What are the "Articles of Incorporation"?
Before any property in a condominium or planned development is sold, the developer forms a Homeowners’ Association to run it. Each purchaser of property in the development automatically becomes a member of the Association.
The Association is typically created by filing Articles of Incorporation (“Articles”) for a nonprofit organization with the secretary of state where the development is located (although some states allow unincorporated associations).
The articles are usually brief and contain only the basic information about the Association, its name, location, and its purpose. There is ordinarily no need for a buyer or owner to review the Articles.
What is contained in the "HOA By-laws"?
Once formed, the Association typically adopts a set of bylaws. Bylaws are important: They describe how the Association is run, set out voting rights and procedures, and contain rules for such things as how to call a meeting and how often meetings must be held. The bylaws may also describe the Association’s rights and responsibilities. For example, the Association is typically responsible to enforce the rules and regulations and to collect assessments. The bylaws may also lay out procedures for creating the annual budget and determining assessment amounts.
Associations are generally run by a board of directors (a “Board”) made up of a certain number of members (owners) elected by the membership at large (all the owners) during periodic elections. The bylaws typically set forth the length of the terms for the Board members and the procedures for elections. If, for example, there’s someone you wish would leave the Board — perhaps so that you can assume a seat there — you’ll want to know about the term limits!
It is helpful for an owner or potential buyer to review the bylaws to understand how the Association functions and to be familiar with the powers of, and the restrictions on the Association. You may be surprised to find out, for example that the Association can hold closed meetings or remove a Board member without notifying the owners.
What is the Declaration of Covenants, Conditions and Restrictions (CC&Rs)?
Usually referred to as the CC&Rs are the “big Kahuna” of the governing documents… They contain the most comprehensive and probably the most important information about the development and its operation. If there is anything in another governing document that conflicts with a provision of the CC&Rs, the CC&Rs win (and the conflicting provisions are considered invalid).
The Declaration of CC&Rs is typically a lengthy document, setting up the general structure of the development and describing what land is subject to the governing documents, as well as what parts of the development are common areas owned by the Association.
The CC&Rs also contain restrictions on the use of each owner’s property as well as of the common areas. They specify the Association’s authority and obligations and define the rights and responsibilities of Association members (owners). Every owner must abide by all the rules, restrictions, terms, and conditions found in the CC&Rs.
By reviewing the CC&Rs, an owner or potential purchaser can learn about the general restrictions on the use of the property in the development, and about the rights and responsibilities of owners. For example, a review of the CC&Rs may reveal that owners may not have visible satellite dishes or antennas, or that all owners must mow their lawns once a week.
Most CC&Rs also contain procedures for amendments. If the development is older, the CC&Rs may already have a number of amendments revising the original terms.
Most state laws require recording the CC&Rs in the real property records in the county where the development is located. A copy must ordinarily be provided to a buyer prior to making a purchase. If you are an owner or potential buyer and don’t already have a copy of the CC&Rs, get one, and familiarize yourself with its terms.
Rules and Regulations
Although general rules and regulations may be contained within the CC&Rs, the Association typically also adopts separate (usually more lengthy and specific) “rules and regulations.” The Association likely has wide discretion to adopt rules and regulations (provided they do not violate any state or federal law and do not conflict with the terms of the CC&Rs).
Rules and regulations can cover anything from prohibiting broken cars and trash in yards to regulating the height of fences to limiting the number of swimmers in the pool. Because the purpose of the Association is to do what’s best for the common good and value of the development regardless of whether all individual owners agree, the rules and regulations are often the most controversial documents in a development, and the cause of many disputes.
Because the rules and regulations can affect how the property in the development is used, a potential buyer should study them and determine whether they can live with them before making a purchase. For example, you might have second thoughts about purchasing in the development if you find out that you’d have to get rid of your golden retriever, because owners are not allowed to have dogs over ten pounds. Current owners should also be familiar with the rules and regulations and keep up with any changes.