|
Living in a Condominium or Planned Community |
The Homeowner and the Community Association |
|
Community Associations Institute 225 Reinekers Lane, Suite 300, Alexandria, VA 22314 (703) 548-8600 |
|
 |
The Homeowner & the Community Association
You have moved into a new home in a community association. It is one of the three types of community associations in the U.S.: condominium association, homeowner association, or cooperative. Perhaps you would like to learn more about how your community operates and possibly become a volunteer.
Or, perhaps you have been living in a community association for some time. You know there is an association, but you've never really understood what it is all about. And, you've been reluctant to get involved.
Whatever your situation, this booklet is for you. It will familiarize you with the purpose and operation of a community association and it will also help you determine whether your association is operating effectively to protect your investment and your community.
Never before have there been so many choices in housing. At one time, the typical home buyer could find only one choice: a traditional house on a lot. What's more, the planning of many communities was uninspired: long straight streets, treeless lots, and virtually no open space.
Things have changed. Homes now come in a vast array of architectural styles: patio homes, townhouses, and even apartments for individual ownership. Single-family detached houses have taken on a new look too, in cluster developments and open space communities.
There are three features that make these homes and communities different from traditional forms of homeownership. One is the you share ownership of common land and have access to facilities such as swimming pools that often are not affordable any other way. The second is that you automatically become a member of a community association with all other homeowners, and as such must abide by association rules. The Third feature is that you will pay an "assessment" - a regular fee (often monthly) that is used for upkeep of the common areas.
There are many advantages to living in this kind of development. The community usually features attractive combinations of well-designed homes and landscaped open spaces. The houses may even cost less than traditional housing due to more efficient use of land. Parks, pools and other amenities, often too expensive for you to own alone, can be yours though shared ownership. So now you have a chance to own and enjoy the pool, tennis court, or other recreational facilities that may have been unaffordable previously. What's more, you won't have direct responsibility for maintenance, so you won't have to clean out the pool, fix the tennis nets, and you may not even have to mow your lawn. But that doesn't mean you'll never have to think about it.
The community association operates and maintains these shared facilities. Of course, you'll pay your share of the expenses; and, as an association member, you'll have a voice in the association's decisions.
The association may have one of a variety of names: homeowners association, property owners association, condominium association, cooperative, or council of co-owners. To simplify matters here, we'll refer to them by the commonly used umbrella term, community association or CA.
Because the association is so important to the community and your personal investment, it is vital that you know about its purpose and operation. This booklet will give you basic information about community associations.
What's a CA All About?
When developers first started building CAs, everyone agreed that having property shared by all owners was a good idea. But one question remained, Who's going to take care of it?
Local government wasn't responsible because the land was privately owned. The developer would eventually sell all the homes and go on to build another project. That left the residents. Since they own the open space, they should have the responsibility for its maintenance. The concept of an association of owners was born.
The association is a private, nonprofit organization in which all property owners automatically are members and have certain rights and obligations.
The actual ownership of the common areas can be set up in several different ways. For example, in a typical homeowner association, the association owns the common facilities. In a condominium, however, each resident holds title to an individual interest in the common facilities. In each, the homeowner automatically belongs to an association comprising all owners and owns his or her unit. In a homeowner association, the unit owners also own the lot their house sits on.
Like a person or a nation, a community association has a life history of its own: a birth, an infancy, an adolescence and a maturity. And it changes greatly from phase to phase. Developers conceive and design CAs when they build a new development. They give birth to it in certain legal documents and appoint an initial board of directors. They nurture and guide the CA through the early growth of the association while it is dependent on the developer for finances and leadership. During the association's later growth, however, it becomes independent of the developer's support and control. It becomes a mature association governed entirely by the homeowners.
Both the developer and the homeowners operate the association with the help and advice of others - the lawyer, accountant, recreation director, maintenance contractor - all will help to create or operate the association.
Skilled advisors also play a vital role in association operation. The association manager attend association meetings to lend assistance and guidance. Public officials may have an interest in association success and may become familiar faces in the community.
A community association operates as a government, a community, and as a business, making it a truly specialized type of organization. However, the major responsibility of the association is to protect the investment and enhance the value of the property owned by the members. This is done by providing for the maintenance and operation of the common facilities, such as grounds, parking areas, private streets, swimming pools, or other recreational facilities. The association also may provide common services such as security, trash collection, or snow removal. It may also perform certain services on individual properties, such as maintaining the roof and exterior walls of townhouses and condominiums.
The association has other responsibilities too, such as enforcing the master regulations and architectural controls, planning recreational programs, and setting up an effective communication system among members.
Although the association operates as a quasi-government (under legal documents discussed later) it is not a political organization; it does not influence outside issues or elections. On rare occasions, a CA may become active on a single civic issue if it affects the property values of members. Usually, however, associations do not become involved, leaving such matters to civic associations and political parties.
