Community Living

COMMUNITY ASSOCIATION FUNDAMENTALS

Even though we live in an association, you might be surprised how many of our neighbors—owners and renters alike—don’t really understand the fundamental nature of common-interest communities. And we know that many others, including the media and government officials, lack a true understanding of the community association (or condominium) concept.

Community Associations Institute (CAI), a national membership organization that represents the best interests of common-interest communities like ours, developed 10 basic principles that answer three essential questions: What is the basic function of a community association? What are the essential obligations and expectations of homeowners? What are the core principles that should guide association leaders?

We’re confident you’ll recognize your community while reading these principles.

1. Associations ensure that the collective rights and interests of homeowners are respected and preserved.

2. Associations are the most local form of representative democracy, with leaders elected by their neighbors to govern in the best interest of all residents.

3. Associations provide services and amenities to residents, protect property values and meet the established expectations of homeowners.

4. Associations succeed when they cultivate a true sense of community, active homeowner involvement and a culture of building consensus.

5. Association homeowners have the right to elect their community leaders and to use the democratic process to determine the policies that will protect their investments.

6. Association homeowners choose where to live and accept a contractual responsibility to abide by established policies and meet their financial obligations to the association.

7. Association leaders protect the community’s financial health by using established management practices and sound business principles.

8. Association leaders have a legal and ethical obligation to adhere to the association’s governing documents and abide by all applicable laws.

9. Association leaders seek an effective balance between the preferences of individual residents and the collective rights of homeowners.

10. Association leaders and residents should be reasonable, flexible and open to the possibility—and benefits—of compromise.

Fundamentals can be downloaded at www.caionline.org/governance/fundamentals.pdf. For more information about Community Associations Institute, go to www.caionline.org.

 

DO YOU KNOW WHERE YOUR ASSOCATION DOCUMENTS ARE?

When you bought a home in your community, you should have received copies of all your governing documents prior to or at closing. Sometimes these documents get lost among all the other papers you received at closing. And many homebuyers are so involved moving into their new homes, they don’t take the time to read all the fine print.

As a homeowner, you have a right to these documents; so, if you don’t have copies for any reason, let us know, and we’ll provide them to you.

Of course, it’s your responsibility to provide the association with your current address and phone number (particularly nonresident owners). This enables us meet our obligation to provide all owners with information from the association.

It’s very important to have copies of the governing documents because you’ll be expected to know and comply with all rules and regulations of the community. You’ll also want to stay informed by reading all materials provided by the association.

It’s our responsibility to make these documents—the bylaws and the covenants, conditions, and restrictions—as understandable as possible, so if there’s anything you don’t understand, please let us know. We’ll be glad to clarify any confusing language or give you other materials that answer your questions.

That old expression—ignorance of the law is no excuse—isn’t exactly our motto, but it’s close.

Source: Community Associations Institute

 

WHAT’S SO GREAT ABOUT COMMUNTIY ASSOCIATIONS?

Community associations offer one of the best opportunities for Americans to own their own homes. They are for the 21st century what land grants were in the 19th century, and what the New Deal and GI Bill were in the 20th. Why?

 

COLLECTIVE MANAGEMENT PROTECTS VALUE

Americans have accepted, for the most part, the collective management structure of community association living. Covenants and rules are no longer a new concept to most of us: renters are used to lease agreements with restrictions; single-family, detached-home owners are used to zoning ordinances and building codes. The difference is that in traditional, single-family housing, restrictions are administered by public bodies rather than by private boards.

Most Americans have accepted private governance because they understand that collective management and architectural controls protect and enhance the value of their homes.

 

PRIVATIZING PUBLIC SERVICE ALLOWS GROWTH

Wherever a new community is built, local infrastructures are stretched. School populations, snow removal, storm water management, road maintenance, utilities, traffic, everything increases leaving the local jurisdiction unable to support new community development. Yet housing is sorely needed. Therefore, local jurisdictions often require community associations to assume many responsibilities that traditionally belonged to local and state government.

This privatization of public services has allowed local jurisdictions to continue developing needed housing without increasing local taxes. Instead, the developer must build the infrastructure and create an association to maintain it after it’s developed.

 

COMMUNITY ASSOCIATIONS MAKE OWNING A HOME AFFORDABLE

Almost from their inception in the 1960s, condominiums have provided housing for low-to-moderate income Americans. In fact, in some areas, builders are required to include a certain percentage of affordable homes in new developments.

Also, converting rental apartments and commercial buildings into condominiums not only revitalizes many decaying neighborhoods, it’s also made ownership more affordable for those wanting to live in urban centers.

Community associations have made home ownership possible for millions of Americans partly because 21st century families tend to be smaller, the number of single-parent homes has increased, and more retirees are staying in their homes after retirement.

 

COMMUNITY ASSOCIATIONS MINIMISE SOCIAL COSTS

Community associations also minimize social costs. Because they have mandatory covenants that require certain obligations from homeowners and the association, associations ensure that all who benefit pay their share and everyone is equally responsible. Community associations have sufficient enforcement authority that local government is seldom, if ever, needed to resolve assessment disputes. Many associations use alternative dispute resolution because it’s a faster and cheaper way to solve problems than legal action.

