The trend today is toward a paperless world. Electronic record keeping can reduce costs overall by eliminating the need for physical paper, while also helping to improve our environment and save space. But are electronic records the right thing for co-op and condominium properties? And are there any legal or practical reasons to keep paper records for your corporation or association?
What Is the Board Legally Required to Do?
Julie Schechter, a partner at the New York City law office of Montgomery McCracken Walker Rhoads, points out that according to the Business Corporation Law (BCL) 624(a), the New York State statute governing co-ops: “Each corporation is required to keep correct and complete books and records of account and minutes of board meetings and shareholder meetings. According to the statute, any of the books, the minutes, or the records may be in written form or in any other form capable of being converted into written form within a reasonable time. Accordingly, it is permissible for a cooperative to keep electronic files in lieu of paper ones, so long as the electronic records can be printed within a reasonable time.”
In the Real World
Greg Cohen of Impact Real Estate Management, a co-op and condo management firm in the greater New York area, says what he would suggest to his clients: “If the managing agent is also the transfer agent, then [he or she] must keep hard copies of the proprietary lease, stock certificates, and corporate records such as the articles of incorporation. As far as paperless is concerned, we still keep the paper in addition to electronic copies, but we send it out to storage and use scanning for bills. We never shared anything. As for payables, all the monthly bills--everything is electronic, both bills and checks.”
Cohen went on to explain that New York State doesn’t have any requirements for paper copies per se. The IRS, he continued, is increasingly accepting electronic documents sent in email for most pretty much everything.
Requested, Not Required
The one area where paper copies may be requested, though not necessarily required, is where lawyers and especially banks are involved. “Lawyers like paper,” says Cohen. A good case in point is lost documents pertaining to financing. Often banks that hold loans on individual units will sell those loans to other banks or financial institutions. The hard copies of things like stock certificates are supposed to follow the loan to the new lender. But things can get lost. Upon refinancing, new or replacement documents may be necessary. Though there is no requirement that they be in printed form, most attorneys and banks will request that they be, requiring a replacement document and the payment of a fee for the creation of such document.