Retention of Documents
We often get asked by clients “How long should we retain documents?” Obviously, no one wants the bother of keeping boxes and boxes of obsolete paperwork, unless it is absolutely necessary.
There is no hard and fast rule as to this. The general recommendation, where there could possibly be tax implications, is that documents should be stored for a minimum period of 6 years. Anything less than this would be subject to criticism as not only can HM Revenue and Customs seek documents going back 6 years but also, any claims in contract or tort have a 6 year Limitation period.
Let’s look, however, at 2 specific areas which fall outside this general rule:
- Building Works: Suppose you manage or own a building where extensive works are carried out. Ordinarily, the paperwork relating to such works would be retained 6 years. However, this may not be long enough to protect you and your clients. If a defect arises after the works have been completed, potentially there is a right of action for a period of 3 years AFTER the defect has been discovered. If the defect is discovered , for example, 9 years after the work was carried out, it could be up to 12 years before Action is brought. There is a long stop provision of 15 years from the date of the works. This means that where building works (including new builds) or extensive renovations have taken place, it is prudent to retain all of the documents for at least 15 years. We have encountered several situations where such papers have been disposed of, only to cause serious difficulties when a claim raises its head many years later. Since the owners or management companies are usually the entities who want to bring a claim, it is self-protective to ensure that everything is kept. If storage is an issue, the documents can, of course, be stored electronically.
- Claims Arising From a Lease: It is, of course, always open to a leaseholder to challenge charges which are made under the terms of a Lease, for example, insurance charges or electricity charges. You may assume that there is no necessity to retain documents relating to such charges (eg: original bills from the suppliers, calculations, meter readings…). This is not the case. Where such charges are payable under the terms of a Deed (and a Lease is a Deed), then any claim in respect of such charges can be backdated for 12 years. We have recently had a matter where electricity charges have been challenged and a client has been ordered to produce all details of the charges since 2005. If such an Order is made and you are not able to produce the documents, the risk is that the charges will automatically be deemed unfair which could have huge implications for the management of a development. We would therefore recommend that all documents relating to charges under a Lease, and this includes all service charge items, should be retained for a minimum period of 12 years. If there is a handover of ownership or management during this period, obviously you can pass on these documents. It is, however, worth keeping an electronic copy in the event of any future litigation.
If you have any questions arising we will be only too happy to answer them. Please contact Charlotte Collins at any time for further advice on 01743 260121.