such as:
• account balances
• Social Security numbers
• other sensitive, personal information