(Frequently Asked Questions)
What is a Community Association?
An association is a not for profit, private organization with mandatory and automatic membership for all homeowners. It is a business and is operated as such. Any owner in the community is automatically a member of the community association and will remain so as long as they own a home in that community.
What is the difference between a Condominium, Homeowners Association and Cooperative?
In a condominium association, a person has individual ownership of a unit and ownership of the common (shared) areas based on a percentage assigned to the owner’s unit.
In a home or property owner’s association, a person has ownership of the home and the lot it sits on while the association has title to the common (shared) property.
In a cooperative corporation, a person owns stock in the corporation while the entire project, including common facilities and all units, is owned by the corporation. By being a shareholder a cooperative member has the right to occupy a unit.
What is the role and responsibilities of the members of a Community Association?
The basic authority in a community association lies with the owners. In order for the association to govern effectively, the owners elect a board of directors to act on their behalf. The governing documents delegate most of the association’s decision-making powers to a board.
The owners have very few direct powers. Typically, they have only the voting power to:
o Elect and remove directors
o Amend any of the governing documents, except board resolutions
o Approve special assessments or capital improvements
Generally, other daily operating and policy decisions are left to the board.
What is the Board of Directors?
The Board of Directors are elected by the Association members unless otherwise specified by the governing documents. They manage the Association business by making decisions and setting policies. The Board has a fiduciary responsibility that includes collecting, spending and properly budgeting funds, maintaining the integrity of common (shared) areas, upholding the community’s governing documents and addressing community issues on the association’s behalf.
What are Governing Documents?
Governing documents define the legal structure and operation of the community association.
The typical Governing documents are:
o Recorded map, plat or plan (to show the precise location of units, lots and/or common area)
o Declaration, CCR (Covenants, Conditions & Restrictions), master deed, proprietary lease, or occupancy agreement (Note that the master deed, proprietary lease, and occupancy agreement only apply to cooperatives)
o Articles of Incorporation
o Board Resolutions ( Rules and Regulations)
The general hierarchy of authority for governing documents is loose one because not all documents address all issues involved in operating a community association. The bylaws and board resolutions must be consistent with the articles of incorporation. Generally, the declaration would control if there is a conflict with any of the other documents. Resolving such a conflict will depend on the specific facts and legal issues involved.
What do these governing documents do?
Articles of Incorporation (if incorporated)
o Bring the corporation into existence
o Define its basic purposes and powers
o Indicate whether stock will be issued
o Indicate whether there will be a board of directors and if so, identify the initial board
Declaration, CC&R’s, or Master Deed
o Defines the portion of the development owned by the individual owners and those owned by the community association, if any
o Creates interlocking relationships binding all owners to one another and to the community association for the purposes of maintaining, governing and funding the development
o Establishes protective standards, restrictions and obligations in areas ranging from architectural control to prohibitions on various activities in order to promote harmonious living
o Creates the administrative framework for the operation and management of the community association although many of the specific administrative details are spelled out in the bylaws
o Provides the mechanism for financial support of the community association through assessments
o Provides for a transition of control of the community association from the developer to the owners
Proprietary Lease or Occupancy Agreement
o Identifies the premises that the stockholder is permitted to occupy exclusively
o Defines the term of the lease and the rent (sometimes called the maintenance fee or carrying charge) that is payable by the stockholder
o Establishes the powers and obligations of the cooperatives board of directors, including assessments rights
o Defines the events which would result in the termination of the proprietary lease
o Requirements for membership in the community association
o Requirements for membership meetings
o Voting rights of member owners
o Procedures for electing the board of directors; qualification of directors
o Procedures for the board of directors to elect offices (In some associations, the association members elect the officers)
o General powers and duties of the board
o Provision for indemnification of officers and directors, except in cases of gross negligence or willful misconduct
o Enacts rules and regulation
o Formalizes board decisions
What does the Management Company do?
A management company is an agent for the Association and is contracted to act on the behalf of the volunteer Board of Directors to secure and manage such services as collection of assessments, supervision of contractors, obtaining bids for contracted services, providing financial statements and collection reports, as well as a filter for problem solving and communications with the Board of Directors.
What are Assessments?
Assessments are periodic amount due from each homeowner to cover the operating expenses of the common area and provide for reserve funds for replacement of common facilities in future years. The Board of Directors adopts an annual budget that sets the annual assessment for you home. The assessments provide the primary source of funding for the association and, by law, are not subject to deductions
What are the consequences of delinquent assessment payments?
Because a community association relies on the timely collection of assessments in order to meet operating expense requirements, delinquent payments may result in:
o Assessments having to be increased to cover the shortfall (deficit)
o Essential maintenance becoming unaffordable
o Property beginning to appear run-down, which in turn reduces property values
o Shortfalls added to the next years operating budget if any monies are outstanding at the end of the year
o Borrowing from otherwise restricted community association funds
o Borrowing from a lender
o Disharmony between paying owners and delinquent ones
What are the benefits of living in an Association?
A Community Association provides amenities, services and other conveniences to its members. The collective buying power of owners allows services to be obtained for a lower cost, resulting in substantial savings. Maintaining the integrity and appearance of common areas allows owners to enjoy higher standards and resale values. These benefits are just a few of the reasons Associations living has increased in popularity.