M-100 The Essentials of community association management Questions and Answers correct

M-100 The Essentials of community association management Questions and Answers correct community association legal entity in which the owners enjoy the protection, enhancement, maintenance & preservation of their homes & property community association has 3 defining characteristics Membership in the community is mandatory & automatic for all owners; certain association docs bind the owner & the association to each other through mandated actions; mandatory lien-based assessments (maintenance fees) are levied on each owner in order to operate & maintain the community assocation lien legal claim by one party (community association) on the property of another (delinquent owner) to obtain the payment of a debt or the satisfaction of an obligation. What does the lien do? Placing a lien on an owner's property protects the community association's interests. It encourages payment of the debt. Consequence of lien is the owner cant sell or transfer the unit without settling the debt. Purpose of a community assocation to provide for the community, business, & governance aspects of the association. This is achieved by administering, maintaining, & enhancing a residential real estate development, and through the establishment of a system of property rights, binding covenants & restrictions, & rules & regulations. 3 basic types of residential community associations (1) Planned community; owner owns his unit ; community owns any common areas such as tennis courts, for the use & benefit of the lot owners second type Condominium; owner owns his living unit & an undivided interest in the common elements of the community. Each owner owns a % of the common elements, which consist of everything except the living units. third type Cooperative; person owns stock or membership; holds a proprietary lease or occupancy agreement for his living unit Proprietary lease or occupancy agreement defines the member or stockholders' rights & obligations in relation to the living unit. The community association owns all of the real estate as a not-for-profit corporation. 3 types of residential community associations can exist by themselves or can be group in clusters called: Master or umbrella associations: consists of more than 1 residential community association. Second type Mixed-use development-consists of a mixture of residential & commercial &/or industrial uses grouped together. Third type 55 & older communities; must have 1 person who is 55 of age or older living in at least 80% of occupied units. Sources of legal obligations for a community association Federal, state & local statues, regulations, & case law second source legal documents unique to the community association that bind the association & its owners third source lender requirements; requirements set by secondary institutions (ex; FHA, Fannie Mae) fourth source standards set by professional bodies; ex: auditing standards set the American Institute of CPAs Types of Federal Laws applying to community associations Equal employment opportunity commission (EEOC); federal govt prohibits discrimination against otherwise qualified people in hiring, promotion, dismissal, based on specific characteristics like race & ethnicity, age, color, gender, religion second federal law Fair Debt Collection Practices act: protect debtors from unscrupulous debt collects & to impose a consistent & fair method to collect debts. third federal law Fair Labor & standards act (FSLA); dictates standards for the basic minimum wage & overtime pay fourth federal law Family & Medical Leave Act (FMLA); requires employers of 50 or more employees to provide up to 12 weeks of unpaid, job-protected leave to eligible employees for birth or adoption of a child or serious illness of the employee or spouse, child or parent. fifth federal law Federal Insurance contributions act (FICA) sixth federal law Occupational Safety & Health Act (OSHA) 7th federal law US Bankruptcy code 8th federal law Fair housing Act Highlights of fair housing act Reasonable accommodations/modifications; they created a new class of protected individuals - those w/ disabilities Maintenance: a person with a disability can sue the association for failing to maintain physical components of the community needed by the resident. Pets/Service Animals; No difference between having a pet to help with physical disability or mental disability State Statues Statutes are laws written & adopted by legislatures or administrative agencies: 3 types of state statutes that apply to community associations: General State Statutes One that applies to community associations, as well as to other types of organizations Specific state statutes One that applies only to 1 or more types of community associations Uniform state statutes National conference of commissioners on uniform state laws draft generic, content-specific wording for topical issues to encourage uniformity among the states Governing Documents of community associations purpose: to provide legal structure & operation of the community the documents do 4 things: define the rights & obligations of both the community association & its owners create a binding relationship between each owner & the community association establish the mechanisms for governing & funding the community association's operations including the establishment of automatic lien set forth rules & restrictions for the: protection of both owners & the community; enhancement of property values; promotion of harmonious living General hierarchy of authority for governing docs If there are conflicts between docs, the document that is here in the hierarchy would prevail. The higher a document's place in the hierarchy, the greater its legal weight in a court of law Recorded map, plat or plan Help define an owner's or a community's tile to property Declaration, CC&Rs, master deed Declaration brings the condo or planned community into existence because it spells out the essential elements of ownership Proprietary lease or occupancy agreement Used in cooperative; defines the member or stockholder's rights & obligations in relation to the living unit 4 parts to the proprietary lease or occupancy agrmt 1. identifies premises that stockholder is permitted to occupy exclusively. 2. Defines the term of the lease & rent that is payable by the stockholder. 3. establishes the powers & obligations of the cooperative's board of directors, including assessment rights. 4. defines events which would result in the termination of the proprietary lease Articles of Incorporation Community association's corporate structure is established when a developer's attorney creates the association's governing docs. Attorney may file articles of incorporation with the state corporation agency. 