Many of us live in Homeowner Associations, also known as Condo Associations, Townhome Communities, Community Associations or Planned Unit Developments. An all encompassing term used to describe all of the associations is Common Interest Development or CID’s.
First time homeowners that move into a CID will oftentimes be puzzled at the rules or the meetings or the letters that might be sent out from the management company. Everyone gets an opportunity to read their association governing documents called CC&R’s as they are closing escrow. It is a large, stapled, ream of paper looking very ominous. Your escrow officer will ask you to sign that you agree with the terms included in the document but you can read it later. You will also get By Laws and Articles of Incorporation. All of the documents tell you something about your community and are really important to read if you plan to invest in the community. Most people file the papers away and don’t think anymore about them until something comes up.
What you should look for in your CC&R’s - If you want to streamline your reading you should refer to the detailed Table of Contents. Most owners want to know, “Who maintains what?” You should be able to find Owner Maintenance Responsibilities and Common Area Maintenance. A few paragraphs in each section will explain what you must take care of and repair and replace and what the association funds will keep repaired and replaced. Common Area Assessments are the monthly fees that you and your neighbors pay for common area upkeep, administration of the community, utilities, and reserves for future replacements. Oftentimes the management company is accused of collecting the entire monthly assessment as their fee. That is not the case and you will see that only a small portion is allocated to the administration of the community in your Annual Budget.
Another really interesting section is titled, Use Restrictions. These are the rules and regulations that you must agree to abide by when you move into a community. It is a sad new owner that finds out that he can’t park his boat, RV or large commercial truck within the community streets. Pet restrictions, antennae, noise, window coverings and parking regulations are usually mentioned in Use Restrictions and become the basis for specific Rules and Regulations that are written, amended and adopted by the association.
A really important section is titled Architectural Guidelines. This section is written in the governing documents to notify you that you must go through the architectural review process before you do most anything outside your front door. Some associations include front yard landscaping in their monthly association fees and the installation and choices are decided before you move in. Other associations expect the new owner to landscape their front and rear yards soon after move-in. Detailed plans and architectural guidelines, based on the Architectural Guidelines in the CC&R’s must be followed to gain approval to landscape or add a patio, new fence, bar-be-que, pool/spa, or trellis. Not knowing the process is necessary and starting construction before gaining approval can be very costly.
Why it is important to attend Board of Director Meetings? - New owners should attend board meetings to see what is being discussed, to meet community leaders and to consider adding your expertise to the association in some way. Our homes are usually our biggest asset. Maintaining and enhancing the asset will help increase the value and add to the enjoyment of community living. Boards of Directors are volunteers who agree to serve for a period of time. It can be time well spent if the board is productive, responsive and works in the best interest of the entire community. Your attendance at board meetings assures that your board is working in your community’s best interest. Most communities have committees that assist the board. It is an excellent training ground for new board members.
What does the Management Company do for their fee? – Many residents are critical of the management company for what they do and what they do not do. Each management company and each association enter into a contract for services. We will discuss, in general, what a “typical” contract entails. However, your association may have specifics that are deleted or added because of board decisions and some associations only contract for financial management.
A typical association management contract includes Financial Management – Collecting assessments, paying bills, creating a monthly financial report, monitoring a collection policy for delinquent assessments and providing escrow/refinance services. Administrative Management– customer service, board support – monthly board reports, minutes, walk throughs, committee oversight, architectural oversight, annual calendar, board education, etc. The management company maintains all of your association’s files, both administrative and financial. All month long, between meetings, your manager and support staff, both administrative and financial, are answering the needs of your residents and preparing information for the board. The success of the manager in providing clear, concise and useful information allows your board to make decisions for your association in a timely manner. It is a very important contract and the success of the association often depends on the cooperation and coordination between management and the board.
Why are there so many CID’s? Is it a Good Thing? – Cities make developers enclose their communities within an association. Nobody wants to pay more taxes. People need someone to take their trash, clean their streets, and provide Police and Fire Protection. To divide up some of those tasks and to create a system to more efficiently handle the direct costs, community associations were created. Each developer pays for attorneys to create CC&R’s that define what the community will provide and what the homeowner must budget for and maintain himself. By using volunteer boards to manage budgets and decide what is best for their communities, the homeowner gets a more direct voice in decision making. Well educated boards with professional management can be very effective in solving community issues. The most effective communities are active with a constantly evolving committee system that will eventually become future board members.
Karen Bennett, PCAM®, CCAM®
Community Association Consulting
