Documents Retention – How Long Must We Keep All That Paper
Whenever a dispute arises concerning a real estate transaction, the first thing the attorneys do is request a copy of your file. Why? Quite simply because all real estate contracts are required to be in writing including any information on which the contract is based. It is not uncommon for buyers, sellers, and agents to have completely different recollections of what was said or agreed to and so the broker’s file becomes critical.
For example, recently we were defending a seller and agent being sued for failure to disclose an alleged defect. Yet there in the file were the e-mails and inspections indicating that the buyer was fully aware of the defect and waived any repairs. Absent a complete file, this fact might have gone unknown. Therefore, your retention of documents is critical. But which documents must you save and for how long?
The documents which real estate brokers must retain are primarily governed by California Business & Professions Code Sec. 10148 which states in part: “A licensed real estate broker shall retain for three years copies of all listings, deposit receipts, canceled checks, trust records, and other documents executed by him or her or obtained by him or her in connection with any transactions for which a real estate broker license is required.” Failure to maintain such records is grounds for license suspension or revocation by the Bureau of Real Estate. A clarification effective January 1, 2015 will exclude text messages, instant messages and tweets (unless designed to be retained or to create a permanent record). The law does not exclude emails.
While the three-year period may be sufficient since the deadline for a party to bring a claim against an agent is generally two years from close of escrow – that is not always the case. A buyer has four years from the date of discovery to bring a claim against a seller for an undisclosed defect or some other contract breach. Recent case decisions have extended the Discovery Rule to claims against real estate agents as well. And very often, they are looking to the broker’s file to find all of the communications. Thus, it is not at all unusual for communications being expressed through the agents after close of escrow and running beyond the two-year deadline for claims against agents. Did those communications include some representation or agreement? If so, they could trigger agent liability long after the deal has closed.
So, while the law for agents is 3 years, the norm may still be 4 years, 6 or more may be better. While not legally required, it is our recommendation that a more prudent practice is to scan files prior to their destruction. California Association of Realtors offers free, unlimited scanned document storage and retrieval through zipVault. But if there is any on-going controversy, it is best to retain the complete file until after the dispute is fully resolved. At BPE Law, we retain files for up to 10 years and scan everything.
For over 20 years, the attorneys of BPE Law Group, P.C. have been advising and representing property owners and real estate licensees in dealing with their legal concerns and maximizing their opportunities. If you would like a consultation with us, please call our office at (916) 966-2260. If you have legal questions, give us a call at 916-966-2260 or e-mail me at firstname.lastname@example.org. Our flat fee consult for new clients may get you the answers you need for the questions you have.
The information presented in this Article is not to be taken as legal advice. Every person’s situation is different. If you are facing a legal issue of any kind, get competent legal advice in your State immediately so that you can determine your best options.