4 parts to the Articles 1. Brings the corporation into existence; 2. Define its basic purpose and powers; 3. Indicate whether stock will be issued; 4. Indicate the number of board members & identify the initial board Bylaws Formally adopted regulations for the administration & management of a community association. Bylaws address 7 topics: Requirements for membership in the community association Requirements for membership meetings Voting rights of member owners Procedures for electing the board of directors Procedures for board of directors to select officers General powers & duties of the board Provision for indemnification of officers & directors - except in cases of gross negligence or willful misconduct To indemnify & hold harmless To exempt a person or entity from responsibility for claims made against the organization AND To reimburse or directly pay for the person or entity for damages or expenses incurred as a result of such claims Resolutions Rules & Regulations for all 3 types of community associations are established by means of board resolutions. A resolution is a motion that follows a set format & is formally adopted by the board of directors. Public Offering Statement Not a governing document. It's a disclosure statement that provides info on the community association to the first prospective buyers in a new development Mandated by state statute. Rule regulation or resolution, a specific statement of required behavior or action, a violation of which carries a penalty Architectural Guidelines Rule that applies to the appearance of an owner's lot or exterior of his unit or improvements Scope of rules & guidelines In a community association, rules & guidelines outline expected behavior, identify limitations, and govern the community in 4 areas 1. Use of common property. Rules & guidelines are developed in this area to promote harmonious living. 2. The use of individual lots or units. This helps with conformity within the association. 3. changes in the architecture, construction, or the appearance of lots or units 4. Behavior of residents, guests, & other visitors. Types of Resolutions Resolution is a motion following a set format & formally adopted by the Board. Resolutions should be Kept in a Book of Resolutions 4 types of resolutions Policy Resolutions: affect owner's rights & obligations & usually address ambiguities & omissions in the declaration Administrative Resolutions: address the internal operations of the community association & usually address ambiguities & omissions in the bylaws. Special Resolutions: These are resolutions stating board decisions that apply a policy or rule to an individual situation. General Resolutions: These are resolutions which involve routine events Sources of authority to make & enforce rules 1. State Statues & court decisions: often statutes or case law empower the board to make & enforce rules. Consult w/ legal counsel often to ensure rules are proper under current law. 2. Governing Docs: Governing docs provide general powers, which consist of the broad authority to adopt & enforce rules in order to carry out the main purpose of the community association. The purpose is to preserve, maintain, protect & enhance the community's property. Criteria for valid & enforceable rule In general, courts recognize the following list as characteristics of a valid rule. People are more likely to accept & cooperate w/ rules with these characteristics: 1. Rule must not violate a fundamental constitutional right; 2. Rule must be consistent w/ applicable federal, state & local statutes & community's governing docs; 3. Rule must reasonable relate to the operation & purpose of community. 4. Rule must be reasonable-just, sensible & not excessive; 5. Rule must be fair. Not create a separate class or group of people. 6. Rule must be capable of uniform enforcement. 7 Rule must be uniformly enforced-no selective enforcement or exceptions; 8. Rule must be necessary. Steps in developing rules 1. Determine the need for a rule in the specific area; why? check to make sure your association's existing rules & governing docs are inadequate to address the issue 2. Consider both the immediate impact of such a rule & its long term implications. How is rule likely to be received? Will it create a solution? 3. Identify the source of your community's authority to make a rule in the specific area involved 4. Define the scope of the rule; who & what 5. Apply an enforceability test. Check to make sure the proposed rule has the 8 characteristics of a valid & enforceable rule. 6. Give notice of any proposed rule. Build consensus & support for the rule before its adopted in order to gain acceptance & compliance. 7. Act promptly on a proposed rule. once a proposed rule has been published & input received, board should act on it at its next regularly scheduled meeting 8. Give notice of an adopted rule. Send notice to owner's last known address in community's records. 9. Revise the rules & regs document to include the new rule Benefits of using a resolution process to adopt rules Resolution is a motion that follows a set format & is formally adopted. Benefits: Resolution process: Provides a thorough, deliberate approach to making rules; provides for consistency in making & wording rules; provides a formal record of all rules made As a Result the process: Protects owners from arbitrary board actions; Protects community from charges that could result in invalid & unenforceable rules Resolution Format: Resolution contains 4 sections (PASS) Purpose: Why a rule is being adopted Authority: Primary source of a board's authority to make a rule on the topic Scope & intent: who will be affected; for what period of tie; reach or range & extent of rule; penalties for noncompliance Specifications: State clearly & completely what those bound by the rule will be expected to do Development of Architectural Guidelines Development of Architectural Guidelines begin with review of governing docs to determine in what areas the board can allow a change. Usually community's declaration, CC&Rs or master deed provides for architectural changes. In community's best interests for board to establish written architectural guidelines for 2 reasons: 1 Written guidelines indicate to owners what types of changes will be allowed under normal circumstances; 2 Written guidelines are a way to avoid claims of arbitrary or selective treatment of owners Use of Due Process Procedure to enforce rules Due process procedure is a formal process designed to protect the rights of all parties involved Several benefits to using due process procedure to enforce community association rules: 1. All alleged rule violations are handled in the same manner 2 Use of a due process procedure is recognized by the courts as an indication of legally valid rule enforcement 3 Vast majority of rule violations an be resolved w/ this procedure, this avoiding going to court 4. Opportunity to be heard in a non-threatening fact-finding forum is often enough to result in a person's voluntary decision to obey a rule 5 Such a procedure provides an opportunity to explore alternative means to resolve a violation Basic steps in a community association due process procedure for handling alleged rule violations. If violation is resolved after any of the steps, don't need to continue to enforcement process 1. Consider calling the resident or sending a courtesy letter to resolve violation. Check state statutes or governing docs for guidance w/ formal enforcement process