Thanks for your support over the years. Let’s get back to some basics! This is truly a fundamental review of terms that you need to know.
We wanted to share this information with you all to provide you a greater understanding of common phrases and definitions that are commonplace within Homeowners Association. Please take a few moments to familiarize yourself with this information, and as always, do not hesitate to reach out with any questions.
Administrative Fees are charged to the HOA by its management company, or third-party vendors for professional services rendered outside the parameters of the assigned task. The administrative fee typically pays for costs of paperwork, phone bills, administrative staff’s time, or other costs that an office might incur. IT IS A BEST PRACTICE FOR YOUR ASSOCIATION TO UNDERSTAND THE FEES CHARGED BY THE HOA OR ITS MANAGER BECAUSE, ULTIMATLEY, THIS IS WHAT YOUR MEMBERS PAY AND USUALLY IT IS IN ADDITION TO COLLECTION COSTS. PLEASE MAKE SURE YOU UNDERSTAND THIS NUMBER AND DISCUSS IT. THE STATUTE DOES LIMIT THIS FEE TO $50 FOR CERTAIN SERVICE.
The HOA or its management company may charge you an ADDITIONAL administrative fee for the processing and handling of:
- Violation Notices
- Architectural Reviews
- Late Assessment Notices
- Legal Fees
- Lien Processing Fees
- Paper/Postage/Copies, etc.
ALTERATIONS OR IMPROVEMENTS
HOAs regulate exterior alterations and improvements in accordance with the HOA’s architectural standards. Therefore, an owner must obtain prior approval to make physical improvements or modifications to the owner’s exterior of the property. Examples of some exterior alterations or improvements include:
- Structure design
- Solar Panels
- Satellite dishes
- Paint colors
- Window tinting and coverings.
- Balcony surfaces, flooring
However, in Utah, you cannot charge your owners fees related to architectural review unless incurred by a third-party. Please contact our office on this point.
ARCHITECTURAL COMMITTEE (ACC or ARC)
HOAs typically have a committee to control the architectural standards of the community and manage the architectural alteration application and approval process. We realize, however, that oftentimes the Board serves as the ARC. Nevertheless, the “ARC” wears a different hat from the Board, and you must understand its roles accordingly (and have the right type of insurance for committees).
ARTICLES OF INCORPORATION
In general, the Articles of Incorporation (the “Articles”) are filed with the Secretary of State identifying the Association as a nonprofit corporation. The Articles typically contain the Association’s:
- Registered agent and office
- Purpose and powers
- Voting Rights
- Liability of Directors
Assessments are mandatory HOA fees that all members in a common-interest development must pay. Assessments may be designated as Regular Assessments, Maintenance Assessments Extraordinary Assessments, or Special Assessments used to cover the costs for the management and maintenance of the Association’s common areas. Often referred to as “dues.”
Professional procedures that are accepted or prescribed as being correct or most effective within the industry of community association management. If your management company or attorney (or other professional) is not advising you of best practices, they are not in the know.
A member of the Board of Directors, typically the president, who works as the primary point of contact between the manager and the Board of Directors.
An elected or appointed member of a Board of Directors that acts as the governing body of the community association.
BOARD OF DIRECTORS
The Association’s Board of Directors (the “Board”) is elected by the membership to manage all aspects of the Association’s business affairs. Under the Declaration and the law, it is the Board’s duty to promote the health, safety, and welfare of the Homeowners and the fiduciary duty to act in the best interest of the Association and its members. The duties and powers of the Board are outlined in the State’s Corporations Code and the Association’s governing documents. In Utah, a Management Committee is the same entity as the Board. Knowing and understanding your duties cannot be understated.
Remember, the Management Committee is the same as the Board in Utah BUT each group may have its own COMMITTEES – that is a different situation. Please contact us for use of Committee and protecting them from liability.
An official document containing a series of rules, formally made by a community association to govern the operation of the community association, required to be established in compliance with the Declaration of Covenants, Conditions, and Restrictions. Bylaws should be PRIMARILY procedural in nature. If you find that your Bylaws contain a lot of “USE RETRICTIONS” please contact this office. Further, Bylaws now need to be recorded with the County Recorder’s office but we find that many Bylaws remain unrecorded. Please check your document.
