What the three years covers
The instinct is to file closed deals and throw away the rest. That is exactly backwards from a compliance standpoint: a rejected offer or a transaction that collapsed is often the one that later produces a complaint, and it is specifically named in the retention requirement.
Count the three years from completion or termination — the closing for a deal that closed, the termination date for one that did not.
- Purchase and lease contracts, and their addenda
- Listing and property management agreements
- Agency disclosure forms and acknowledgments
- Earnest money receipts, deposit confirmations and disbursement records
- Closing statements
- Failed transactions and rejected offers
Secure, and at the place of business
Retention is not only about duration. Records must be maintained at the broker's designated place of business as required by law and Commission rule, and they must be protected — physically for paper, and with sensible technical controls for digital files.
Confidentiality is an ethical duty independent of the retention rule. Client information in transaction and financial records stays confidential, and a breach carries both legal and reputational cost.
Electronic communications count
Email and text messages between licensees and with clients are part of the record picture. Brokers should tell licensees, in writing, how the company expects those communications to be archived and made retrievable, and then verify that it is actually happening.
Being ready for a Commission inquiry
How fast a brokerage can respond to an AREC inquiry is a fair proxy for how healthy its compliance is. Keep files organized so a request can be answered quickly, and keep a written action plan describing who does what when a subpoena or complaint arrives.
A history of documented self-audits and corrections made after them is itself evidence of diligence.