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When to chuck old files

Before cranking up the shredder, boards should check the laws governing record-keeping.

June 29, 2008|Stephen Glassman and Donie Vanitzian | Special to The Times

Question: We are owners in a group of six town houses in the San Pedro area. Having terminated the property management company to save money, we now take care of everything ourselves. I am a board director and would like to discard much of the association-related paperwork that goes back to 1993. How long do we have to keep gardeners' receipts, bank statements, utility bills and other documents?

Answer: Whether your association has six owners or 6,000, the laws are the same. Document retention is an important part of the association's business operations. Part of the board's record-keeping parameters are governed by California Civil Code section 1365.2(i), which sets forth time periods that specified records shall be kept.

The association records shall be kept and, on request, provided to titleholders for the current fiscal year and for the previous two fiscal years. Minutes of member and board meetings shall be permanently made available to titleholders. Any committee with decision-making authority shall keep minutes permanently on file of all its meetings, also to be made permanently available to titleholders.

Internal Revenue Service Publication No. 583 states it is important to keep sales slips, paid bills, invoices, receipts, deposit slips, canceled checks, credit-card sales slips, cash register tapes, account statements and petty cash slips as they contain information to support tax returns. As a business, the association should keep all documents that support the minutes and board of directors' actions indefinitely. As it pertains to individuals, IRS Publication No. 552 recommends individuals hold onto documents for seven years.

Real-property-related documents, records and contracts, including blueprints, permits and architectural control permissions, should be kept indefinitely. If your association has not obtained copies of those documents, it should do so, as some California counties are destroying records more than 25 years old.

Retention of "documents" is not limited to paperwork. Tape recordings, pictures and negatives, or film and digital media also should be kept. E-mails should be printed out and filed using a system designed for quick access. Today, hard disk drives and other storage media onto which "original" documents may have been transferred should also be kept.

The many variations in "originals" make it all the more important for individual titleholders to retain paper copies of all documents they receive or request from the association, including minutes, meeting notices, fliers and announcements. Beginning with escrow documents, these papers should be kept for the duration of ownership.

Many laws exist pertaining to retention and destruction of records and documents -- including those that may contain personal information -- and other record-keeping methods in general.

Additional requirements for record retention and destruction may be found in statutes pertaining to the IRS and Franchise Tax Board and in state and local laws. For example, since the association would be required to produce any contracts between it and any of its vendors, including its attorneys, those specific documents must be kept for at least as long as the contract is in force.

However, the association should keep those documents on file for at least four years after the contract expires or is terminated. Depending on the type of contractual agreement, it may be wise to keep some contracts indefinitely.

In keeping with the board's due diligence, consulting with an experienced tax attorney and certified public accountant regarding these matters would be prudent.

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Send questions to P.O. Box 11843, Marina del Rey, CA 90295, or e-mail noexit@mindspring.com.

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