The Association’s Bylaws contain guidelines for the operation and management of the Association. In the Bylaws, you find provisions related to the Associations’:
- Purpose of the Board
- Indemnification of the Board
- Officer designation
- Term of office
- Powers and duties
- Meeting rules and schedules
- Quorum for action by Officers
- Nomination and Election of Officers
- Removal of members
- Finance Management
- Liability and Indemnification of Officers
Capital Improvements are usually significant improvements or structural additions to the community. This term should be defined within the CCR’s. Your CCRs may require an owner vote to incur costs for Capital Improvement beyond a certain dollar amount. The idea is that the Board is authorized to maintain the Common Areas and other items called out in the CCRs but if you are adding a ‘new’ feature or element, owners should approve that expenditure.
A law that is established after a court makes a ruling forming a legal precedent. As you can understand, cases from Utah courts have more influence on a court than cases from other states – BUT IT IS ALL IMPORTANT. Please attend our HOA University for case law updates.
CERTIFICATE OF ACCOUNT STANDING
Also referred to as a Payoff Statement, describes the financial condition of a property within a community association to include account balance, frequency of assessments, and certain other information that varies by jurisdictions which may have specific items or issues that must be addressed. Please talk with us as there are financial caps on what can be charged at time of closing for a certificate of account standing.
CODE OF CONDUCT
An internal policy, adopted by the board, setting forth both expectations and obligations regarding conduct within the community by members and the board of directors. Also known as Civility Guidelines.
Common Areas will be defined in the CCRs and in some cases applicable statutes. Typically, the common area of a common interest development constitutes everything that is located within the community development except the units, or lots (or other property such as a park space) owned by the association’s individual homeowners, also known as, “separate interest.” Examples of typical common areas are:
- Everything outside the owner’s lots or parcels.
- Non-public streets
- Community amenities
- Development walls
- Entrance/Exit gates
- Condominium exteriors and roofs
- Everything located on the outside of the Unit’s interior perimeter walls, floors, and ceilings.
- Community Amenities – Club House, Pools, Tennis Courts, etc.
- Park Areas / Playground Equipment
As mentioned, to get a clear understanding of what constitutes a common area in your development, review your Association’s governing documents or your state’s real property codes. More specifically, you should contact our office for any interpretations of where common area ends and a unit or lot begins. This is the source
COMMON INTEREST DEVELOPMENTS (CID)
Homeowner Associations have another, more formal name which is a “Common Interest Development” (CID). CID’s are a type of home ownership in self-governed private communities. CIDs are developed in many different types and styles, such as single-family homes, condominiums, townhouses and apartment-like multi-story high rises known as cooperatives.
Is the organization that gives “life” to a “CID” or HOA. Usually a non-profit corporation or other legally formed entity, to oversee the use and administration of a development for either commercial or residential use (or both but for our purposes most residential) that is governed by a Board of Directors. Typically, but not always, comprised of those with an ownership interest in the community association. The term is broadly applied to condominium associations, homeowners’ associations, and maintenance corporations.
A form of legal ownership in which ownership is divided into individual units and sold. Ownership usually includes a nonexclusive interest in certain “common properties” controlled by the condominium community association. Owners share an undivided interest in the ‘Common Areas” and own their Units outright.
CONDOMINIUM ASSOCIATION (also see Homeowners Association)
A Condominium Association is a type of common-interest development governed by the elected Board of Directors in accordance with the Association’s governing documents and applicable laws. Condominium owners own their unit and a portion of Association’s common area which is owned jointly by all owners in the Association.
Also known as Governing Documents, the documents forming and regulation how the community association is operated which usually include the Bylaws, Declaration of Covenants, Rules and Regulations, and Articles of Incorporation. State laws regulate the recording of these documents in land record offices and the distribution to prospective home buyers.
