Everyone has experienced disorganization at one time or another. Say you have to go somewhere, and you forgot your driver’s license, only to find it in the pocket of another jacket. Or you can’t locate your cell phone because you turned it off—only to finally find it under a pile of mail in the kitchen.
If this situation is so disruptive to one’s personal life, that goes ten-fold for a co-op or condo building or a management office. Imagine if someone moves out after 20 years, and no one knows how much that person owes in fees. Or someone loses a key, and no one in the maintenance office knows where to find a duplicate. Or management loses the waiting list for spaces in the garage, with no backup copy to be found.
Indeed, if your building has poor-record-keeping, you might be paying for items you really shouldn’t have to pay for—or paying for supplies or services more than once. “Maybe you have to redo a job that has a warranty,” says Josh Koppel, president of HSC Management in Yonkers. “A lot of buildings whose records are in shambles end up paying someone else, because they’re not aware that the warranty on the original installation is still in effect.”
No one wants to be in situations like these. That’s why consistent record-keeping and preserving documents—both physical documents and online copies—are so important.
Brendan Keany, general manager of Mutual Redevelopment Houses (also known as Penn South), a self-managed, limited equity co-op in Manhattan, says historical data often helps the staff pinpoint the cause of a maintenance problem—for example, a leak. “You go into the data of the individual apartments in that line, and you might see that an individual cooperator didn’t replace a faucet or piping,” he says.
Good record-keeping can help the building or development in all sorts of ways. Keany adds that taking a historical look at what the carrying charges were for individual shareholders for a certain number of years “guides us for what we might put into effect in the future and what’s tolerable for shareholders. “We’re a limited-equity, middle-income co-op, with some people living on a fixed income,” he says. “If I had a three-percent carrying charge increase last year, the chances are that I shouldn’t put them in this year.”
With 2,820 apartments, record-keeping is also vitally important in planning for the future. The heads of all of the development’s different departments meet yearly and tell management what they see as items that need to be replaced or repaired. “Documents give an excellent management tool so that we don’t end up with financial surprises,” Keany says, like suddenly discovering that the co-op has to replace all the plumbing in one of the buildings.
What’s the minimum amount of information co-ops are required by law to keep on hand regarding elections, votes taken reserve funds, assessments and so forth?
“Co-ops and condos are somebody’s home, but they also need to operate as a business,” says attorney Phyllis Weisberg of the law firm of Montgomery McCracken Walker & Rhoads LLP. If you don’t have adequate records, such as minutes from board meetings or shareholders’ meetings, it may come back to haunt you.
“Under the New York Business Corporation Law [which governs co-ops], you need to maintain `correct and complete books for records of accounts,’ have the minutes of meetings of shareholders, the board and the executive committee; and need a `stock record book’ with the names and addresses of shareholders, the number of shares held by each, and when they came in,” she says. The physical stock certificate, of course, is very important.
As far as condos are concerned, Weisberg says, “The Condominium Act is fairly vague, and courts typically look to the Business Corporation Law.”
Attorneys are quick to remind us that even though a stock certificate becomes obsolete after a unit is transferred to a new owner, it’s important to save the old stock certificate to keep a “paper trail.” For condos, she says, management needs to keep on file a deed of record, a waiver of the right of first refusal, and certain closing documents.
How One Company Does It
Legal requirements aside, what kind of documents and materials warrant inclusion into a building’s or association’s archives? Let’s look at one management company.
Alvin Wasserman of Fairfield Property Services in Commack, Long Island, which manages 120 properties says that in his company, “Every bill, every receipt, every late charge is recorded and digitized. We scan them, then we digitize.”
This, he says, even includes something as seemingly unimportant as a record of a super paying $2.99 for an extra key to the laundry room—you never know when a board member will ask about it.
Fairfield Property Services, he continues, maintains several types of files. Among these are unit files, which include “anything that takes place in the life of a unit,” even when the unit transfers from one owner to another; accounts payable files, which record purchases from the purchase order to the delivery ticket to the invoice all the way to the check; and accounts receivable files, which include “every bill, every receipt, every late charge.”
If you have a well-organized archive of building information, “The main benefit you have is an accurate history of whatever is taking place in the life of the property,’ he says. “You are able to look back and see when various capital projects were performed. You can have a track record of repairs and maintenance items.”
