Clients: Common Interest Realty Associations: Authority

A homeowners association is typically incorporated by the developer prior to the initial sale of homes, and the Covenants, Conditions, and Restrictions (CC&Rs) are recorded when the property is subdivided. There is no mutual agreement between buyer and seller regarding the CC&Rs, they are legally defined to "run with the land". If an owner sells the encumbered land/ home, he ceases to be a member of the association and the new owner is forced to become a member. All members must pay assessments to and abide by the restrictions of the association.

Somewhat like a city, associations provide services, regulate activities, levy assessments, and may impose fines. Unlike a municipal government, they are private businesses and homeowner association governance is not considered subject to the constitutional constraints that public government must abide by. Some of the tasks which HOAs carry out would otherwise be required to be performed by local governments. A homeowners' association can enforce its actions through the threat and levying of fines, and private legal action under civil law.

Association boards appoint corporate officers, and may create subcommittees, such as "architectural control committees", pool committees, and neighborhood watch committees. Association boards are composed initially of developer-appointed members, then of a mix of appointees and of homeowners elected at the annual meeting to maintain the common areas and enforce the governing documents. The mix changes to solely homeowners as the percentage of land/home ownership shifts away from the developer.

Homeowner associations can compel homeowners to pay a share of common expenses, usually per-unit or based on square footage. These expenses generally arise from common property, which varies dramatically depending on the type of association. Some associations are, not quite literally, towns, complete with private roads, street lights, services, utilities, amenities, commonly owned buildings, pools, and even schools. Many condominium associations consider the roofs and exteriors of the structures as the responsibility of the association. Other associations have no common property, but may charge for assumed services or other matters. Assessments paid to homeowner associations in the United States amount to billions of dollars a year, but are not classed as property taxes. When determining what the monthly/annual assessment should be, it is important to consider what funds are required. There should often be, but not always, a minimum of two funds. An operating fund and a reserve fund. The operating fund is used to pay for the operating expenses of the association. A reserve fund is used to pay for the infrequent and expensive common area assets maintenance, major repair and replacement costs. The reserve fund is significant when reducing the chances of a special assessment. Obtaining a Reserve Study is recommended to help determine and set the reserve contribution rate which is included in the regular monthly assessment.

Copyright Blythe Paperless 2011