If you live in a condominium complex or a neighborhood with an HOA, this article written by Richard Thompson of RealtyTimes explains some terms and practices that are good to know. He also puts forth some great ideas on how to make sure the HOA makes sense for the neighborhood.
THE GOVERNING DOCUMENTS OF YOUR HOA
Written by Richard Thompson
The owner's manual of every homeowner association is the governing documents, sometimes called Declaration, Bylaws, Rules and Regulations or CC&Rs (Codes, Covenants & Restrictions). The CC&Rs are usually drafted by attorneys that are knowledgeable about HOA law, but not so much on how it plays out in real life. Some developers think CC&Rs are boilerplate (one size fits all) and use governing documents written for another project. This is ill advised since each HOA has its own unique needs and state HOA laws change frequently. This could lead to inappropriate or illegal provisions being included or appropriate provisions being excluded.
These anomalies aside, many boards are consternated that the CC&Rs are vague. Rather than neatly laying out the parking and pet rules, they are only mentioned in general terms, if at all. The collection procedure is barely addressed except, perhaps, the date fees are due. What about late fees and finance charges? The details are usually absent. This is crazy! How is the board supposed to know what to do?
The governing documents are intentionally left vague to allow the members to decide how they want things to run. This is particularly true of rules. Rule making does not require amending the governing documents since the authority to make rules is granted to the board. One essential of rule making is to compile them in a Book of Rules so they don't get buried in meeting minutes.
When it comes to making rules and policies, less is more. We live in a world of rules and laws. Only adopt those that are really needed. Think long and hard before adopting a rule that is governed by common sense. Do you really need a rule against loud parties? A rule is useless unless it's enforceable. A parking rule that requires someone to sneak around recording license plates or a pet rule that requires taking pictures of dog doo doo is no way to spend a life or HOA money. The goal is to get most folks to willingly comply, not to set them up for confrontation.
When it comes to rule making, remember that “locks keep your friend out.” In other words, no rule is going to control someone who takes great joy in breaking them. For these folks, this adage applies: “Never try to teach a pig to sing. It’s a waste of time and irritates the pig.” Rather than trying to out-rule a scofflaw, personal persuasion or compromise is usually more effective. However, if the issue is important enough, like a resident dealing drugs, stockpiling garbage or raising pitbulls for malicious purposes, using law enforcement and the courts may be the most expeditious solution.
The HOA can establish rules that are stricter than city, county and state statutes and sometimes do in the area of zoning. For example, even though local zoning may allow certain businesses like daycare facilities, the HOA may prohibit them. Prohibiting home businesses that have no impact on the neighbors (parking, deliveries, noise, smell, dust, storing flammables, etc.) is not reasonable.
HOAs can also establish very stringent appearance and design rules which leave little wiggle room for creativity. These regulations can have a negative effect on market values when restrictions are placed on things like color and roofing. Color preferences change about every five years. Requiring all buildings to adhere to a 1970s color scheme will cause values to fall. And those cedar shingles are now a roofing dinosaur. Cedar shingles are both a fire hazard and expensive to maintain and replace. New roofing alternatives have much longer useful lives, warranties, require little maintenance and have smaller price tags. When it comes to appearance rules, allow flexibility and review based on changing consumer preferences.
The Resolution Process is a great way to deal with complex issues like collections, parking and architectural design. Resolutions can be enacted without amending the CC&Rs and provide a template for defining the issue, penalty for violation and appeal process. The Resolution Process includes a member review of the proposed resolution prior to enactment. Adding this feature ensures greater compliance since all members have been put on notice and have been given a chance to comment. Resolutions can be recorded and should be so prospective buyers are put on notice of significant issues.
The board does not have authority to make a rule or policy that contradicts the CC&Rs. To change the CC&Rs requires a vote of the appropriate number of members. The board may enact rules, policies and resolutions that expand on and are in keeping with the CC&Rs. For example, if the CC&Rs state "The homeowner association may enact architectural design restrictions", the board could enact a policy that states "No awnings, fences or play structures are allowed" and it would pass the test. The board, however, is not required to pass design restrictions. The CC&Rs only provide that option.
Amending CC&Rs can be expensive. Sometimes there is a good reason to do so to remove an illegal provision or to conform with changes that have taken place in state or federal law. Amending CC&Rs should only be done in consultation with an attorney that specializes in HOA law. Many provisions in CC&Rs are interrelated and changing one can impact another. A good attorney understands how it all fits together. Once the amendment(s) are passed, the amended CC&Rs should be recorded so the world is put on notice.
If there are many substantial changes to the CC&Rs that are being proposed, they should be voted upon separately rather than lumping them together which could result in the good going down with the bad or controversial.
Expanding the CC&Rs is one of the board's greatest challenges. It can be done by amending them or adding Rules and Resolutions. When expanding, take your time and get member input. Measure twice and cut once. Finally, it's okay to NOT make rules. Less is more, more or less.
Today, many HOAs are run by professional companies, but the homeowners can vote to be self-managed. Whether run by professional management or the homeowners, be civic minded and participate in the meetings and voting.