The association is administered by a board of directors elected by the owners. The association's officers usually are elected by the board of directors from the board's membership.
The board may be assisted in its duties by committees for finance, communications, maintenance, recreation, architectural control, and nominations and elections.
Each homeowner should become involved in the association in some manner. Involvement for you may mean that you pay your assessment on time, cooperate with the association, and participate where you will be most effective, even if you only vote at the annual meeting.
You may also take a more active role - serve on the board or on a committee - and both the association and you will benefit.
An important thing to remember about a community association is that it is a business. To be successful it must be operated like one and have good financial management. This includes establishing sound financial and record keeping practices, establishing practical budgets and assessments, and collecting assessments from all members.
The CA as a Business, a Community and a Government A CA is a highly specialized type of organization that encompasses aspects of business, government and a local community. No matter what role you decide to play in the association, one thing is certain, you will want it to operate as smoothly and efficiently as possible in all three of these areas. If you have a particular expertise or interest in any one of these three area, you can contribute to your association.
What makes an association work like a successful business? There are many factors, of course, but several critical ones are:
Another key to success is the cooperation and participation of homeowners. However, even if you do no more than pay your assessment on time and vote at the annual meeting, it is still in your best interest to know how your association is being run. The following sections review some important activities that should be of concern to every homeowner.
It is your money that the association is spending day in and day out, so you need to know whether a sound budget is in place. The budget must allow for maintenance of the common facilities, provision of special services and reserves for future large expenditures, such as sidewalk replacement.
The developer originally made provisions for mandatory assessments in the legal documents that created your community. To protect the interests of both you and your lender, the documents usually establish a maximum assessment based on anticipated costs of maintaining the community when the development is completed.
The residents inherit this maximum for better or worse. The CA board sets the specific assessment from year to year according to actual operating needs, but it cannot exceed the maximum established by the legal documents. The association's expenses, however, will undoubtedly increase because real estate taxes, reserve funds, management costs, and other expenses all increase over time.
To accommodate such needs, the legal documents of many CAs provide that the maximum assessment may be increased by the CA board from year to year by a specific percentage or changed annually in step with the Consumer Price Index. Other associations have been locked into a fixed assessment amount, requiring a cumbersome voting process by the general membership to adjust the amounts.
Sometimes the residents inherit an inadequate assessment level from the developer. Although the practice is less common these days, developers have been known to pay an excessive share of association expenses during the sales period to help finance the association. This keeps the assessment low to attract buyers. Later, when the developer phases out, assessments must be raised to operate the association. This may come as a surprise to owners, but it is not usually the association's fault.
Increasing the assessment unduly should be avoided because it may lead to collection problems. One of the most serious association financial concerns is the failure on the part of the association to collect assessments.
In the initial stage of association operation, as units are being sold and residents begin to move in, the developer controls everything. The developer has the majority of votes in the association and makes all major decisions including determining the budget, the assessment and the type of management. This control may seem slightly one-sided, but the developer has the major investment at this point, and needs to get the association running smoothly before turning control over to the residents.
The period of transition from developer to resident control is very important to association stability. Under the legal documents, the developer usually has a majority of the association votes until three-quarters of the units are sold. A wise developer, however, begins to educate owners about the association even before the first residents move into a new development. Social gatherings are arranged and an advisory committee of residents is formed. As the units are sold and owners move in, homeowner participation is expanded to include participation on regular committees and on the board of directors. This way, when the developer leaves the project, a well-informed group of owners can continue smooth association operations.
When any group of people - no matter what size - share property, rules must be established. These rules and their enforcement are essential to preserving property values in the community.
When a developer plans a project, he or she develops a set of legal documents that establish the community association, govern its operation, and provide rules for using the association property. The legal documents may vary, but usually the consist of the following:
Articles of Incorporation establish the association and its purpose, structure and powers.
Bylaws establish rules for the operation of the association through the officers, board of directors, committees and membership meetings.
Covenants, Conditions, and Restrictions (CC & Rs), Declaration or Master Deed Covenants, Conditions, and Restrictions (CC & Rs), Declaration or Master Deed detail each owner's property rights, the conditions on use of the property, and the owner's rights and obligations in the association. In this booklet, we refer to the CC & Rs as the master regulations.
The master regulations are important rules in your day-to-day living. They are designed to make sharing property convenient and fair for all involved. Master regulations usually cover both use of common property and use of individual residential properties.
No matter how well-intentioned the rules are, someone will break them. Here's an example. Your association may have a rule that dogs must be walked on a leash. The reason for the rule are obvious to you, but not to your new neighbor. He knows about the rule, but does not take them seriously and routinely lets his Irish setter roam through the neighborhood.
Other dog owners see the dog running free and begin to let their dogs out, too. Soon, the rule is broken more often than it is kept and problems begin. Gardens are dug up, garbage cans are overturned and you now have to watch carefully where you walk.
