Real Estate Law

Basic Governing Documents of an HOA or Condominium

In 2020, approximately one out of every six people live in a community associations in the United States.  A community association is generally comprised of a group of homeowners in a certain geographic community. These communities include condominiums, townhouses, and planned single-family developments. Community associations are often more affordable than traditional single-family homes in non-planned communities. Community associations usually come with a variety of attractive amenities like gardening, gated communities, security, and common areas with pools or gyms.

While buyers may enjoy the convenience and ease of owning a condominium or townhouse in a community association, these communities are also subject to many rules and regulations. Condominiums are run by an organization called a condominium or homeowner’s association (“Association” or “HOA”). The HOA ensures the rules in the community are followed, creates new rules, and makes sure the community is properly maintained. It is the responsibility of all owners to be intimately familiar with the role of the Association and the documents that govern the community.

This article discusses the important role the homeowner’s association plays in the governance of a community association and the basic documents that govern most communities that have HOAs.

What does the HOA do?

The HOA establishes the community’s rules and ensures they are uniformly enforced. Anyone who purchases a home in the community must pay annual HOA dues and automatically becomes a member of the HOA. The HOA is paid monthly or yearly by the members, the cost of which can range from a couple hundred dollars a month to thousands a month. The HOA oversees the basic management of the community.  

The HOA is usually either incorporated or a non-profit. The HOA is governed by a board of directors, who are elected by the members of the community.  HOAs issue citations to homeowners that violate a community rule (called a restriction or covenant). The homeowner may go before the board and contest the citation or ask for a variance. HOAs hold annual meetings where members can attend and learn important information about the community.

HOAs also circulate among its members important proposals that are subject to a vote by the HOA members. These proposals typically include ideas that will serve to improve the community. The proposals may include any number of ideas such as a proposal for additional security measures, new septic system, changes to the budget, or any number of suggestions that would serve the community.  The HOA is an important aspect of the community association because the members hold a lot of decision-making power over the community.

Perhaps the most important role of the HOA is hearing and adjudicating resident disputes and complaints. State legislatures create laws that authorize HOAs to act. California Civil Code § 4000, known as the Davis-Stirling Common Interest Development Act, governs how HOAs can operate. New York allows homeowners associations to enforce covenants and restrictions and manage the community. These laws give HOAs the power to act as a type of democratic tribunal where they hear complaints from members, evaluate evidence, and can render a decision on certain issues.

Before HOAs can enforce the rules and regulations of their community, they must comply with state laws. Some states, like New York, require Associations to file with the state a community plan, or “offering plan.” The plan usually includes a subdivision map that describes how the community will be built, the broader goals of the community, financial information, common area descriptions, and descriptions of the covenants that will be imposed on homeowners.

HOAs must also file paperwork with the state to incorporate or register as a non-profit. If the HOA files paperwork to incorporate, it must abide by the same responsibilities as other corporations under state law. These responsibilities include electing a board of directors, issuing stock to homeowners, holding regular meetings, and following corporate tax filing requirements.

The HOA is a distinguishing feature of the community association, and its governing members hold a lot of power over the community. The powers of the HOA and rules of the community are laid out in various documents. These governing documents generally include: 1. Articles of incorporation; 2. Bylaws; 3. declaration of covenants, conditions, and restrictions; and 4. rules and regulations.

Articles of Incorporation

The Articles of Incorporation are the basic document that the developer of the community files with the secretary of state to form the Association. The Articles of Incorporation must be filed with the state before any properties in the community can be sold. Depending on state law, the developer can incorporate as either a non-profit or a corporation. The Articles of Incorporation are often a basic, one-page form. They include the name of the HOA, the business address, the managing agent, and the agent for service of process for legal purposes.

The Articles are simply a formality that the builder must comply with to create the Association and do not contain any of the rules or regulations for the community. Community members can usually obtain copies of their HOA’s Articles of Incorporation from their state’s Secretary of State.

The Community Plans

Before the community is built, the developer will map out a community in a plan that shows a visual drawing of the lots in the community. The community plan is important because it is prepared by a professional and filed with the state or county.

The community plans are more than just a map. The plans delineate the official boundaries of the development and the legal boundaries of each lot. The community plans are just one document that describes the boundaries and ownership of the land in a community association. Homeowners should be aware of the plan and other documents that have legal implications for homeowners.

The plat map is another document either included in the community plans or filed separately with the County. A plat map is drawn by a title company and is a detailed drawing of each plot of land that makes up the community. It provides details identifying each plot like house number, parcel number, and lot number. The map includes street descriptions and directional information.

