Are homeowner associations regulated by any state agency? ( General)
No. No specific agency has responsibility for HOAs. However:
the consumer protection division of the attorney general's office may consider complaints involving misappropriation of funds and,
the Real Estate Commission may investigate complaints related to financial issues involving community managers with a broker's license.
Where can I obtain a copy of the Association's Covenants? ( General)
If you are a new homebuyer, you should request a copy of the governing documents prior to making an offer, or should stipulate in writing that the offer is subject to acceptance of the governing documents.
The governing documents include most covenants and bylaws. The association plat will define the common areas. The association may also have adopted resolutions and rules.
Many states have require that the seller or seller's agent disclose that the home is in a community with an HOA. If in doubt, check with the state real estate commission. Some states require that the buyer sign a disclosure acknowleging the existance of an HOA.
The seller should be able to provide a copy of the governing documents. If the governing documents have been lost, the seller should be able to provide contact information for the association board secretary or the management company. If the buyer or seller is represented by a realtor, then the realtor should obtain the documents. Some management companies will charge for photocopy or administrative services. Ask if the documents are available on-line or if they can be emailed.
Click here for additional information for homebuyers.
What is an Annual Report and is our homeowner association required to submit an annual report? ( General)
An annual report is a filing that a corporation or LLC is required to make with the secretary of state. The annual report requires information such as the legal incorporated name, address information, name of registered agent, and a brief description of the nature of the business and the fiscal year of the corporation. Requirements vary from state to state.
Not all states require nonprofit corporations (HOAs) to file an annual report and some require that the report be filed less often. All incorporated HOAs are advised to know and comply with the secretary of state annual reporting requirements. Annual report requirements, instructions, and forms are provided on the secretary of state website. Some states have electronic annual report filing. A fee, usually less than 25 dollars per year is required with most filings. Failure to file an annual report may result in the secretary of state changing the HOA's status to inactive. The state may apply late fees or re-instatement fees.
In Florida, each HOA, whether organized for profit or nonprofit, is required to file an annual corporate report with Florida’s Division of Corporations. Each association is responsible for monitoring the state’s annual report requirements for changes.
The Florida State Division of Corporations website is http://www.sunbiz.org/index.html.
What are the average assessments for homeowner associations? ( General)
This is a difficult question to answer and will be different for each association.
Is the association a condominium, single family, or townhome community?
Is the association self-managed or do the assessments include management fees?
What amenities such as clubhouse, pool, tennis courts, does the association support?
How much of your assessments are for reserves for large capital projects such as private roads, exterior painting, new roofs, etc.?
Is the association a maintenance-free community? If so landscaping, gutter cleaning, powerwashing, etc. will be included in your dues?
What is xeriscaping™? ( General)
Xeriscaping and xerogardening is landscaping and gardening in ways that reduce or eliminate the need for supplemental irrigation. It is promoted in areas that do not have easily-accessible supplies of fresh water, and is gaining acceptance in other areas as climate patterns shift.
Plants whose natural requirements are appropriate to the local climate are used, and care is taken to avoid losing water to evaporation and run-off. In some areas, terms such as water-conserving landscapes, drought-tolerant landscaping, zeroscaping, and smart scaping are used instead
The word xeriscape is a registered trademark of Denver Water, the city of Denver's water department. The xeriscape symbol, according to Wikipedia, has been released into the public domain. For more inforamtion go to xeriscape.org.
What is a CIRA? ( General)
A CIRA is a common interest real estate association. This is The IRS name for homeowner associations, condominium associations, property owner associations, time-share associations.
What is the criteria for classification as a 'large-scale community'? ( General)
According to Community Associations Institute (CAI), a large-scale community is a community with a minimum of 1,200 units or 1,000 acres, and a minimum of 1.5 million dollar operating budget.
What is the criteria for designating a building as 'high-rise'? ( General)
Most building engineers, inspectors, architects and similar profssions define a high-rise as a building that is at least 75 feet (23 m) tall. However, the definition varies by state and local building codes. The average height of a level is around 13 feet (4 m) high, thus a 79 foot (24 m) tall building would comprise 6 floors.
Buildings taller than 492 feet (150 m) are classified as skyscrapers.
