December 2012 – According to Ohio community association lawyers David W. Kaman and Jay Cusimano, a growing number of boards are considering going paperless. What would it mean for an HOA to go paperless, and what are the pros and cons? Here’s the skinny.
Is Paperless a Hot Idea?
How many associations are making their HOA recordkeeping paperless? Impossible to say. Some experts don't see it at all, while others are seeing a migration away from paper.
“I don’t know of any of our clients who’ve tried to go paperless yet,” says Nathaniel Abbate Jr., a partner at Makower Abbate & Associates PLLC in Farmington Hills, Mich., who represents associations. “I do hear talk about it, but so far that hasn’t reached our shores yet.”
Jenny Key hasn’t seen any clients go totally paperless yet, but they’re shedding paper as much as possible. “I don’t know of any association that’s gone entirely and completely paperless,” says the Austin, Texas–based vice president of RealManage, a San Rafael, Calif., association management firm that oversees properties in Arizona, California, Colorado, Florida, Louisiana, Nevada, and Texas. “The law requires some things to be on paper. For example, some notices are required to be first–class mail. But I see more associations trying to moving away from physical documentation. We have some associations that no longer send coupon assessment books unless owners request them, or they don’t ask us to send financials every month.”
In Ohio, Kaman says more of his clients are on board. “We’re probably nearing the 25 percent mark, where for that percentage of our clients, everything current is retained paperless,” says the Columbus–based partner at Kaman & Cusimano LLC, which has offices in Columbus and Cleveland. “A lot of management companies are saying to their board of directors, you’re paying $100 month for this storage garage. That’s $1,200 a year, and $12,000 over 10 years. But for $5,000, we can scan all that information. It might be a few years before the process pays for itself, but in the meantime, it’ll be easier to find records because everything’s scanned.
“We’re also seeing managers saying that everything from, say, January 1 forward is going to be electronically stored,” Kaman adds. “Now it’s all on digital files. It’s pretty cool because we used to see an association go from management company A to B, and B had to rent a truck to get the association’s files. Now manager A is handing to B a couple of storage drives with everything on them.”
Some clients are also taking it on themselves to go paperless. “The other thing that’s amazing is that here in Ohio, a lot of boards are made up of seniors in self–managed buildings,” says Kaman. “And they’ve bought a scanner. I love my 72–year–old board member who’s scanning all the documents!”
Should You Go Paperless?
If you’re contemplating tossing all your paper, what should you factor into the decision?
“Two considerations are cost and manpower,” says Kaman. “If you’re going to try to scan everything going backward, depending on how old your association is, you’re looking at a tremendous amount of money. We had an associations in Avon, Ohio which spent more than $25,000 to have every single paper scanned. That association hired an independent company to scan everything. We’re also seeing management companies charging $.10 a page to scan current documents, and they’re scanning everything all year.
“That Avon association is about 20 years old, but they now have readily accessible things like their roof and paving contracts from 10 years ago, and it’s all readily accessible to owners, too,” adds Kaman. “That reduced the association’s storage costs and increased the ease in accessing that information. The ability to obtain records is amazing. I was on my board for seven years, and somebody would say, ‘What happened five years ago?’ Or you’d have to weed through paper to find the warranty for your hot water tank. With scanning, it’s really easy.”
Another consideration; whether it’ll impede the association’s business. “One association saved about $700 a year by not issuing assessment coupon books,” says Key. “We advised aga0inst it, saying you don’t want to make it harder for people to pay because it may hurt your cash flow. If owners don’t have the bill in front of them, they don’t pay. If people have to be reminded every month to make their payment, you’re not going to be paid on as timely a basis, and I’m going to have to send out more late statements. We raised all these questions, but this community isn’t a starter–home community. Owners are fairly well off, so it didn’t seem to impact them negatively. Others that have more starter homes may have more delinquencies. I’d never advise them going paperless as far as assessment statements go.”
There are Legal Considerations, Too
Ask your lawyer about the legal implications of going paperless. Abbate attended a legal seminar this year on the topic. “The two most important issues for me are having retention policies,” says Abbate, “and encouraging board members not to use their own private email accounts for association business.”
Why are those issues important? “If you have any electronically stored information, under court rules, especially federal court rules, you have to have some sort of record–retention policy,” says Abbate. “And it could be viewed as destruction of evidence if you delete emails.”
In addition, if you’re sued, you’ll have additional records issues to address. “An association that goes paperless has to consider that if it comes down to a lawsuit, all your emails will probably be discoverable,” says Abbate. “You have to consider how to segregate attorney–client privileged material, but you’ll also have the question of whether you should use your personal email account because then you’ll have to turn over all emails, including personal emails. If you go paperless and don’t have a segregated, dedicated account for association business, you may be sharing your recipes with people.”
There are solutions. “You could set up email addresses like president@thisHOA.com or treasurer@thisHOA.com so you can segregate business from personal emails,” says Abbate. “That will ease recordkeeping and make transitions easier. When Joe Blow leaves the board, his official account stays with the board.”
Abbate says there’s a lot to consider before entirely eschewing paper records. “You can’t just go paperless unless you take into account what policies will have to be followed for the storage of all your electronic data,” he says. “It’s not something you’d do without enlisting the services of an expert.”
Matt Humphrey is president of the Alameda, California-based HOAleader.com, from which this article was adapted.