In addition to the plat map, each community association will have a land survey done before property is sold. A land survey is another professional drawing that outlines the exact boundaries of the property, the dimensions of any home on the property, and any easements that may be on the property.

The survey is important because it will reveal any legal obligations like easements a property owner may have to honor. An easement is a legal agreement that allows a person or entity rights to someone else’s land. Easements can include the right of a utility company to run power lines on private property or the right of a neighbor to use a footpath on someone else’s land. It is extremely important for prospective buyers to know who has legal access or rights to their land before buying property. Prospective buyers may have to pay for a new survey before a mortgage company will fund a loan to purchase a house in a community association.

The plat map and survey can be used to legally identify a homeowner’s piece of land, so the they are important for homeowners in the event an issue arises about land ownership or property boundary lines.

A deed is another important document for homeowners. The deed is the legal document that transfers title from own owner to another. Deeds are recorded with the County Recorder’s office so that there is an official trail showing how ownership passes over time. Homeowners should be able to locate their deed with the County Recorder’s office and look up each transfer of title that was recorded for their property.

The community plans, plat map, survey, and deed are important because they define the physical boundaries of the owner’s property. These are also important in relation to the Covenants, Conditions, and Restrictions (CC&Rs) enforced by the HOA because these documents define the areas where certain CC&Rs apply.

If these documents collectively state that the HOA owns the entire community property other than the individual parcels where the homes are, then the HOA will impose CC&Rs on all common areas it owns. This has implications for homeowners’ obligations in common areas, liability insurance, and who is responsible to maintain those areas.

Members can find copies of these documents on file with the Secretary of State or state or county accessor’s office.

HOA Bylaws

The bylaws are important for any community member to know. They are internal rules that establish how the HOA will be run. Bylaws describe the voting rights of each member and contain rules on how and when community meetings will be held. The HOA handles the community’s dues and accounts for the spending of any funds collected. The HOA may allocate the funds on any number of services the HOA needs to operate the community. The bylaws govern procedures the HOA must follow on budget and finance related matters.

Another important aspect of the bylaws is that they define the rules for the election of HOA board members. The bylaws must comply with any state law requirements. In California, any member who suspects the HOA violated an election law may bring a civil action in court for the alleged violation. In Florida, the state with the largest number of HOAs, the legislature enacted specific voting rules that set the standard for voting in HOAs. HOA voting can lead to litigated disputes when voting is mishandled because HOAs must abide by state law and observe many formalities.

The bylaws are important to review and understand before purchasing a home so that a prospective buyer can see how their future HOA is ran.

Declaration of Covenants, Conditions, and Restrictions (CC&Rs).

The CC&Rs are the governing document most important for any member of a community association. They include comprehensive and detailed rules of the community. The CC&Rs are meant to preserve the property, protect the rights of the members, and enhance the value of the community.

Some of the rules concern basic management of the community. Every community has some sort of common area shared or used by all members. The CC&Rs contain the restrictions on using the common areas, such as limiting the time members can use the pool or prohibiting smoking in community park areas.

They also include the restrictions for each individual homeowner with his or her own property. The CC&Rs define all of the rules that each member agrees to abide by. These rules include restrictions on purely aesthetic things, such as restrictions on painting one’s house a certain color to substantive restrictions on how long a house guest may stay. CC&Rs regulate things like parking spaces, garbage can placement, the types of pet’s members can have, and decorations on the facade of the house.

CC&Rs are particularly important for any prospective buyer to review as the CC&Rs can be very restrictive and carry penalties for failing to comply. Once a buyer purchases a home in a community association, the owner agrees to abide by all community rules. Penalties for failure to follow the CC&Rs include fines, suspension from certain privileges, and the HOA may even file a lawsuit against a member.

Rules and Regulations

Although most of the community rules are laid out in the CC&Rs, there may be additional rules contained in another document called “Rules and Regulations” or addendum to the CC&Rs. The HOA has broad discretion to adopt rules related to the governance of the community. The rules and regulations likely cover additional specific topics concerning the details of the community, such as signage on front lawns, pet restrictions, or rules about guest parking.

Rules and Regulations are somewhat controversial because they impose additional rules above and beyond the CC&Rs on members. They may also impose rules that are different than those in the CC&Rs. When the CC&Rs and Rules and Regulations conflict, the CC&Rs will prevail. Rules and Regulations are usually easier to change than the CC&Rs because these are internal rules that the HOA makes and there is likely a procedure in the bylaws to change them. CC&Rs may also be changed, but the process is more difficult and usually requires a majority vote by the members.