HOA Records: Yes, you can toss some of those boxes!

Condominium and homeowners associations are corporations, and as such, effective recordkeeping is paramount.  All too often, however, association boards fail to establish sufficient recordkeeping policies, resulting in records that are unduly voluminous, inaccessible, lost or difficult to locate.

Imprudent recordkeeping is rarely malicious and generally results from a lack of knowledge.  In many cases, boards are simply fearful of throwing out the “wrong” documents and opt instead to retain everything, leaving them with boxes of unnecessary records spanning multiple decades.

Fortunately, Indiana law sets forth clear record retention requirements for condominium and homeowners associations.  Specifically, there are two statutes which apply: (1) the Indiana Nonprofit Corporations Act, at Indiana Code 23-17-1, et seq., and (2) the Indiana Homeowners Association Act, at Indiana Code 32-25.5-1, et seq.

Permanent Records

Indiana Code 23-17-27-1 provides that corporations must keep, as permanent records, the following documents:

• Ownership meeting minutes.

• Board meeting minutes.

• A record of actions taken by members or directors without a meeting.

• A record of actions taken by committees of the board of directors.

• Resolutions of the board relating to the characteristics, qualifications, rights, limitations, and obligations of members.

• A roster of the association’s members in a form that permits preparation of a list of the names and addresses of all members, in alphabetical order, showing the number of votes each member is entitled to cast.

Records to be Stored at Corporation’s Principal Office

Pursuant to Indiana Code 23-17-27-1, the following records must be kept at the association’s principal office:

• Articles of Incorporation or restated Articles and any amendments thereto currently in effect.

• Bylaws or restated Bylaws and any amendments thereto currently in effect.

• Resolutions adopted by the board.

• Membership meeting minutes for the prior three (3) years.

• Written communications to members generally within the past three (3) years.

• Financial statements furnished to the members for the past three (3) years.

• A list of the names and home or business addresses of the corporation’s current directors and officers.

• The corporation’s most recent biennial report submitted to the Secretary of State.

• Ballots for one year after the meeting at which they were submitted.

Though the Nonprofit Corporations Act does not specifically require it, associations should also have on file current copies of the community’s covenants and restrictions and amendments thereto, as well as the recorded plats or building plans.

Ind. Code 32-25.5-1

Indiana Code 32-25.5-1, et seq. sets forth some additional requirements.  Specifically, the law requires associations to keep the following documents on file for at least two years:

• Executed Contracts

• Invoices

• Bills

• Receipts

• Bank Records

• Income/Expense Reports

• Budgets

Tax Records

Although it is not specifically stated in either of the above-referenced laws, associations should maintain all tax records for at least seven years.

Inspection by Members

Members of a condominium or homeowners association have the right to inspect certain records upon a clearly-stated written request.  However, the applicable statutes limit this right to specific types of documents and set forth that owners are not entitled to inspect any records created more than two years prior to the request.  Moreover, Indiana Code 32-25.5-3(m) provides that associations may charge owners a search fee of up to $35 per hour for any time that exceeds one hour, with a maximum total charge of $200.  Associations may also charge reasonable copying costs.

Indiana law establishes specific requirements for producing documents and sharply curtails what owns are permitted to inspect.  Thus, in order to ensure full compliance with the law, boards should contact their attorney whenever they receive document requests from owners.

Where to Keep Documents

Associations utilizing the services of a property management company will typically entrust the community’s records to their property manager.  This is an acceptable practice.  However, boards must understand that they are the ones who are ultimately responsible for maintenance of the association’s records.  Accordingly, boards must work closely with their property manager to develop a document retention system and ensure they are aware of how and where the community’s records are being stored.

Most Indiana condominium and homeowners associations do not have onsite offices.  As a result, self-managed associations often store records at a board member’s – typically the Secretary’s – place of residence.  While the community is hopefully electing trustworthy people to the board, this is still an unsafe recordkeeping practice which can lead to lost records and potential issues when the Secretary resigns or leaves the community.  A safer practice for self-managed associations is to store hard-copy records with a records management company or in a safe deposit box.

Finally, where possible, boards should consider converting hard-copy records to electronic files, which cuts down on space and paper.  Ultimately, electronic filing is a much more efficient and cost-effective recordkeeping practice.

This article and these recommendations are intended to serve as a general guide and are not a comprehensive legal opinion.  If you would like assistance developing an HOA records retention policy tailored to your community or have questions about your legal obligations in this regard, please contact our law firm.