The association must act quickly and firmly in a case like this. The association has the power of enforcement and must use it effectively. Without proper enforcement, the master regulations mean little.
Usually a friendly word of simple written notice from the manager or an association officer will be enough to correct the problem. But with particularly stubborn violators, the association board can take more drastic measures such as suspending violators from use of recreational areas. But this only works if rules are enforced fairly and promptly.
Most master regulations provide for architectural control by the association. These controls are not set up to stifle your individual creativity, but rather to ensure the integrity of the original community design. You can paint the inside of your house purple, if you wish. It's only the exterior of your unit that is of concern to the association.
Common problems with architectural control involve fences, paint colors, and decks. Most associations set up an architectural control committee, which develops and distributes architectural guidelines, reviews and approves all submitted plans, and enforces architectural standards.
It is important that you are familiar with these controls and always work with the committee when making any exterior changes to your unit.
Communication within the association is vital. The association can't expect you to be interested in association activities if you don't know about them.
Person-to-person contact is always a nice way to introduce a new resident to your community. A "welcome packet" of useful information can help the newcomer learn the ropes of association life. The packets can provide a summary of the master regulations, a list of officers, and a list of upcoming activities. A Welcome Committee can pay a visit and take the time to explain how the association works and invite new residents to participate.
The association's social functions are another form of communication. Newsletters and meetings are others. All meetings should be well publicized, particularly the annual meeting. This is where the real business of the association is discussed and important decisions are made.
No type of communications program is complete without a method for airing disputes and grievances. People become very frustrated if there is no way to bring their problems to the attention of the association.
Associations handle grievances in several ways. Many CAs have developed grievance forms that can be filled out and turned in to the manager or president. The complaint is then turned over to the appropriate officer or committee for consideration.
Grievances should never be ignored, no matter how small they seem. You should never hesitate to present unresolved problems to your association. If something is not right in your opinion, say so, but be constructive, and always understand that your neighbor may have a different view.
Smooth and efficient management means less worry for you and ensures that property values will be maintained. Generally, management has the following responsibilities:
There are several different forms of management. Which is best for your association depends on the size of the development, the CA's facilities and services, the finances, and the volunteer support.
Professional association management generally offers the most expertise and the least worry for the board and unit owners. A fast-growing profession, association management can be obtained n various forms ranging from an association-hired onsite manager to retaining the services of a management company.
Your insurance needs in an association should be closely examined because they are different from your needs when owning a home in a traditional development or when renting an apartment.
In a condominium, you own your unit and an undivided interest in the common area. Make sure you have coverage on both. The association should carry a policy to protect the common property for which the association is responsible, such as the recreation facilities, walkways, and parking lots. The coverage should provide adequate protection from liability suits that may result from use of the common areas and from acts of the association or its officers. The association's master policy should also protect you against loss of common property by fire or other hazard.
Association insurance policies do not cover your individual unit or your personal possessions, so you need to have a homeowner policy to protect you against losses from fire, theft and personal liability.
Insurance needs for those who live in a homeowner's association are similar. The association owns all the common property and is responsible for its insurance needs. You should carry your own insurance on your unit and any other property you own outright.
Even though the common property in a homeowner association is owned directly by the CA, not by you, the insurance coverage on it is important to you. If the coverage is inadequate to cover, for example, a fire in the clubhouse, the difference will have to be collected though a special assessment - and that means you pay out extra money.
If you are considering leasing your unit, you should inform the association of your intention and inquire about the rules and procedures governing these leases. Your tenant can be a problem or a responsible resident who contributes to the community. It depends on your selection of the tenant and how you explain the operation and rules of the association.
All residents must follow the same rules whether tenant or owner, and all have the same privileges. In some cases, an owner can even delegate his or her voting right to a tenant.
The rules must be spelled out very clearly to the tenant and should be stipulated in the lease as well. The lease should also require tenants' to abide by all master regulations. As soon as you lease your unit, notify the association.
The key to a successful association is the support and enthusiasm of the members. Again and again, association leaders say that member apathy is the biggest problem they face. Without the involvement of its members, the association cannot operate successfully.
How can you become involved? Serve on the board, head up a committee, lend your talent in whatever way is most beneficial to the association and most rewarding to you. Volunteer work can be richly rewarding and can be an enjoyable form of socializing.
But if you can not get involved or prefer not to, you can still help your association by always:
The value of your home investment and the quality of life of your community depend on your community association.....and the success of the association depends on you.
The above information was prepared by Community Associations Institute. It is a national, nonprofit 501 (c)6 association created in 1973 to provide education and resources to America's residential community association industry. It is a multidisciplinary alliance leading the industry and fostering effective community associations. CAI estimates that 50 million Americans live in dwellings governed by a community association.
The Ashburn Farm Association would like to thank the Community Associations Institute for giving their permission to reprint this information for our residents.
|
Page Contents
|
||
