What is the document retention requirement of a property management company for power of attorney and financial lease documents?
– Patrick from Jacksonville Beach, FL
For real estate professionals, the general rule of thumb is that you should retain copies of all expired leases for at least seven years. This dovetails with the federal statute of limitations: After seven years, it’s generally too late for any party claiming to be aggrieved to bring a suit against you to enforce that contract.
In Florida, however, the statute of limitations on enforcement of provisions of contracts is five years. (The statute of limitations for enforcement of property insurance contracts, however, extends from the date of loss.) For verbal contracts, the statute in Florida is four years. However, the National Federation of Independent Businesses suggests keeping any documents related to the transfer of real estate for at least 20 years.
For IRS and tax-related business documents the statute of limitations is as follows:
That said, your property management company should absolutely have a formal, written document retention policy.
Fortunately, you’re not on your own. The National Federation of Independent Businesses, in fact, on developing a sound and coherent document retention policy.
Note: Some states have passed a version of the Uniform Preservation of Private Records Act, that provides businesses some safe harbor to destroy most records after three years unless there is reason to believe that these records will be relevant to pending litigation, or unless there is a separate statute specifically calling for the retention of these records for a longer period of time. Florida, however, has not passed that law. For other readers, you can see if your state passed that law (select your state from the scroll down menu).
Here are some best practices for document retention:
Note: Nothing in this article should be construed to be legal advice. Your document retention policy should be closely tailored to your specific state law as well as the nature of your business. As electronic storage gets more affordable, there is less reason to purge files. In the event of litigation or an audit, you may need to keep some files around longer than you think.
You may also need to keep some files on hand for public relations reasons, historical interest, or to prepare for the sale of your company. A solid document retention policy can help increase the value of your company to potential purchasers, and even potentially help you manage errors and omissions premiums.