 

COMMUNITY ASSOCIATIONS MAKE THE MARKET EFFICIENT

Many community associations—especially condominiums—have greatly reduced urban sprawl. Because of their collective management and protective covenants, they are precisely what the Housing Act of 1949 intended when it called for “decent home(s) and suitable living environments.” Community associations, as alternatives to traditional single-family homes, are shining examples of free-market efficiency.

The factors that make community associations great places to live are easily ignored or misunderstood. Critics prefer to look at a few sensational issues instead of the whole picture. But for many community associations are affordable, enjoyable, efficient places to live.

Source: Community Associations Institute

 

HERE’S WHAT HOA RESIDENTS HAVE TO SAY

Americans who live in community associations are overwhelmingly pleased with their communities, expressing strong satisfaction with the board members who govern their associations and the community managers who provide professional support.

More than seven in 10 community association residents expressed satisfaction with their community experience, according to a survey conducted by Zogby International, a leading public opinion research firm. Almost 40 percent of community association residents say they are “very pleased,” with only 10 percent expressing some level of dissatisfaction. Almost 20 percent express neither point of view.

An estimated 54 million Americans live in some 274,000 homeowner associations, condominium communities, cooperatives and other planned developments.

Here’s what community association residents say:

88 percent believe their governing boards strive to serve the best interests of the community.

90 percent say they are on friendly terms with their association board members, with just 4 percent indicating a negative relationship.

86 percent say they get along well with their immediate neighbors, with just 5 percent reporting a negative relationship. Of those who reported issues with neighbors, the most common problems were pets, general lifestyle, noise, and parking.

78 percent believe community association rules “protect and enhance” property values, while only one in 100 say rules harm property values. About 20 percent see no difference.

88 percent of residents who have interacted with professional community managers say the experience has been positive.

Source: Community Associations Institute

 

WHY DO WE NEED RESERVES?

Equipment and major components must be replaced from time to time, regardless of whether you plan for the expense. We prefer to plan and set the funds aside now. Reserve funds aren’t an extra expense—they just spread out expenses more evenly. There are other important reasons we put association monies into reserves every year:

1. Reserve funds meet legal, fiduciary, and professional requirements. A replacement fund may be required by:

  • Any secondary mortgage market in which the association participates (e.g., Fannie Mae, Freddie Mac, FHA, VA).
  • State statutes, regulations, or court decisions.
  • The community’s governing documents.

2. Reserve funds provide for major repairs and replacements that we know will be necessary at some point in time. Although a roof may be replaced when it is 25 years old, every owner who lives under or around it should share its replacement costs.

3. Reserve funds minimize the need for special assessments or borrowing. For most association members, this is the most important reason.

4. Reserve funds enhance resale values. Lenders and real estate agents are aware of the ramifications for new buyers if the reserves are inadequate. Many states require associations to disclose the amounts in their reserve funds to prospective purchasers.

5. The American Institute of Certified Public Accountants (AICPA) requires the community association to disclose its reserve funds in its financial statements.

Source: Community Associations Institute

 

CLARIFYING YOUR MANAGER’S ROLE

Your association employs a highly-qualified professional community management company, and residents should know what the manager has—and has not—been hired to do. The manager has two primary responsibilities: to carry out policies set by the board and to manage the association’s daily operations.

Some residents expect the manager to perform certain tasks that just aren’t part of the job. When the manager doesn’t meet those expectations, residents naturally are unhappy. Since the board wants the owners to be happy, here are a few clarifications to help you understand what the manager does.

• The manager is trained to deal with conflict, but he or she will not get involved in quarrels you might be having with your neighbor. However, if association rules are being violated, the manager is the right person to call.

• While the manager works closely with the board, he or she is an advisor—not a member of the board. Also, the manager is not your advocate with or conduit to the board. If you have a concern, send a letter or e-mail directly to the board.

• Although the manager works for the board, he or she is available to residents. That doesn’t mean the manager will drop everything to take your call. If you need to see the manager, call and arrange a meeting.

• The manager is always happy to answer questions, but he or she is not the information officer. For routine inquiries, check common information sources first, such as the association newsletter, website, update letter, etc.

• The manager is responsible for monitoring contractors’ performance, but not supervising their staff. Contractors are responsible for supervising their own personnel. If you have a problem with a contractor, notify the manager, who will forward your concerns to the board. The board will decide how to proceed under the terms of the contract.

• The manager inspects the community regularly, but even an experienced manager won’t catch everything. Your help is essential. If you know about a potential maintenance issue, report it to the manager.

• The manager does not set policy. If you disagree with a policy or rule, you can send a letter or e-mail to the manager and ask that they foward to the board for discussion.

• The manager has a broad range of expertise, but he or she is not a consultant to the residents. Neither is he or she an engineer, architect, attorney or accountant. The manager may offer opinions, but don’t expect technical advice in areas where he or she is not qualified.

• Although the manager is a great resource to the association, he or she is not available 24 hours a day—except for emergencies. Please be considerate of the manager’s time and privacy and if your problem is outside of the normal workday (and not a true emergency), please either leave a voice mail message at their office or send an email that can be addressed when they are back in the office.

Source: Community Associations Institute