The cooperative housing also known as a co-op, is a type of real estate ownership of a group of dwellings or apartment buildings owned by a corporation. The co-op is governed by the elected Board of Directors in accordance with the co-op’s governing documents. The members of the co-op are stockholders who have the right to occupy a unit for as long as he/she owns the stock. The Corporation owns the title of the real state. Co-ops are seen more in Southern Utah than anywhere else in the State. Usually, the Owner owns the RIGHT TO USE the “dirt” or “pad” upon which a semi-permanent mobile home is situated.
DECLARATION OF COVENANTS, CONDITIONS & RESTRICTIONS
The Declaration of Covenants, Conditions & Restrictions (“CC&Rs” or “Declaration”) contain the contractual obligations of the Association and its members. The CC&Rs sets forth the guidelines and internal “law” on how the Association through its Board of Directors may operate and govern to protect the interest of the Association and its members. It also contains the members’ obligation to maintain and pay assessments and describes the owner’s use of limited common areas and general common areas. Repair and maintenance obligations are contained in the CCRs. The Declaration usually includes rule making authority to help the Board clarify any provisions of the CCRs.
The legal document recording the person(s) who have a legal right to property. Please pay attention to your CCRs or Bylaws – often times only named on the deed have rights to vote, run for the Board, etc. This is referred to the rights of the “owner of record.” Contact us if you have concerns about who is being elected and whether they qualify to run, etc.
The following list of documents are known as the “governing documents” that govern the common interest developments and homeowners. See the definition of “Hierarchy of Governing Documents” so you know which document controls in case of a conflict.
- Declaration of Covenants, Conditions & Restrictions (CC&Rs)
- Articles of Incorporation
- Plats of Survey and Easement Agreements
- Rules and Regulations
HIERARCHY OF GOVERNING DOCUMENTS
Utah Code states if there is an internal conflict between two separate documents or code, the higher document on this list take priority and determines the outcome. The following list is the hierarchy of documents per Utah Code.
- Community Association Act or Condominium Act (depending on which applies to your association)
- Utah Revised Non-Profit Corporation Act
- The Plat & The Declaration (these two separate documents have equal control)
- Organizational Document (Articles of Incorporation)
- Rules or Policies
The “HOA” acronym stems from Homeowners Association. HOA is typically used to reference the following types of common-interest development communities:
- Planned Unit Development (PUD)
- Townhome Style Single-family homes
- Co-Ops (in Utah)
A Homeowners Association (“HOA”) is a private incorporated, or unincorporated (we always recommend nonprofit incorporation) planned development managed by its elected Board of Directors according to the HOA’s governing documents. The HOA’s membership is comprised of owners of properties who have the obligation to maintain and pay HOA dues. Likewise, the HOA has the obligation to maintain the common areas, and the right to enforce covenants agreed to by its members.
LIMITED COMMON AREAS
Part of a unit or dwelling on a lot that is typically maintained by a deeded owner but that is the property of the community association (as a form of Common Area), typically in a condominium, items such as balconies, decks, doors, windows, etc., are generally deemed Limited Common Area. In townhome communities and single family home communities, often times driveway, patios and decks will be Limited Common Area. PLEASE NOTE that the Governing Documents (and statute) of the Association govern the definition of Limited Common Areas and assign maintenance, repair, and replacement obligations.
A community association set-up specifically to maintain certain common elements of a group of homes, homeowner’s association, condominium association, or a combination of smaller associations. These are rare in Utah. In some instances, there is not a “full blown HOA” but a limited purpose entity formed for something as simple as say, nothing more, than managing private street lights.
The company retained by the community association’s Board of Directors to manage certain aspects of the association as outlined in a management agreement.
The person(s) appointed by the Management Company to act as the liaison between the Board of Directors, Homeowners, service providers, and others and complete certain tasks as the Agent for the community association.
A community association that oversees a group of subordinate associations. If you live in a community that has a Master Association, you will be subject to over-arching Mater HOA CCRs, then your neighborhood specific CCRs. It is important to know that you may have 2 or even 3 levels of assessments and Governing Documents to be aware of. Usually, this arrangement are for large scale communities.