Keeping Records—and Disposing of Them
When it comes to how long to keep these documents, again, there are disagreements, but there are some basics. For example, all financial data must be kept for seven years. What about other documents?
For the most part, says attorney Weisberg, “You have to maintain the minutes forever, the stock book forever. There have been many issues where we’ve had to go back to minutes of a building from the 1920s and 1930s to figure out what the parties’ rights are.”
Sometimes, she says, how an alteration was done to a particular unit and who authorized the alteration becomes an important issue—regardless of how long ago it was done.
Wasserman adds, “Anything like a proprietary lease, a signed contract or any kind, an agreement signed by the board with someone else, or a sales agreement between two parties should be maintained forever. All other records, we’ve been advised by attorneys have to be kept for seven years.”
When it’s time to dispose of a sensitive or formerly confidential document or record, professionals agree that it should be done by shredding, especially by a professional shredding company that travels to the office, then gives you a certificate or a receipt.
Some managers, after they have kept the physical records for a certain number of years and have digitized them, give the boards the option to keep them for themselves, before they decide to send them to the shredder.
In today’s world, of course, even after the papers are shredded, their scanned-in “clones” still exist. As Wasserman says, “Anything that is digitalized can be kept forever.”
Where To Keep Them?
Now that we’ve talked about what records should be kept, where should they be kept within the co-op or condo, and who should keep them?
Those who were interviewed for this article are also pretty careful about how they keep their physical records.
Koppel keeps the physical documents in his possession in a locked, fireproof file cabinet in his office—which is equipped with a sprinkler system in case of fire. Wasserman keeps the physical records in a safety deposit box—and digitized records go on a server that gets backed up regularly to an off-site facility.
Where the physical documents are kept can also depend on the size of the co-op or condo. If you have a self-managed co-op of five units, the storage facility could be a fireproof lockbox in the president’s closet. If there are 150 units, the records should probably go to the management office.
Maintaining these documents and their digital records are particularly important if a building or development transfers its management from one firm to another. Although no manager wants to think about losing an account, it works both ways. A large management firm also will find itself taking on condos and co-op buildings that have had previous managers.
Unfortunately, sometimes these previous managers weren’t the best record-keepers. “I’ve taken over buildings that had only one piece of paper,” says Koppel. “There are more buildings that don’t have any paper [files] than you think.”
How do you get the records of such a building back on track? Carl Borenstein, president of Veritas Property Management in Manhattan, says, “Sometimes if you know the companies that have been involved [in transactions with the building], you can ask them for their records. For boiler repairs, ask the previous management who they used. Call that company up and ask for all their invoices for the last two years.”
No matter what happened in the past, the new management company still needs to create good records going forward. And despite how many management companies a building goes through, these records still, when you come right down to it, belong to the board. Many attorneys advise that every now and then, someone from the board should go to the management company and make sure that the building’s papers are still in order.
Actions Have Consequences
Most professionals have horror stories about the consequences of poor record-keeping for a building or development.
“I took over a building,” said Borenstein, “whose old management had allowed workmen’s compensation to lapse for a few months. I found a $10,000 fine when I came in—and no one on the board knew about it. I contacted the insurance broker, and he kept detailed records. I went to the previous manager and confronted them. They didn’t want to pay, so we got an attorney.” In the end, he says, the former company paid—but if they had kept complete, accurate records, his firm would have been spared a headache.
Aside from the headaches poor record-keeping will cause the management, board and unit owners alike, it will sooner or later give a particular building or development a bad reputation.
“If I represent a prospective purchaser and I am doing my due diligence,” says Weisberg, “and I go and don’t see any minutes, or the last minutes are from three years ago, I will go and tell my clients there’s a problem with the way this building is being run. It’s affecting the way prospective purchasers view the building.”
Particularly for board members, who are volunteers, she says, “It’s as important to make sure you document what‘s going on and keep records as it is to go to the meeting and make decisions.”
Conversely, good record-keeping will save you time and money. You won’t have to spend hours looking for information, and you will have a complete history of the building. You’ll know what happened to equipment. And, most importantly, you’ll have peace of mind.
Raanan Geberer is a freelance writer and a frequent contributor to The Cooperator.