Homeowner Association Terminology

Who's Who

•Advise and provide administrative, managerial, and operational counsel to the association governing body
•Exhibit professionalism and loyalty to the principal (the Board)
•Exercise diligence in performing duties on the principals behalf
•Account for financial activities covered by the Management Agreement
•Perform onsite property inspections
•Solicit and evaluate bids for association services
•Supervise maintenance activities and contractor performance
•Oversee and authorize payment for primary association services
•Know and abide Bylaws, recognizing the State agency that supervises the community associations

Depending on the management agreement, some of the following responsibilities can be turned over to a managing company

•Chief executive officer and leader of the association
•Presides at all meetings of the board and membership
•Executes legal documents on behalf of the association
•Sets meeting agendas and controls all meetings
•Represents the board before the residents
•May have nominating, if not appointment, responsibility for all committees

•Performs all of the duties of the president in his/her absence
•Typically shares some of the burden of the president regarding appearances, liaison, public hearings, etc.
•Usually assigned liaison responsibility to specific staff or contractors, and to specific committees

•Prepares and distributes board and membership meeting agendas, minutes, and materials referred to in minutes
•Maintains minutes and book on all meetings
•Maintains book of resolutions
•Maintains all official records, including official correspondence, contracts, membership roster, etc.
•Receives, verifies, and maintains all proxies
•Attests, by signature, to the legitimacy of certain documents

•Works with appropriate staff, contractors, and committees to develop and submit annual operating budget for approval
•Maintains adequate records of all association financial transactions
•Maintains roster of disbursement of funds, as authorized
•Prepares period financial reports
•Arranges, subject to board approval, an independent audit of financial affairs

Perspectives of Board, Homeowner & Manager

•Maintaining the value of the property and a good quality of life for the residential community
•Governing smoothly
•Enforces rules
•Establishing and keeping budget

•Most care a great deal about residences
•Will want service from manager and decisions from Board that will provide a good quality of life
•Problems may arise when expectations are too high or not realistic; this can occur when interests are too specialized or unique

•Working in balance with homeowners, and board.
•Multi-task oriented

Governing Documents
•All documents that regulate the community life
•Documents may vary depending on type of Association (condo, townhome, etc.) ?State law
•Declaration of Covenants or Master Deed
•Conditions and Restrictions
•Rules and Regulations
•Plats of Survey and Easement Agreements (may be separate, often included in the declaration)

Basic Condominium/Townhome Legal Documents
•State Enabling Statute-permits the creation of condominium/townhome form of ownership and prescribes the basis of determining ownership interest, rights and obligations of the owners, duties and powers of the association, and the process of dissolution of the condominium
•Subdivision of Condomimium/Townhome Plat-describes the location and nature of the common elements and the units
•Condominium Declaration or Master Deed-defines the units, common and limited common elements, and is the collection of covenants imposed on the property to provide for: ?The basis for allocation of percentage ownership interest
•The obligation of each owner to share in funding the cost of association operations
•The power, authority, and responsibility of the association in its operations and in making and enforcing rules

•Individual Unit Deeds-comprises the individual unit deed
•Articles of Incorporation-creates the association as a corporation under state corporate statute and defines its membership and sets forth the process for creating the board of directors, voting procedures, etc.
•Bylaws-implements, in specific detail, the provisions of the Declaration and the Articles of Incorporation regarding the association operations, including delineation of the meeting process, election procedures, powers and duties, board meetings, committees, insurance requirements, rule-making and enforcement process
•Rules and Regulations-sets forth the operational powers or provisions and the use restrictions adopted by the association

Legal Docs for Homeowner Associations and the Hierarchy of such Documents
•Subdivision Plat-describes the location and nature of the common property and the individual lots
•Property Deeds-comprise the individual lot deeds and the deeds to common property which give a legal description of the property
•The Declaration of Covenants, Conditions, and Restrictions-the declaration of CC&R's is the collection of covenants imposed on all property within the development and provides: ?For automatic association membership of all owners and the basis for voting rights
•The obligation of each owner to share in funding the cost of association operations
•Certain restrictions (architectural control and other rules) on the use of the property and the association's enforcement powers
•Sets forth the power and authority of the association to own and maintain the common property and to make and enforce rules

•Articles of Incorporation-creates the association as a legal entity under state corporate statute; defines the board powers and responsibilities of the association and its membership; and, sets forth the process for creating the board of directors, voting system, etc.
•Bylaws-implements, in specific detail, the provisions of the CC&R's and the Articles of Incorporation regarding the association operations, including delineation of the meeting process, election procedures, powers and duties, board meetings, committees, insurance requirements, rule-making and enforcement process
•Rules and Regulations-sets forth the operational powers or provisions and the use restrictions adopted by the association

Applicable Civil Rights Laws
•Prohibition against racial discrimination as stated by the Civil Rights Act of 1866

•Equal Credit Opportunity

•Fair Housing Amendments Acts, 1988, applies to sale of residence Does not prohibit discrimination by owners, if selling or renting as long as they own 3 or less homes

•Board is prohibited from discrimination in exercising its 1st right of refusal

•Association must abide by laws prohibiting discrimination against families with kids

•Persons with disabilities (at own expense) must be allowed to make accommodations per the Americans with Disabilities Act, 1993

Accounting Methods 
•Cash Method of Account-income and expenses are only recorded when cash changes hands. Financial reports only reflect cash transactions. This is a relatively simple system for simple situations. Because all obligations are not recorded until cash changes hands, this method does not provide an accurate portrayal of the financial condition of the association at any given time.

