A Homeowners Association (HOA) is the governing body of a planned unit community, or real estate development. It’s created so that the organization and maintenance of the common areas are properly supervised. The ruling documents, which are referred to as the Declaration of Covenants, Conditions and Restrictions (CC&R’s), and the By-Laws, specify the HOA board’s responsibilities.
The board of directors consists of elected homeowners in the community, as well as the original developer. The developer will contribute dues for any unsold units and thereby holds a strong position on the board, generally until the project is sold out. Sometimes the developer may retain units as well as a board position; again, the CC&R’s and By-Laws will dictate the terms of these agreements.
Now that you know what the HOA is, it’s important to understand their role.
1. Enforcement of the Rules
When it comes to maintaining a sense of order amongst the homeowners, common areas within the real estate development need to be maintained and certain rules must be followed. The neighborhood and the external aesthetic appearance of homes within the community must also be kept to a specific standard. All new rules and restrictions are sent out via notices or newsletters to the membership; certain changes may require a majority vote by the homeowners. New rules cannot negate any previously set down by the CC&R’s without an amendment, which must be voted for by a majority of the membership.
If a homeowner is in violation of a rule, they will receive a notice, explaining how the situation can be rectified and the legal recourse that the HOA might take if the violation is not set right within a given time frame. Commonality, property value and sense of order are maintained within the community when such rules are enforced by the HOA.
2. Minutes Minutes
Keeping a record of decisions that are made during board meetings is also one of the HOA board responsibilities. A document stating issues addressed during the regular or executive meeting is created to keep track of the minutes. The minutes will record the type of information that was focused upon – including any issues that the board members voted on, as well as any objections that were raised by the HOA members. The HOA may need to reference these details later, or may need to support decisions they made.
3. Execution of Contracts
Another HOA board responsibility is to create binding financial or legal obligations, and execute contracts with third parties on the Association’s behalf. The HOA board is also responsible for acquiring appropriate insurance coverage, hiring a suitable property management company and retaining legal counsel on behalf of the association. The obligatory duties must be satisfied by the HOA board of directors, who must make the best possible vendor and professional choices for the entire body of homeowners.
4. Financial Management
Ensuring that the Association makes sound financial judgments on the homeowners’ behalf is also the responsibility of the HOA board. It has several financial duties, which include the assessment and collection of dues from homeowners every month. All of the operating expenses of the association are to be covered by these dues, as well as a reserve fund for future replacement of area components and unforeseen costs. The board and management company are also charged with making certain a reserve study is performed as often as dictated by state law. The reserve study helps to outline the Association’s annual budget, as well as the ideal contributions necessary to appropriately maintain the reserve fund account.
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