For simplicity and consistency, HOA-USA defines a high-rise condo as 6 or more floors.
What is the largest homeowner association in the United States? ( General)
According to Wikipedia, the Association of Poinciana Villages (APV) in Florida is the largest unincorporated master-planned community in the United States. It lies southwest of Kissimmee and about 14 miles east of Haines City. It is located on approximately 47,000 acres. According to the APV, the population stands at 68,555 as of January 2007. Poinciana is a deed-restricted community, which means that it is governed by an HOA.
What is a Registered Agent? (Governance/Operations)
A registered agent, is a business or individual designated to receive service of process (SOP) when a business entity (HOA) is a party in a legal action such as a lawsuit or summons.
The state may send the paperwork for the yearly renewal of the business's charter to the registered agent's address. The registered agent for a business may be an individual member of the company, or a third party, such as the organization's lawyer or a service company. Failure to properly maintain a registered agent can have a negative effect on a company.
Most businesses are not individuals but instead business entities such as corporations or limited liability companies (LLCs). This is because there are substantive (and substantial) liability protections as well as tax advantages to being incorporated instead of self-employed.
Most jurisdictions in the United States require that any business entity that is formed or doing business within their borders designate and maintain a registered agent.
A registered agent should provide a legal address (not a P.O. Box) within that jurisdiction where there are persons available during normal business hours to facilitate legal service of process being served in the event of a legal action or lawsuit. Generally, the registered agent is also the person to whom the state government sends all official documents required each year for tax and legal purposes, such as franchise tax notices and annual report forms. It is the registered agent's job to forward these suit documents and notices to the entity itself. Registered agents should also notify business entities if their state government filing status is in good standing or not. These notifications are a desired function of a registered agent because it is difficult for a business entity to keep track of legislative changes and report due dates for multiple jurisdictions given the disparate laws of different states.
Penalties for not maintaining a registered agent generally will cause a jurisdiction to revoke a business’s corporate or LLC legal status as well as additional fees.
If a registered agent fails to perform their function, there may be consequences for the business entity. For example, if an association is sued, and the association's registered agent fails to notify the business entity of a summons to appear in court, then the association will lose in court by a default judgment. Additionally, the association may not be able to get the judgment overturned on appeal because they had been properly served. This is one of the most common reasons that business entities generally will utilize a third party as their registered agent like a commercial service company, an attorney, or in some cases, a CPA.
The person at the business entity that maintains contact with the registered agent is the corporate secretary or governance officer.
HOAs should check with their secretary of state to determine the current name and address of their registered agent. Update this information on the secretary of state's website if it is not correct. The information my not have been updated when the association transitioned to community control. It is inexpensive and simple to download the proper form and submit the current information to the secretary of state.
What is the 'Chain of Governing Documents? (Governance/Operations)
Your association is governed by a chain of governing documents:
The articles of incorporation filed with the secretary of state provide the legal basis of the association in the form of an incorporated nonprofit corporation.
The recorded map or plat defines each owner's title to property including the association's title to common areas.
The CCRs (covenants, conditions, and restrictions) are publicly recorded deed restrictions.
The bylaws are the rules for management and administration.
Resolutions are additional rules and regulations that the association may adopt.
Federal laws also apply. Some include the The Fair Housing Act, Internal Revenue Codes, the American Disabilities Act, and the Fair Debt Collection Practices Act.
State laws affecting homeowner associations are primarily contained in the Florida Statutes. Click here for more information. Additional state laws regulate stormwater runoff, coastal development, elevator inspections for condos, and pool operations are included.
Local ordinances, while not specific to homeowner associations, apply to building codes, animal control, abandoned cars, water restrictions, etc.
Additional legal regulations can exist in the form of case law: standards set by professional organizations such as accountants, engineers, architects, home inspectors, and real estate brokers, as well as lender requirements.
The HOA-NC Partner Directory also provides contact information for many law firms with HOA practice experience.
What can I as an owner do if the association is not performing its duties or if other owners violate restrictive covenants or bylaws? (Governance/Operations)
Read your association's governing documents. Often the association has adopted resolutions or rules that clarify the language of the governing documents. Also, if the association maintains a website, look for copies of the governing documents, a resident handbook, and contact information for the board and/or management company.
