In Kansas, real estate agents and brokers must comply with the Kansas Real Estate Commission (KREC) regulations regarding record retention. While text messages are not explicitly mentioned in Kansas statutes or regulations, any communication material to a transaction may fall under the state’s record-keeping requirements. Here’s a detailed look at the laws and their implications for text message retention:

1. Record Retention Requirements

• Under Kansas Statutes Annotated (K.S.A.) § 58-3062 and KREC rules, brokers are required to maintain transaction records for at least three years from the conclusion of the transaction.

• Required records include contracts, agreements, disclosures, correspondence, and any other materials pertinent to the real estate transaction.

2. Inclusion of Text Messages

• Kansas law requires brokers to retain “correspondence” and “communications” related to real estate transactions. If text messages contain:

  • Offers or counteroffers

  • Contract amendments

  • Client instructions or approvals

  • Negotiation details or material transaction discussions

  • They should be retained as part of the transaction record.

• Text messages with such content are likely to be deemed relevant under Kansas’s retention requirements.

3. Electronic Communication

• The KREC has acknowledged that electronic communications (including emails) are part of a broker’s required records. By extension, text messages should also be retained if they are material to the transaction.

• Brokers and agents using text messages for substantive communications with clients, other agents, or third parties should consider these part of the official record.

4. Method of Archiving

• Kansas law does not specify the format in which electronic communications must be retained, but all records must be securely stored and accessible for the entire three-year retention period.

• Methods for archiving text messages include:

  • Printing and filing with paper transaction records.

  • Exporting text messages to digital formats (e.g., PDFs) and securely storing them.

  • Using software solutions designed to capture and archive electronic communications, including texts.

5. Consequences of Non-Compliance

• Failure to comply with record retention requirements, including the omission of relevant text messages, can result in disciplinary action by the KREC.

• Possible penalties include fines, license suspension, or revocation.

• In legal disputes, the absence of complete records (including text messages) may increase liability exposure, especially if missing documentation impedes the brokerage's ability to defend its actions.

Summary

In Kansas, real estate brokers are required to retain all communications material to a transaction for at least three years. Text messages that document significant details related to a real estate transaction should be archived as part of these records. Brokers should implement clear policies and tools for securely retaining text messages to ensure compliance with Kansas laws and reduce regulatory and liability risks.

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E&O Risk

The risk to a brokerage concerning errors and omissions (E&O) insurance in relation to record retention of text messages and electronic communications is significant. E&O insurance generally provides protection against claims of negligence, misrepresentation, and failure to perform duties as expected. If a brokerage fails to archive important communications—including text messages—that document critical aspects of a real estate transaction, it can expose the brokerage to increased liability, and E&O insurance may not fully cover the consequences in certain situations. Here are key risks and considerations:

1. Potential for Gaps in Transaction Records:

   • If a brokerage does not properly archive text messages that contain vital transaction information (such as offers, counteroffers, client instructions, or contract amendments), it may create gaps in the documentation of a transaction. In a dispute, the absence of these records can weaken the brokerage's ability to defend itself and may lead to claims that cannot be fully supported or disproven.

   • If critical communications are missing, clients may allege that the brokerage acted negligently or misrepresented information, and E&O insurance may not cover claims if the brokerage did not follow industry standards for record-keeping.

2. Violation of Regulatory Requirements:

   • Most states have regulations that require brokers to retain all material records for specific periods. Failing to comply with these record-keeping regulations can lead to regulatory penalties and disciplinary actions by the state real estate commission.

   • E&O insurance often does not cover regulatory fines or penalties, meaning that the brokerage could be solely responsible for any costs incurred as a result of non-compliance.

3. Increased Likelihood of Claims Due to Incomplete Communication Records:

   • In the absence of complete and accessible records, brokerages may face higher risks of claims alleging failure to disclose, miscommunication, or misunderstanding of terms. This is particularly relevant in real estate transactions where documentation of all communications is critical to resolving any disputes that arise.

   • Without comprehensive records (including relevant text messages), brokerages may struggle to prove they acted appropriately, which can lead to larger settlements or judgments that may impact their E&O policy premiums or insurability.

4. Possible E&O Policy Exclusions:

   • Many E&O policies have exclusions related to "known wrongful acts" or "acts of intentional non-compliance." If a brokerage knowingly neglects to retain necessary records, or if record-keeping negligence is proven, E&O coverage may be limited or denied for claims resulting from this oversight.

   • Insurers may consider a failure to retain legally required records as an act outside the scope of covered professional services, thus potentially excluding coverage for claims related to missing documentation.

5. Impact on Policy Renewals and Premiums:

   • Repeated or severe claims arising from record-keeping issues can impact the brokerage's insurance premiums, making it more expensive to maintain E&O coverage.

   • If a pattern of poor documentation or non-compliance with record retention is identified, an E&O insurer may choose not to renew a brokerage's policy, forcing the brokerage to seek other (potentially more costly) insurance options.

6. Defensibility in Claims Situations:

   • Retaining text messages and other communications can be crucial in defending against claims. For instance, if a client claims that a certain promise or representation was made, well-kept records can help demonstrate what was actually communicated.

   • Without archived text messages, a brokerage may have to rely solely on testimony, which may not be as persuasive as contemporaneous written records in legal proceedings.

Risk Mitigation Strategies for Brokerages

To mitigate these risks, brokerages should:

• Establish a clear policy for retaining all relevant electronic communications, including text messages, emails, and digital correspondence, and ensure all agents are trained to comply.

• Invest in archiving technology that captures and stores electronic communications in a secure, accessible, and compliant manner.

• Regularly audit compliance with record-keeping policies to ensure agents are properly retaining required communications and that records are easily retrievable.

• Work closely with E&O providers to understand the requirements and best practices for documentation to ensure comprehensive coverage.

By maintaining thorough, organized records of all communications, including text messages, a brokerage can better protect itself against claims, demonstrate regulatory compliance, and strengthen its defensibility if claims arise, thereby optimizing its E&O insurance coverage and reducing the risk of adverse financial consequences.