Basics of Homeowner Associations

Basics of Homeowner Associations

Community Associations 101

Owners of a condominium are required to be members of the Homeowner Association (HOA); the HOA is responsible for collecting dues from members to insure the common property, perform building maintenance, pay bills, etc.

With a condominium, you own everything inside the residence, from the interior side of the walls; all owners of a condominium share an undivided interest in the common elements: the grounds, roof, pools, elevators, building exterior and other components – each owner is responsible for an equitable share of the expenses needed to maintain and protect the property.

A HOA can make and enforces rules and levy special assessments on the members to fund unplanned expenses. Some HOA’s have strict rules & regulations that govern window-coverings, signs, pets, plants, color of exterior door, etc. HOA’s have significant legal authority when owners “break the rules” or don’t pay their share of expenses – they can fine members, place a lien on the property, and even foreclose.

Board of Directors (BOD) & Officers of the HOA have a fiduciary duty to the members of the Association – trust and confidence is imposed on the directors and officers to act in good faith, with prudence and diligence, in the best interest of the members. If a Director or Officer has breached their fiduciary duty, their personal assets may be at risk; volunteer members are not relieved of fiduciary duty – upon acceptance of a Director or Officer position, the law presumes knowledge of the duties and responsibilities. The HOA should have a Directors and Officers Liability Insurance Policy payable to the Association, as indemnification for losses resulting from negligence, fraud, or conflict of interest.

A Reserve Fund is necessary to ensure the HOA has adequate funds for major expenditures (roof, water-proofing, etc.). Major expenditures should be planned well in advance – a Reserve Study will assist the HOA in planning for the repair and replacement the major components.

If you have a question regarding the Board of Directors and/or a Homeowner Association, contact me anytime.