Lew Nonnenmocher, RE/MAX on the Coast 
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Real Estate Reports

What Are the Nuts and Bolts of Homeowners Associations?

What is a homeowners association and why do they exist?

Condominiums, cooperatives, planned communities and other forms of homeowners associations ("HOA") are to allow the owners to administrate and manage their community. One of the main purposes of the HOA is to enforce a set of covenants (promises) that bind all owners. The covenants are usually contained in a document called a Declaration of Covenants, Conditions and Restrictions ("CC&Rs"). Many HOAs include common property, such as pools, greenways and private roads and in the case of condominiums, usually building structure, walls, roofs, plumbing, wiring and other aspects of the building. Individual property owners are required to pay assessments (usually monthly) to enable the HOA to operate the association and maintain the common property.

Who serves on homeowners associations, what do they oversee and how are such associations governed?

A board of volunteer owners elected by the remaining owners usually governs HOAs. The board holds regular meetings to enforce the CC&Rs, to establish a budget, authorize expenditures, collect assessments, problem solve, and oversee maintenance of the common property. The board acts in much the same way as a corporate board of directors. Many HOAs also utilize committees to help administer the association. For example, Architectural Control Committees are commonly used to maintain architectural consistency in the neighborhood.

What kind of legal power do such associations have to enforce their rules?

The main source of legal authority allowing an HOA to enforce its rules comes from the recorded CC&Rs and Bylaws. Because the documents are recorded on the county real estate records, the valid provisions of these documents legally bind homebuyers when they purchase their homes. Condominium and Planned Community HOAs also have the additional backing of state law, which clarifies legal authority in many ways. HOA laws may also provide additional legal authority not contained in the HOA's documents. Specific state law governs all condominium HOAs and many subdivision HOAs. HOA actions are usually upheld in court if the authority is provided in the documents or by statute and the board acts reasonably in carrying out the authority.

If I buy property in an area governed by a homeowners association, how will I know the rules? And what is my recourse if I disagree with a rule?

The CC&Rs and Bylaws are recorded documents and potential buyers should obtain a current copy and read them before buying. The CC&Rs permit the HOA to make rules and regulations governing the conduct of the members and the use of the common property. The HOA should have copies of all its current documents available for review, or sometimes you can get a copy from a title insurance company.

Homeowners that disagree with a rule should address concerns to the board. Rules can be amended or revoked if they are unreasonable, unnecessary or simply unwanted by most owners. The amendment or revocation will likely require a member vote. Voting requirements are usually found in the documents. If owners disagree with a rule and are unsuccessful in getting it amended or revoked after following the proper procedures within the HOA, the owners can always bring a legal action to declare the rule unenforceable. However, this could become very expensive, especially if you lose since most HOA documents require the owner to pay the HOA's attorney fees if the owner loses.

What are some of the common problems faced by HOA boards? Do you have any suggestions for how such associations might be run more smoothly?

Rule creation and enforcement are an area of concern. Owners need adequate notice of any alleged rule violation, including an opportunity to be heard before any fines are imposed. When owners fail to pay assessments, the board often struggles on how best to get payment. When conducting meetings, it is recommended that the board use a guide like Roberts Rules of Order. This will allow orderly participation of HOA members and assist the board to reach decisions on important issues.

It is not uncommon for volunteer board members to have little experience in running an HOA. For this reason, it is important that all directors become familiar with the governing documents. While the documents often outline the steps necessary for proper action, some situations may require some guidance from someone with more experience. Many HOAs hire management companies to assist with administrative duties. Experienced attorneys also provide needed assistance in interpreting and amending documents, assessment collection, internal dispute resolution and other complex issues.

Finally, and perhaps most importantly, harmony can be sustained by encouraging open communication and cooperation between owners and the board.

Where can I get more information about homeowners associations?

Community Associations Institute (CAI) is a national organization with many state chapters that specialize in HOA issues. CAI publications provide a variety of interesting and relevant information, including tips and guidelines in problem solving. CAI hosts seminars, vendor fairs, and other activities that provide valuable education and information.

CID (Common Interest Development) Network provides vast HOA information including relevant state and federal legislative issues, service provider directories and discussion groups. CID will soon premiere a powerful new web homeowner association concept called Disclosure Line (stay tuned).

Regenesis is the largest homeowner association resource in the world. Among its pages, are links to all available state HOA statutes, books, videos, software, sample policies and forms and much more.

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