M-100: Community Association Management – HOA
Governance Exam Questions and Verified Answers
with Rationale Latest Edition 2026/2027
Part 1: Core Characteristics & Types of Associations
Question 1
Each of the following are key characteristics of community
associations EXCEPT:
A. Mandatory lien-based economic charges or assessments
are levied on each owner in order to operate and maintain
the community association.
B. Membership in the community association is mandatory
and automatic for all owners.
C. A requirement of community association ownership is
serving on the board of directors.
D. Certain documents bind all owners to be governed by
the community association.
Correct Answer: C. A requirement of community
association ownership is serving on the board of directors.
Rationale: The three defining characteristics of any community
association are: (1) mandatory membership, (2) mutually
binding documents (CC&Rs), and (3) lien-based assessments.
While community involvement is strongly encouraged, owners
are not legally required to serve on the board of directors.
Question 2
,Each of the following are basic types of residential community
associations EXCEPT:
A. Planned community
B. Townhouse
C. Cooperative
D. Condominium
Correct Answer: B. Townhouse
Rationale: Community associations are defined by ownership
rights, not architectural styles. A townhouse is an architectural
style; a townhouse development can be organized as a planned
community or a condominium, but "townhouse" on its own is
not a legal association type. The three primary legal types are
planned communities, condominiums, and cooperatives.
Part 2: Legal Documents & Hierarchy of Authority
Question 3
Complete the following sentence: The _________ bring the
community association into existence, define its basic purposes
and powers, and indicate whether stock will be issued.
A. recorded map, plat, or plan
B. declaration, CC&Rs, or master deed
C. proprietary lease or occupancy agreement
D. articles of incorporation
Correct Answer: D. articles of incorporation
Rationale: The articles of incorporation formally establish the
association as a legal corporate entity under state law, outline its
,core purpose, and state whether stock will be issued (frequently
applicable in cooperatives).
Question 4
True or False: According to the general hierarchy of authority
for governing documents, the bylaws would control in a conflict
with the recorded map, plat, or plan.
Correct Answer: False
Rationale: Governing documents follow a strict hierarchy.
Documents lower in the hierarchy cannot override or conflict
with those higher up. Recorded maps, plats, and plans sit higher
in authority than bylaws; therefore, the map, plat, or plan
prevails in any conflict.
General Hierarchy:
1. Federal, State, and Local Laws / Statutes
2. Recorded Declaration (CC&Rs / Master Deed)
3. Articles of Incorporation
4. Bylaws
5. Rules and Regulations / Board Resolutions
Part 3: Board Authority & Fiduciary Duty
Question 5
Complete the following sentence: The board of directors in a
community association has a _________ to act in the best
interests and for the benefit of the community as a whole.
A. bond
, B. fiduciary duty
C. ballot
D. quorum
Correct Answer: B. fiduciary duty
Rationale: Board members occupy a position of trust. Their
fiduciary duty obligates them to act reasonably, avoid self-
interest and conflicts of interest, and exercise ordinary care on
behalf of the entire membership.
Question 6
True or False: The "business judgment rule" means that if a
board has exercised reasonable business judgment in making a
decision, the court will generally not consider the board
negligent in its fiduciary duty.
Correct Answer: True
Rationale: Under the business judgment rule, courts will
generally not hold board members personally liable for decisions
made within the scope of their authority, provided those
decisions were made in good faith, with due care, and in the
honest belief that they were serving the best interests of the
community.
Part 4: Association Rules & Resolutions
Question 7
Adoption of the annual operating budget is an example of which
type of board resolution?
Governance Exam Questions and Verified Answers
with Rationale Latest Edition 2026/2027
Part 1: Core Characteristics & Types of Associations
Question 1
Each of the following are key characteristics of community
associations EXCEPT:
A. Mandatory lien-based economic charges or assessments
are levied on each owner in order to operate and maintain
the community association.
B. Membership in the community association is mandatory
and automatic for all owners.
C. A requirement of community association ownership is
serving on the board of directors.
D. Certain documents bind all owners to be governed by
the community association.
Correct Answer: C. A requirement of community
association ownership is serving on the board of directors.
Rationale: The three defining characteristics of any community
association are: (1) mandatory membership, (2) mutually
binding documents (CC&Rs), and (3) lien-based assessments.
While community involvement is strongly encouraged, owners
are not legally required to serve on the board of directors.
Question 2
,Each of the following are basic types of residential community
associations EXCEPT:
A. Planned community
B. Townhouse
C. Cooperative
D. Condominium
Correct Answer: B. Townhouse
Rationale: Community associations are defined by ownership
rights, not architectural styles. A townhouse is an architectural
style; a townhouse development can be organized as a planned
community or a condominium, but "townhouse" on its own is
not a legal association type. The three primary legal types are
planned communities, condominiums, and cooperatives.
Part 2: Legal Documents & Hierarchy of Authority
Question 3
Complete the following sentence: The _________ bring the
community association into existence, define its basic purposes
and powers, and indicate whether stock will be issued.
A. recorded map, plat, or plan
B. declaration, CC&Rs, or master deed
C. proprietary lease or occupancy agreement
D. articles of incorporation
Correct Answer: D. articles of incorporation
Rationale: The articles of incorporation formally establish the
association as a legal corporate entity under state law, outline its
,core purpose, and state whether stock will be issued (frequently
applicable in cooperatives).
Question 4
True or False: According to the general hierarchy of authority
for governing documents, the bylaws would control in a conflict
with the recorded map, plat, or plan.
Correct Answer: False
Rationale: Governing documents follow a strict hierarchy.
Documents lower in the hierarchy cannot override or conflict
with those higher up. Recorded maps, plats, and plans sit higher
in authority than bylaws; therefore, the map, plat, or plan
prevails in any conflict.
General Hierarchy:
1. Federal, State, and Local Laws / Statutes
2. Recorded Declaration (CC&Rs / Master Deed)
3. Articles of Incorporation
4. Bylaws
5. Rules and Regulations / Board Resolutions
Part 3: Board Authority & Fiduciary Duty
Question 5
Complete the following sentence: The board of directors in a
community association has a _________ to act in the best
interests and for the benefit of the community as a whole.
A. bond
, B. fiduciary duty
C. ballot
D. quorum
Correct Answer: B. fiduciary duty
Rationale: Board members occupy a position of trust. Their
fiduciary duty obligates them to act reasonably, avoid self-
interest and conflicts of interest, and exercise ordinary care on
behalf of the entire membership.
Question 6
True or False: The "business judgment rule" means that if a
board has exercised reasonable business judgment in making a
decision, the court will generally not consider the board
negligent in its fiduciary duty.
Correct Answer: True
Rationale: Under the business judgment rule, courts will
generally not hold board members personally liable for decisions
made within the scope of their authority, provided those
decisions were made in good faith, with due care, and in the
honest belief that they were serving the best interests of the
community.
Part 4: Association Rules & Resolutions
Question 7
Adoption of the annual operating budget is an example of which
type of board resolution?
