Q: I am a licensed New York real estate broker and I am creating a record retention policy for my firm. Are there any rules or regulations which stipulate what records licensed real estate brokers and real estate salespersons are required to maintain?
A: Yes. Title 19 NYCRR §175.23 of the Rules and Regulations affecting Real Estate Brokers and Salespersons (hereinafter "the Regulation") addresses which records licensed real estate brokers and real estate salespersons (collectively "Brokers") are required to maintain.
According to the Regulation, all licensed Brokers must keep and maintain, for a three year period, the following information for most residential sales:
"(1) the names and addresses of the seller and the buyer, (2) the broker prepared purchase contract or binder, or if the purchase contract is not prepared by the broker, then the purchase price and the amount of deposit (if collected by the broker), (3) the amount of commission paid to the broker, (4) the gross profit realized by the broker if purchased by him or her for resale, (5) any document required under Article 12-A of the Real Property Law and (6) the listing agreement or commission agreement or buyer-broker agreement."
The foregoing information must be kept for sales involving real property used or occupied, or intended to be used or occupied as a home or residence improved by a co-op, condominium, or one-to-four family dwelling. The Regulation does not apply to sales of "unimproved real property upon which such dwellings are to be constructed."
Records may be stored in either paper or electronic form.
Please note that the Regulation contains a "safe harbor" provision, which recognizes that a Broker will not be found to have violated the Regulation if he or she was not provided with the required documents or information in a particular transaction.
The Regulation does not apply to leasing transactions (due, in my opinion, to an omission when the Regulation was drafted). However it is recommended that, in connection with leasing transactions, Brokers always keep a record of (i) the names and addresses of the landlord and tenant, (ii) the terms of the transaction, including the rental amount and the term, (iii) the amount of commission paid to the real estate broker, and (iv) the listing agreement, fee agreement or representation agreement. The obligation to maintain a copy of the Agency Disclosure Form for leasing transactions is required under Section 443.
Although the Regulation sets a three year period for record retention, you should maintain digital versions of records for an unlimited period of time. The cost associated with scanning, digitizing and storing electronic records is nominal and the ability to locate past records, potentially beyond three years, can be invaluable.
The Legal Line Question by:
Neil B. Garfinkel
REBNY Broker Counsel
Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP