This article summarizes the reasons why community associations need to have systems in place for preserving evidence. Associations are routinely involved in disputes, claims and litigation, such as accidents, covenant enforcement, construction defects, assessment collections and contract disputes. Recognizing this reality, associations must have internal systems and controls to preserve information, data and documents which may be needed later for evidence to fairly resolve such disputes.
This is not just a good idea, it’s the law. The legal obligation to preserve evidence has been recognized since the early 1600s in England’s common-law courts. The general rule is that a person or organization has a duty to retain and preserve all evidence or documents concerning pending or foreseeable claims. This includes the responsibility to not lose, destroy, or meaningfully alter documents or similar instruments. The legal system takes a dim view of the careless or intentional loss of evidence, because the absence of relevant evidence undermines the integrity of the judicial system.
Preservation of evidence has become more complicated in recent years because of society’s increasing reliance upon electronic communications. Electronic versions of documents are more transient and subject to alteration. Ironically, they are also more permanent, residing on the hard drives of many computer users for years. Versions of documents are frequently and routinely modified, overwritten, and perhaps deleted by computerized automatic deletion programs.
Such events can become a serious issue in a dispute resolution process. The legal system has come up with a name for loss or destruction of evidence known as “spoliation.” If a legal tribunal (court, arbitrator, administrative body, unit of government, etc.) finds that the loss or destruction of evidence was improper, significant adverse sanctions can be imposed such as fines, an instruction to the jury that the loss of the evidence should be interpreted against a person causing the loss, adverse rulings on pending claims, or even default judgment.
There are several measures community associations can adopt to preserve evidence without an undue burden or expense. A document retention/destruction policy should be adopted, and more importantly, followed. The decisions about the details of the policy include many considerations, such as: the differing periods of time which various documents should be preserved; the expense of storing all documents; the need and ability to efficiently locate and retrieve records; and the need to avoid sanctions for spoliation of evidence. If documents are routinely destroyed because of a properly adopted document retention/destruction policy, the courts will generally acknowledge such corporate policies and should not sanction an association for such routine destruction. On the other hand, routine, overly prompt destruction may remove information to establish a community association’s legal rights.
Document retention and destruction policies should be in writing, dated and disseminated to all involved parties. The policy should include provisions for annual purging periods when particular records are reviewed and discarded. The policy must include a procedure for notification of all responsible parties of situations where the retention and destruction policy must be suspended, such as in the case of threatened or pending litigation. The policy needs to be audited to ensure compliance, and periodically reviewed and updated as necessary.
All existing document retention/destruction policies should be revisited and updated (if not yet done) because the Colorado legislature adopted new laws, effective January 1, 2013, defining precisely which records must be maintained kept available for inspection by community associations. C.R.S. § 38-33.3-317. This statute significantly redefines what records must be kept. Consideration of these changes should be incorporated into any document retention/destruction policy.
Associations should be familiar with the document management systems and practices they use so that all evidence, such as emails, photographs, video recordings, audio recordings, etc. are considered in any document retention/destruction policy. The policy should include an email retention system. That system may use technology to automatically purge all emails, except official communications, which must be retained pursuant to statutory requirements. The policy should also include provisions in all management agreements requiring the management company to follow the document retention/destruction policy, and to turn over all records to the Association upon a change of management companies.
If a claim or lawsuit is threatened or commenced, clear and prompt communication is critical. At that point, all document destruction and policies must be halted for the duration of the dispute. That directive must be communicated to anybody who may have relevant documents. This includes current and former board members, current and former managers, committee members, third-party vendors, etc. A written, “litigation hold” communication should issue involving instructions to preserve evidence until the dispute is resolved. The legal system is much less forgiving if significant evidence is lost or destroyed after a claim has been asserted.
These requirements do not simply prevent the loss or destruction of unhelpful evidence, but to preserve for the benefit of the Association evidence which will help it to sustain its legal rights. Memories fade quickly, and opposing recollections pervade when a dispute arises. Preserving data and documents reduces the: “he said, she said” situations which inject doubt into the resolution process. Proper design and implementation of systems to preserve evidence is part of good risk management and governance in addition to being a legal obligation.
Please feel free to contact one of our attorneys if you have any specific questions concerning the topic of preserving evidence concerning your community. If you would like to discuss this article in greater detail, feel free to call one of our attorneys at 303.432.9999.