Your HOA – What you Should Know

Rick Johnson
President

Excerpt from The 2017 September Breeze 

Homeowners associations (“HOA”) allow the owners to administrate and manage their community.

The main purpose of our HOA is to enforce a set of covenants (promises) which bind all owners.
Our covenants are contained in a document called “Public Offering Statement” (POS).
Since our HOA includes common property, such as the pool, tennis courts, and clubhouse, individual property owners are required to pay assessments to enable the HOA to operate the association and maintain the common property.
Since both the POS and the Bylaws are recorded as county real estate records, the provisions of these documents legally bind residents when they purchase their homes.
HOAs also have the backing of state law, which clarifies legal authority in many ways and may provide additional legal authority not contained in the HOAs’ documents. HOA actions are usually upheld in court if the authority is provided in the documents or by statute and the board acts reasonably in carrying out its authority.

The Board of Trustees

To enforce its rules, a board of five volunteer owners is elected by the owners to govern our HOA.
The board holds regular meetings to enforce the covenants, to establish a budget, authorize expenditures, collect assessments, problem solve, and oversee maintenance of the common property.
The board acts in much the same way as a corporate board of directors with the Trustees performing most of the association functions, although we may delegate specific tasks to others.
Association members are like shareholders in a corporation; they have an interest in the corporation but do not run the association.
That responsibility lies with the board to do so. Fiduciary duties imposed upon Trustees include two components, undivided loyalty, and reasonable business judgment.
Undivided loyalty means that each board member must act in the best interest of the association.
For example, a board member should vote for matters that are necessary or appropriate even though some owners do not agree.
 Reasonable business judgment in conducting the affairs of the association is the second requirement of trustee fiduciary duty. Each trustee must understand the association’s business, actively participate, determine what is required for the association to operate, and then vote prudently.
 For example, the law does not mandate securing three proposals on a project; however, it is a reasonable method to determine a fair price to pay for work.
It is also reasonable to get competent advice in areas that require expertise. Engineering, architecture, law and reserve planning are all areas that require a high level of training to do well. The board is not elected to guess at highly complex issues but to use prudent judgment based on competent input. While that input may cost money, the consequences of uninformed decisions are usually much costlier. In addition to these fiduciary standards, the board is responsible to:

 1. Provide for the operation, care and improvement of the common elements.

2. Prepare, adopt, and distribute the annual budget.
3. Levy, collect and spend assessments according to the approved budget.
4. Hire and fire personnel necessary for the maintenance and operation of the property.
5. Obtain adequate and appropriate kinds of insurance.
6. Adopt rules and regulations regarding the use of the common area.
7. Keep detailed and accurate financial records of the property operation.
8. Enforce provisions of the governing documents, rules and regulations.
9. Vote on all contracts and policies.

 It is hoped that you have a better understanding of both HOA operations and trustee’s responsibilities.
Homeowners are again reminded that your monthly maintenance fee is DUE on the first of each month. Kindly arrange your mailing so it will arrive in time to avoid a late fee assessment.