The seriousness of the issue often dictates the manner in which you first communicate your concern. The best way may be a simple phone call, an email, or a presentation at the board meeting. Using tact and diplomacy will go a long way in achieving success.
Present your concern to the board of directors and/or the property management company. If the board or management company is unresponsive to oral communication, present your concern again in writing. Be specific regarding your concerns and ask for answers in writing by a reasonable date. If the association contracts with a management company be sure to copy both the board and the management company. Remember that the board is ultimately the governing authority.
If you feel that the association is violating laws, look for the appropriate government agency to assist. This may be at the federal, state, or local level. For example, the Federal Communications Commission is the authority for satelite dishes. State laws governing common interest communities vary widely. In many cases, local ordinances can be enforced regarding lease laws, abandoned cars, trash cans, etc.
If the concern is still unresolved, seek legal assistance to pursue the concern throught the court system. If you seek legal recourse, be sure to use an attorney/law firm with practice experience in common interest community laws and that does not already have an attorney/client relationship with the association. Remember that legal fees are high. Evaluate the risk/reward of pursuing a legal solution and ask your attorney to also evaluate the financial and non-financial risk/reward.
Become involved in the governance of your association by running for office, or by removing a board member for cause or through the election process.
For some residents, the final step is to move.
Our association has a contract with a management company. Who is responsible for ensuring that our association complies with various laws? (Governance/Operations)
Your association has responsibility for complying with various laws. The contract or agreement with the management company should determine their responsibilities. In most situations, the management company has a responsibility to advise the board. If the board has lost confidence in the management company, it should consider terminating the agreement.
Several states now require community managers and community management firms to have a license. Check with your state agency responsible for business and/or professional licensing.
Management companies will often do less if there is contention between board members. They do not want to be placed in the difficult position of appearing to take sides or jeopardizing their contract with the association. Generally, management companies will advise, but unless the board directs that specific actions be taken by the management company, the association is responsible.
How can a Board Member be removed? (Governance/Operations)
The authority and procedure for removal of a board member will be found in your HOA's governing documents. The following is an example of the procedures common for HOAs:
Section 3. Removal. Any director may be removed from the board, with or without cause, by a majority vote of the board of directors or the members of the association. In the event of death, resignation or removal of a director, his successor shall be selected by the remaining members of the board and shall serve for the unexpired term of his predecessor.
State laws governing non-profit corporations also provide authority and procedure for removal of officers and board members.
Before proceeding, the board may want to seek legal advice from an attorney experienced in condominium/homeowner association law in the state where your association is located.
Does the association or it's representative have the right to go on the property of it's members (Governance/Operations)
Maybe. Check your HOA's documents. Many covenants have a provision similar to the following:
The association shall have a right, license and easement to go upon any lot for the purpose of fulfilling its obligation under this declaration, the restrictive covenants applicable to the subdivision, and any other laws, ordinances, rules and regulations, public or private, which the association is obligated or permitted to enforce. Such easement shall include, without limitation, the right to go on any lot to correct, repair or alleviate any condition which, in the opinion of the board of directors for the association or of the manager employed by the association, creates or may create an imminent danger to the common area or improvements thereon or is a clear violation of this Declaration or the Restrictive Covenants applicable to the lot, including, but not limited to an obligation of maintaining the subject lot.
The association shall at all times have the right and easement to go upon any lot for the purposes of exercising it rights hereunder, including, but not limited to, enforcement of the architectural guidelines applicable to the properties. Any entry onto any lot for purposes of exercising this power of self-help shall not be deemed as trespass.
Can an individual officer of the Board approve a contract? (Governance/Operations)
No. All contracts should get the approval of the board in a meeting. The board has a responsibility to act in the best interests of HOA members. The bylaws and state laws governing HOAs and non-profit organizations may be even more specific. The board should always strive to conduct business in a way to avoid questions of ethics.
However, exceptions may be made for circumstances requiring immediate or emergency response. An example would be approving a contract for services after a fire, storm or water leak. The board should also weigh the magnitude of the issue. Was the contract for a 100 dollar purchase for flowers at the entrance way, or a landscape contract icosting thousands of dollars.
