Recordkeeping for Your Rental Operations

Keeping good records for your rental business is critical for several reasons. From simply handling inquiries from your tenants, to providing evidence in a fair housing complaint investigation, to working with an IRS auditor, etc. Following are some guidelines for keeping good records.

SETTING UP RECORDKEEPING
As with any business, it is important to keep records (digital and/or hard copy) of every transaction including:
• A folder for each tenant containing every transaction from application to vacate notice and deposit refund accounting. All financial transactions, lease agreements and changes, complaints, repair requests, default notices, and any other communications, etc. Have a reminder system for lease renewals and rent increase notices.
• A folder for each property and rental unit containing, purchase & sales documents, maintenance and repairs, install dates and lifespans of major appliances/features, improvements, tax payments, registration/license, etc.
• General business documents including tax returns, annual business meeting minutes, Income & Expense Reports, Profit & Loss Reports, etc.

Make sure you create a system for filing new records in a way you can easily maintain over time. They
could be paper files in a cabinet or digital folders on the hard drive of your computer or in the cloud.
Whatever you choose, it needs to be a method you are comfortable with and can easily maintain over
time.

RECORD RETENTION POLICY
It is important to have and follow a retention policy for saving documents and other records related to your rental business, especially tenant files. If you save things forever, it just means unnecessary work and exposure for you when faced with some kind of legal action that requires you to produce records. If you do not save things consistently or long enough, it may cause you to lose an important legal battle. So how long should you save your records?

There are various reasons to keep files, and each has an associated retention recommendation from 1 to 7 years. You can determine a different retention period for each type of file or a simple approach is to keep all records for the longest recommended period which for most housing providers would be 7 years.
• Criminal charges: Based on type of crime 1-3 years; or no limitation for filing.
• Civil penalties: 3 years’ limitation for filing most civil crimes, defamation is 2 years, debt collection is six years.
• Fair Housing: Complaints can be filed up to 1 year from the incident to the Washington State office, or up to 2 years to the Federal HUD office.
• Insurance: Claim limitation is generally 6 years.
• Taxes: The IRS recommends 3 - 7 years based on various circumstances. It’s a good idea to get recommendations from your lawyer, CPA and insurance agent. Whatever you decide, just make sure to have your policy in writing and make sure you follow it consistently. When it’s time to get rid of files, they must be handled securely. You can shred them yourself or contact a trusted company that provides pick-up and shredding services. For digital files, simply delete and then “empty” the trash or deleted folder. Do the same with any backup storage area.

Formal legal advice and review is recommended prior to selection and use of this information. RHAWA does not represent your selection or execution of this information as appropriate for your specific circumstance. The material contained and represented herein, although obtained from reliable sources, is not considered
legal advice or to be used as a substitution for legal counsel.