September 11th, 2019
Homeowner Associations (HOAs) are mostly nonprofit corporations organized under state law for the purpose of serving the HOA owner members. The documents that create, control, and guide the are called Covenants, Conditions, and Restrictions (CC&Rs).
Every HOA has its own unique set of CC&Rs. But in general, most CC&Rs include these key items:
- Articles of Incorporation. These articles are filed with the Secretary of State to legally establish the HOA as a corporation.
- Declaration. The declaration spells out what is permitted and what is prohibited in the HOA. For example, the declaration might authorize the HOA to collect assessments from homeowners.
- Any amendments to the Declaration. If the HOA board needs to add to or change the original declaration after it was created, they will hire a lawyer to draw up an amendment.
- CIC Platt.
- Bylaws. The bylaws establish how the HOA will be run. Among other things, the bylaws define the roles of the board members, member voting rights, and how often board meetings will be held.
- Any amended bylaws. If the bylaws need to be updated at any time, the board may create an amendment.
The items above have the most legal authority in the CC&Rs. An HOA’s governing documents can also include the following documents:
- Disclosure statements for buyers and sellers. These disclosures include safety information about the property and any recorded liens,
- Architectural Control Guidelines. These guidelines may provide additional detail about what is and isn’t allowed when renovating or remodeling an HOA home.
- Rules and Regulations. This document is a place for the HOA board to put rules that aren’t covered in the CC&Rs or Bylaws. The R&Rs are more flexible than the CC&Rs and Bylaws, because they don’t have to hire a lawyer to make revisions and file the new document with the state. The HOA can update the R&Rs themselves. Typically, the board will vote to adopt a new rule, then give community members 30 days to provide feedback. After 30 days, the board reviews the community feedback and makes a final decision.
- Responsibilities Matrix. This document clarifies who is responsible for paying for different repairs and renovations around the HOA—the association or the homeowner.
These last four items are typically not legal documents, but still important to managing and living in an HOA.
6 things to remember about CC&Rs:
- Following CC&Rs is mandatory. When someone buys a home in an HOA, they become members of the HOA. And by becoming members, they agree to follow the CC&Rs. There isn’t a way to opt-out of these rules.
- CC&Rs have tremendous power when it comes to HOA actions. If a homeowner wants to challenge the CC&Rs, they face an uphill and costly battle to overcome these controlling documents.
- CC&Rs can be enforced at any time. These rules may go unenforced for a period of time, and then be enforced on an owner. For example, a homeowner may build a noncompliant fence, and the board doesn’t take action for a year because they’re tied up with other HOA business. A year later, they can still levy a fine or require the homeowner to rebuild the fence. Rules and Regulation items do not have the same effect.
- CC&Rs are typically drafted by lawyers hired by parties who create the HOA. Real estate developers are a good example of people who create HOAs. They tend to include items in the CC&Rs that can favor completing and selling HOA units, rather than things that will matter to the HOA over time. A good example is the number of HOA regular assessments, and including a limit on annual increases.
In this example, developers would set HOA assessments at a lower level to encourage HOA unit sales. This isn’t bad, but when coupled with an annual increase limit of 5% or even 10%, what can happen is the HOA is limited on raising HOA assessments to a point to simply cover operating costs. This is a practical but not uncommon occurrence.
- Don’t confuse the Rules and Regulations with the Declarations. People often get these two documents mixed up, especially in regards to rentals and leasing. Rules and Regulations are merely policy documents of the HOA, and not officially part of the CC&Rs. The Declaration IS part of the CC&Rs and is legally controlling.
- Read and understand CC&Rs fully before becoming an HOA owner. Make sure you know what you’re getting into! HOAs expect and demand that homeowners adhere to CC&Rs. HOAs have the power to enforce the CC&Rs if violations occur. The CC&Rs also limit what an HOA and its board of directors can do, so there are checks and balances to protect owners, too.
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Posted In: Governance