Membership is automatic when a person acquires ownership of a property in a common interest development. Usually, the “member” if the owner of record on the deed (and their family) but confusion often arises as to ‘who the members are…’ and you if you find your HOA in this situation, please let contact us.
Usually, but not always, a member of the Board of Directors who acts in an official capacity as directed by the Board of Directors but in compliance with the controlling documents of the community association; examples include a President, Vice-President, Secretary, and Treasurer.
PLANNED UNIT DEVELOPMENT
Also referred to as a PUD, a planned development mapping out a planned layout or use for a community. The term is more often applied to single-family homes forming a community association but can refer to other types of home and business forming a development. A PUD is also a regulatory process for developing a planned community with some definitions and processes varying by federal, state, county, and local laws, and regulations.
A map of a lot within a Planned Unit Development (PUD) or a Condominium community showing where the home is situated on that lot or the dimensions of the unit and identifying the common and limited common areas. A Plat is typically maintained with a County Recorder’s Office. in Utah, a Plat has the same priority (as plat maps contain terms and requirements of owners and the HOA from time to time) as the CCRs.
There is a lot of confusion as to the role of the President. Typically the President is a member of the Board of Directors and who is elected by the Board of Directors to serve as a leader of the Board of Directors and principal officer of the community association. Duties and powers are delineated in the communities controlling documents.
Quorum is the presence of a required number of members in a meeting for the proceedings to be valid. It is critical you know your quorum requirement for both owner meetings and Board meetings. It is also vital that you know whether you base a quorum off the total membership or those who show up. This distinction is critical. Proxies typically count towards a quorum so do written ballots. One of the most common errors of a Board and/or annual meeting is that a quorum was not properly established. We have ideas for your Bylaws to help your reach your quorum. Please contact us as needed.
RESALE PACKAGE (aka Closing Packet)
A resale package is a packet of vital information provided to those purchasing a condominium or a home in an association usually purchased/provided by the seller. This is often provided by the property manager or the closing agent. The package includes a complete set of recorded documents that govern your association. The Resale Package will vary from state to state but each state and some jurisdictions have specific items or issues that must be addressed in each transaction when real estate is sold. The resale package usually includes a Certificate of Account Standing (Payoff Statement), Articles, Declaration(s), Bylaws, Easement(s), Agreement(s), Resolution(s), Annual Budget, Insurance Accord(s), Rules and Regulations, HPS Management Forms, Inspection Certificate, and Association Disclosures. Your Association should record a Notice of Existence of Association that alerts purchasers and title companies of what documents you (as the HOA) expect Buyers to have and be aware of BEFORE they close.
RULES AND REGULATIONS
A series of rules or regulations usually adopted by the Board of Directors for a community association governing certain aspects of the community association usually allowed to be established in accordance with the Bylaws. The rule making process for non-condominium communities is stricter than for condominium communities. Please contact us as needed. A Rule cannot conflict with a CCR or Bylaw provision or it will be unenforceable. Further, Rules should be accompanied by a Schedule of Fines for noncompliance (of both the Rules and the CCRs). This Fining Policy / Schedule of Fines is a separate Rule or policy adopted by the Association and largely dictated by statute. Everyone should have this free-standing policy in place.
The officer of the community association appointed by the Board of Directors whose duties are delineated in the communities controlling documents but who is usually responsible for supervising and handling the documents of the community association such as minutes, resolutions, correspondence, contracts, rosters, etc.
An assessment that is in addition to a regular budget assessment, typically assessed by a board of directors, to pay for an expense or expenses of the community association that was not originally budget for in the annual approved budget.
Also known as Statutory Law, a law that is passed by an elected group of legislators.
A community association that is subject to a Master Association. Remember, you will be bound by the sub-HOA’s CCRs, Bylaws AND the master’s Governing Documents.
A professional determination of the physical boundaries forming a lot.
The officer of the community association appointed by the Board of Directors whose duties are delineated in the communities controlling documents but who is usually responsible for supervising and handling the finances of the community association.
Typically, a member of the Board of Directors and who is elected by the Board of Directors to serve as a leader of the Board of Directors and principal officer of the community association in the absence of the President. Duties and powers are delineated in the communities controlling documents.