HOMEOWNERS' ASSOCIATION BASICS
WHAT ARE COMMON INTEREST COMMUNITIES?
ORGANIZATION--WHO'S IN CONTROL?
WHAT ARE THE ASSOCIATION DOCUMENTS?
HOMEOWNERS' ASSOCIATION BASICS
The number of homeowners’ associations has exploded in recent years. In 2005, there were 274,000 association-governed communities with 54.6 million residents. At least 1.25 million people serve on community association boards. These numbers are astonishing when you consider that homeowners’ associations are a relatively recent development.
It wasn’t until the 1960s that Americans began collective private ownership of residential property, in the form of condominiums. Since then, the legal system has been struggling to catch up with this trend. Colorado’s first statute addressing condominium ownership was the Condominium Ownership Act, enacted in 1963. Colorado then enacted the Colorado Common Interest Ownership Act in 1992 to govern the broader category of common interest communities.
Buying a home now entails understanding corporate governance, keeping up with the newly developed, and still changing laws, as well as complying with the unique responsibilities associated with being part of a common interest community.
WHAT ARE COMMON INTEREST COMMUNITIES?
“Common interest community” (“CIC”) means real estate described in a declaration with respect to which a person, by virtue of such person’s ownership of a unit, is obligated to pay for real estate taxes, insurance premiums, maintenance, or improvement of other real estate described in a declaration. The purpose of the CIC is for the development of the property, sale of residential units, and administration of the residential property. The CIC establishes a plan for the community by which the developer develops the lots according to a marketing and sales plan. The CIC is continued after the development of the community for the benefit of the owners. Often, a CIC is able to offer certain amenities to the owners in the community which the owners would not be able to afford individually. The CIC also has community rules and regulations to ensure that one owner is not able to use his property in a way that will damage the values of the other owners. The rules may include matters like regulating landscaping plans, limits on the number or type of pets the owner can have, or exterior house colors. The rules create a “community feel” for the neighborhood. The homeowners’ association manages the CIC and enforces the rules.
ORGANIZATION--WHO'S IN CONTROL?
Declarant. The Declarant is the person (or group of persons) who originally owns the property located in the CIC. The Declarant offers to dispose of his interest in the units of the CIC to purchasers as part of a common promotional plan. The Declarant may also reserve special Declarant rights to assist in the sales of the units. The Declarant records the Declaration and is named in the Declaration.
Members. Anyone who buys property in a CIC automatically becomes a member of the homeowners’ association.
Directors. The board of directors is designated by the Declarant or Members to act on behalf of the homeowners’ association. The board of directors is responsible for the operation of the homeowners’ association, but may delegate many duties to the officers or a property management company. The board of directors also appoints members to committees such as an architectural review committee, clubhouse committee, newsletter committee, neighborhood watch committee, or welcoming committee. A typical delegation of duties may be that the architectural review committee is responsible for adopting rules and guidelines to further the restrictions contained in the declaration and reviewing and approving/rejecting plans submitted by homeowners.
WHAT ARE THE ASSOCIATION DOCUMENTS?
Declaration (Declaration of Covenants, Conditions and Restrictions). A CIC is created by recording a Declaration. The Declaration is the document which establishes the common areas, sets rules for the individual units or lots, and provides for an association to manage the community.
Bylaws. The bylaws set forth the rules, regulations, and procedures that govern the homeowners’ association, including the rights and powers of its directors, officers, and members. The bylaws also include the procedures to call and hold meetings, vote on issues, and elect directors.
Minutes. Minutes are the official record of the Association’s business conducted at a meeting. Major decisions that affect the Association or each Member’s rights and responsibilities as a homeowner are reflected in the Minutes.
Rules and Regulations. Rules and Regulations are initially established by the Declarant and are specified in the Declaration. The Board of Directors can add to or amend the Rules and Regulations through a process that is described in the Bylaws and the Association’s responsible governance policy on adoption and amendment of policies, procedures, and rules.
If you have a question about Homeowners’ Associations, please contact us. As always, we look forward to being of service to you with any legal, business, and personal issues you may have.
“The world is full of fools and faint hearts; and yet everyone has courage enough to bear the misfortunes, and wisdom enough to manage the affairs, of his neighbor. “
~Benjamin Franklin
“Good fences make good neighbors.”
~Robert Frost
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