How long should I keep my Real Estate Transaction files?
It is a common question with two competing principles: Regulations vs. Statute of Limitations.
Since most of you are Real Estate Professionals in Missouri and Kansas, I will limit the analysis to these states. Both jurisdictions require that a Real Estate Broker maintain his/her files relating to any Real Estate Transaction for three (3) years.
Missouri - 20 CSR 2250-8.160 - Retention of Records
Kansas Administrative Regulation No. 86-3-10
Most Brokers are proponents of destroying any file older than three (3) years. It is understandable, it helps to clear out valuable storage space. In many brokers' minds, it may also help them to avoid liability. While the first thought may be partially correct, the second is patently false.
Missouri and Kansas have different Statute of Limitations applicable to negligence and fraudulent misrepresentation claims:
Missouri - 5 years
Kansas - 2 years.
This post doesn't apply as much to Kansas transactions since the Commission requires retention for a time period longer than the Statute of Limitation, but Missouri has a troublesome 2 year gap.
I will tell you from experience that the worst case for an attorney is one where the client has no records to dispute the claims, other than a Real Estate Professionals' foggy memory of events that happened over five years ago. To help prove my point, I want you to close your eyes, picture a client from five years ago and tell me who inspected their property and what the inspection report said. Obviously, this exercise is nonsense because it is impossible.
The bottom line is anyone acting as a Real Estate Broker in a Missouri transaction needs to retain his/her files for 5 years. Scan them, and store them on CD, hard drive, back-up disks, online storage, etc. There are many options with little cost, so find one you like and do it.
If you destroy the file, and you get sued, you may have just destroyed your best defense. Open up your check book.
Monday, January 14, 2008
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