•Accrual Method of Accounting-keeps track of all financial activities, including revenue as it is earned (as opposed to when it is received) and expenses as the obligation is incurred (as opposed to when it is paid). This makes possible a more accurate determination of the financial condition of the association at any point in time. Also, this is a better method for multi-year tracking of capital reserves credits and deficiencies. The primary disadvantage is the greater complexity and technical knowledge that is needed to maintain the records, understand the reports, etc.

•Modified Cash- Records income and expenses on a cash basis with selected items recoreded on the accrual basis 
  • Most common = records income (assessments) on the accrual basis and the expenses on the cash basis 

•Capital Reserves-the Board has the obligation to repair and replace major capital facilities, buildings, and equipment of the association. The ideal method of providing for these future expenses is the establishment of a capital reserves system and budget to assure that such funds are available when needed. With knowledge that the future holds predictable major expenditures for repair and replacement of facilities and equipment, the association could begin the gradual accumulation of funds through a reserve account to meet all or a portion of that expense when it comes due.
 Clarifying Misconceptions About the Manager's Role
By Gil Cross : Common Ground : May/June 1997

Community associations hire managers for two reasons: to carry out the policies of the board of directors and to manage the association's day-to-day business affairs.
Frequently, however, residents and even some directors don't understand the manager's role. They see the manager as a referee and information source. They expect the manager to be
on call 24 hours a day. They believe the manager works only for them.

That's not how it works. In most communities, the manager meets with the board of directors each month to report on association business. Often the manager gives advice, suggestions, and recommendations. A board typically directs the manager to perform 10 to 20 tasks before the next meeting. This may include writing letters, soliciting bids, preparing policy statements, and negotiating contracts. The manager also must deal with maintenance and rule enforcement problems. The limit on the manager's authority generally is spelled out in the management

What are the most common misconceptions? Consider the following:

1. The manager is a referee. Homeowners should not expect managers to arbitrate disputes with
their neighbors. Unless the dispute involves a violation of association restrictions, the manager does not need to be involved.

2. The manager is the homeowners' advocate. Homeowners should have enough interest in their community to present their concerns to the board--forwarding those concerns is not the manager's job. The manager does not vote on any board issues. Venting frustrations at the manager may make a homeowner feel better, but it's unproductive for everyone involved. Homeowners should direct their attention to the board. Likewise, managers cannot update each owner on association activities. Residents should attend board meetings to learn what's happening in the association.
Those who can't attend meetings should read the newsletter or contact board or committee members for updates.

3. The manager is available at all times. With the exception of on-site managers, most community managers have commitments to other associations. They are entitled to a
courtesy call to arrange a meeting.

4. The manager is responsible for contractors. The board and the manager try to choose the best
contractors for the association. But they do not have direct control over the contractors' actions and they are not responsible for poor performance.
The contractors are responsible for supervising their personnel, not the manager.
The manager is responsible for monitoring their performance and reporting problems to the board. Homeowners should report any problems with the contractor to the manager, who will forward them to the contractor. The board is responsible for any subsequent actions.

5. The manager anticipates every problem. Managers typically inspect the property on a monthly basis, but even an experienced manager can miss a problem--particularly if there's no evidence on the building's exterior.
Owners should not rely solely on the manager to safeguard their investment--their participation is essential in identifying problems.

6. The manager takes orders from each owner. The manager is accountable to the board of directors, not individual owners. Homeowners who disagree with the board's polices--and, in turn, the manager who carries them out--should resolve the conflict with the board of

7. The manager takes orders from
individual directors. Managers act
under the orders of the entire board of
directors, not one individual director
or committee member (unless the
board grants a particular individual the
authority to deal with a specific
matter). The management agreement
between an association and a
management company usually
stipulates that the board should
identify one person to act as liaison to
the manager. Too many bosses
creates problems for everyone.

8. The manager is responsible for
delinquent accounts. A manager or
management company typically has
three responsibilities regarding

* Send monthly notices to delinquent

* Give the board a monthly
delinquency report

* Represent the association in small
claims court

The manager's collections efforts
do not include phone calls or visits to
delinquent owners. Beyond small
claims courts, collection activities
should be handled by the association

9. The manager should give advice
on everything. Managers have a
broad range of expertise, but they are
not engineers, architects, attorneys,
or accountants. Owners should not
expect them to give advice if they are
not qualified.

10. The manager responds to all
emergency calls. The manager
responds to all true emergency calls.
Inconveniences, however, are not
emergencies. Failing to plan a party
around the association's lawn
irrigation schedule or getting locked
out of the house does not damage or
threaten the community--which is
how the association classifies an
emergency. Understanding this--and
understanding the manager's
role--will reduce future conflicts.