Determining How Long to Keep Tenant Files and Abandoned Records in Self-Storage
Copyright 2014 by Virgo Publishing.
By: Jeffrey Greenberger
Posted on: 09/02/2009



 

An important question being asked by self-storage operators these days is: How long do I keep the private information of former tenants who move out voluntarily, or business records left in abandoned or auctioned units?

Unfortunately, this article doesn’t contain a hard and fast answer because state laws vary. However, it covers factors to consider when making this critical decision.

It’s imperative that you establish a policy about how long to keep former-tenant records. (For the purpose of this article, former tenants are those who moved out voluntarily, abandoned a unit, or had a unit sold at auction.) Once you have a policy in place, adhere to it in all cases. Sporadic disposal of records when you have a formal policy will be questioned if you’re ever sued.
 
Statute of Limitations

The first factor to consider is how long a lawsuit can be brought against you in your state, known as a “statute of limitations.” The statute of limitations will vary for different types of actions. For example, the statute of limitations on a medical-malpractice claim may be longer or shorter than the one for a personal-injury claim.

You need to be familiar with your state’s statute of limitations for breach of a written contract. This is the most common type of lawsuit a self-storage facility faces because most operators have written contracts with their tenants. There can also be other claims, such a wrongful conversion.

However, the breach-of-contract statute of limitations tends to be one of the longer ones and serves as a good guide for the time you may need to keep records. In most states, this statute ranges from five to 15 years. Thus, one solution would be to keep records until the statute of limitations for breach of contract runs out, which would be a set amount of years after move-out, sale or abandonment.
 
Audits

The Internal Revenue Service can audit a tax return for up to seven years after a filing. If a tenant moves out in January 2009, for example, the seven-year audit statute of limitations is the tax return filing date for that year, generally April 15 of the following year. If you file for an extension or fail to file on time, the calculation doesn’t begin until the filing occurs. Keeping records for seven years after the tax filing date of the year after move-out (eight years, really) could be your policy.

For various personal reasons, a self-storage operator may need to refer to former-tenant records. More than likely, you’ll need them to resolve a problem or deal with an audit. In any case, the value of older records to your operation needs to be factored into your time limit. Some of this requires institutional memory, which your facility might not have; but it’s worth considering how long you may want records for these purposes.
 
Property

Sometimes you’re left with property from an abandoned unit, or goods that were not sold at auction because they were inappropriate to include in the sale, such as photos and business records. In these cases, you should not dispose of the underlying paperwork sooner then you dispose of the property you’re still holding.
 
Ultimately Determining a Limit

In the end, you should keep former-tenant records for at least the length of time you may need them for your own internal or tax-audit purposes, or approximately eight years after a move-out, abandonment or sale. Consider this the minimum. The maximum would be the longest of all the scenarios addressed above, usually the statute of limitations for breach of written contract in your state.

With that time span in mind, discuss with your attorney if there is an advantage in disposing of records sooner than the maximum hold date or the statute of limitations date.

There’s a defense to certain lawsuits called “Laches,” which is similar to a statute of limitations. It essentially says that you’re unable to defend yourself because of a change in conditions. For example, someone waited so long to make their claim against you that you no longer have adequate information or records to defend yourself. This is not a perfect defense and should not be relied on, but do address it with your attorney.

Many attorneys will advise clients to dispose of records before the end of the written breach-of-contract period because it’s unlikely a claim will be raised more than seven or eight years after a move-out. In a worst-case scenario, you should dispose of records after the last of the appropriate statute of limitations run outs, regardless of how long that is.

Consult with your attorney to ensure your records-disposal plan complies with the laws of your state, and then set up a system so you comply with your policy consistently. Finally, avoid further trouble by properly disposing of documents when you’re done with them.
           
This column is for the purpose of providing general legal insight into the self-storage field and should not be substituted for the advice of your own attorney.
 
Jeffrey J. Greenberger is a partner with the law firm of Katz, Greenberger & Norton LLP in Cincinnati, and is licensed to practice in Kentucky and Ohio. Mr. Greenberger primarily represents the owners and operators of commercial real estate, including self-storage owners and operators. To reach him, call 513.721.5151; visit www.selfstoragelegal.com.

Related Articles:

Abandoned Records in Self-Storage: Whose Responsibility Are They?

Resolving Self-Storage Defaults and Avoiding Lien Sales

Self-Storage Sale and Disposal: Know the Law Before Acting

Self-Storage Talk: Abandoned Legal Documents