In an action has been taken without full board consideration and has created significant exposure to the board/HOA, the board may want to have the association's attorney in the next meeting. The attorney can review the board's fiduciary and duty of care obligations. If an individual acted without authority or in the best interest of the HOA, the board may consider the following actions:
Excuse the poor judgment, but caution the officer/board member(s) regarding future actions.
Request reimbursement of expenses associated with personal gain.
Vote to remove the officer/board member.
Is our homeowner association required to file an annual income tax return with the Internal Revenue Service. (Legal)
If your HOA is a nonprofit corporation, it is not tax exempt and must file an annual tax return. Tax returns of your HOA are part of the financial and accounting records of the association.
As a homeowner, am I entitled to participate in the budget process? (Legal)
Yes. This right is addressed in the North Carolina General Statutes (NCGS):
NCGS 47F-3-103 (planned communities)Within 30 days after adoption of any proposed budget for the planned community, the executive board shall provide to all the lot owners a summary of the budget and a notice of the meeting to consider ratification of the budget, including a statement that the budget may be ratified without a quorum. The executive board shall set a date for a meeting of the lot owners to consider ratification of the budget, such meeting to be held not less than 10 nor more than 60 days after mailing of the summary and notice. There shall be no requirement that a quorum be present at the meeting. The budget is ratified unless at that meeting a majority of all the lot owners in the association or any larger vote specified in the declaration rejects the budget. In the event the proposed budget is rejected, the periodic budget last ratified by the lot owners shall be continued until such time as the lot owners ratify a subsequent budget proposed by the executive board.
NCGS 47C-3-103 (condominiums)Within 30 days after adoption of any proposed budget for the condominium, the executive board shall provide a summary of the budget to all the unit owners, and shall set a date for a meeting of the unit owners to consider ratification of the budget not less than 14 nor more than 30 days after mailing of the summary. There shall be no requirement that a quorum be present at the meeting. The budget is ratified unless at that meeting a majority of all the unit owners or any larger vote specified in the declaration rejects the budget. In the event the proposed budget is rejected, the periodic budget last ratified shall be continued until such time as the unit owners ratify a subsequent budget proposed by the executive board.
Are associations required to publish the names and addresses of officers and board members? (Legal)
Yes. This requirement is addressed in the provisions of the North Carolina General Statutes (NCGS):
NCGS 47F-3-103-f (planned communities)NCGS 47C-3-103-g (condominiums)
Your association should publish the names and addresses of all officers and board members within 30 days of an election.
Do amendments to the restrictive covenants have to be recorded? (Legal)
Yes. Amendments to the restrictive covenants must be recorded with the Register of Deeds.
Can a husband and wife (or other related lot owners) serve at the same time on the association's board as officers? (Legal)
Maybe. Check your HOA’s governing documents for any conditions that prohibit related lot owners from serving.
The next consideration would be the size of the board. If the board is only 3 members, then related individuals could be a potential voting block that prevent fair representation of all owners. If the board is larger and has difficulty reaching the required number of members, they may consider allowing related lot owners to serve. Even so, a low number of board members may prevent fair representation of all owners. If related lot owners are allowed to serve, the board should consider adopting a resolution that defines the conditions, or consider amending the by-laws.
The board may want to ask an attorney to review the HOA’s governing documents. The attorney could prepare amendments or resolutions. It is likely that your HOA wants to avoid these costs, however, in the long run legal guidance will protect the board and the HOA.
Check our HOA Legal Directory on our website for a list of experiences attorneys.
Can a homeowner or board member keep the association's books? (Legal)
Yes. A board member or homeowner can manage the association finances. However, the board should understand their fiduciary responsibility. Regular written financial reports should be submitted to the board along with an annual independent review (audit, compilation, or review). Also, a fidelity bond will protect the HOA from fraudulent acts by individuals.
Some state laws governing HOAs are specific about compensation for services, financial responsibility, record keeping, and reporting. In some states, an individual will need a community manager license to be paid for his services.
The board may ask an attorney to review the HOA's governing documents. If so, the HOA should hire an attorney with experience in community association law.
Check the HOA Legal Directory on our website for a list of experienced attorneys.