A large part of the urban population lives in properties built and organized under a "Community" structure, usually called Homeowners' Association, or HOA, or Community Association.
An HOA has three basic characteristics:
- Mandatory membership of its members. That is, who buys a property in an HOA does not have the option to buy without belonging to the HOA.
- Documentation (mandatory) that links each owner to the Association.
- Mandatory monetary contributions from each owner to the Association. These contributions are governed by "lien" laws, which means that if the owner does not pay his obligatory contributions, the HOA has the right to sell and liquidate the owner's unit (under certain conditions) for paying off the debt.
Community associations have a governmental component. Like a city or county government, an HOA has a charter—called the declaration. The declaration encompasses bylaws, covenants and other documents that give community associations their legal foundation.
These governing documents obligate the association to preserve and protect the assets of the community. To enable the board to meet this obligation, association governing documents also empower the board to make rules and define the process for adopting and enforcing them—within limits. Governing documents also establish parameters for the nature and type of rules the board can make.
State law gives associations the authority to make rules. These are called common interest community statutes, and they apply to condominiums, cooperatives, and property owners’ associations.
It is important to notice, however, that the board can’t make or enforce any rule that is contrary to the governing documents, local ordinances, state law or federal regulations. Remember also that the board make rules on your behalf—to protect your investment, your home.
Members of an HOA have rights and certain responsibilities, which are described in documents based on federal, state, municipal, and local laws. Also, and particularly, in the bylaws, covenants, conditions and restrictions.
Among other rights, members of an Association of Homeowners may:
- Attend and participate in all owner meetings
- Participate in the HOA decision-making process
- Vote in person or by proxy
- Access to HOA records, financial statements and governing documents
- Use and enjoy common areas (this privilege may be suspended for lack of payment of HOA assessments or for violations to the HOA restrictions)
- Sell or rent your unit or other individually owned property
Some of the responsibilities of owners in an Association are:
- Pay mandatory monetary contributions, in the correct amount and term. These contributions are used by the HOA to pay common expenses (set of expenses originated because of the HOA normal operation).
- Maintain the property according to the HOA’s statutes and architectural standards (some regulations are stricter with paint colors, garden decorations, landscaping, etc.).
- Respect neighbors and allow "quiet enjoyment" of property and facilities. Noisy parties, smoking smog, outdoor lighting can cause disturbances to your neighbors' privacy.
The HOA Board of Directors includes positions of President, Vice-president, Secretary and Treasurer. In general, the Board also includes a Committee of Architectural Affairs or other specific activities. Except in very particular cases, the Directors occupy their positions ad-honorem (voluntarily, without monetary compensation).
Since decisions taken by the Board of Directors must obligatorily respect federal, state, municipal, local and co-ownership and administrative regulations, the Board frequently decides to delegate some of its responsibilities to a private company whose professionals have specific knowledge on the management of Associations in a legal and efficient manner, called Community Management, or HOA Management.
The Board governs the Association. The Management Company reports to the Board, coordinates the overall operation and provides specific knowledge. The Board of Directors must periodically evaluate the performance of the Management Company with the purpose of anticipating and avoiding inconveniences.
Some warning signs, indicative of the need to improve inefficiencies, level of knowledge, etc. by the Management Company in the management of the HOA are:
1. Constant decrease in the amount of cash available. More and more owners are in arrears in paying their mandatory contributions and cannot be attributed to a poor economy.
2. Increase in the amount of delayed contributions by the owners.
3. Increase in the amount of arrears to suppliers by the Association
4. Lack of reconciliation of statements of account (should be monthly reconciliations)
5. Significant and unexplained differences between current values vs. budgeted
6. The list of tasks of the Management Company grows after each Meeting of Directors or Assembly
7. An increasing number of owners are presented at Directors' meetings
8. The Board receives a greater number of complaints from the owners
9. It takes longer to resolve maintenance requests
10. The productivity of the HOA decreases and its employees take a defensive attitude when asked about it.
11. Board members begin to resign for "personal reasons"
In summary, HOA’s have a governmental component. Like a city or county government, each HOA has a letter called declaration, which includes bylaws, covenants and other documents that give HOA their legal foundation.
By Alejandro Haiek CPM®, CMCA® - CEO at HEXAGON CRE
Note: Some of the language used in this article was extracted from material provided by CAI® The Community Association Institute.
||The author of this article, Alejandro Haiek, is founder and Chief Executive Officer the company HEXAGON Commercial Real Estate, in the state of Texas and the state of California, providing professional services of Commercial Property Management and Homeowners Associations since 2004.