CMCA - M100 UPDATED ACTUAL Exam
Questions and CORRECT Answers
Waiver of lien - CORRECT ANSWER Contract provision that gives up the right to make a
claim against the community association for payments not received. A waiver of lien should be
used when a project involves the heavy use of materials or subcontractors—e.g., some type of
construction project—and the community association wants to avoid the risk of having to pay for
materials or subcontractors if the contractor fails to do so. A performance bond, payment bond,
and waiver of lien all provide for the community association's financial protection if the
contractor should default.
Waiver of subrogation - CORRECT ANSWER A common insurance contract endorsement
designed to minimize a community association's property exposure to loss, the waiver of
subrogation prohibits the insurer from attempting to seek restitution from a third party who
causes any kind of loss to the insured. This type of arrangement is allowable under certain
circumstances where the insured could be held liable for a claim that is paid. In other words, a
waiver of subrogation is the endorsement that deletes the right of the association to seek
reimbursement for a covered loss from the owner who caused the damage. Also commonly
known as a "waiver of the transfer of recovery rights."
Waiver of the transfer of recovery rights - CORRECT ANSWER A common insurance
contract endorsement designed to minimize a community association's property exposure to loss,
the waiver of the transfer of recovery rights prohibits the insurer from attempting to seek
restitution from a third party who causes any kind of loss to the insured. This type of
arrangement is allowable under certain circumstances where the insured could be held liable for
a claim that is paid. In other words, a waiver of the transfer of recovery rights is the endorsement
that deletes the right of the association to seek reimbursement for a covered loss from the owner
who caused the damage. Also commonly known as a "waiver of subrogation."
Waiver provision - CORRECT ANSWER Contract provision that states that a waiver
(permission) by one party of any breach of contract (failure to fulfill a provision) by the other
party shall not act as a general waiver of future breaches. In other words, each party says to the
other, "If we let you slide on any contract requirement at any time, it doesn't mean we're letting
you slide on any other requirements, or even on that one a second time— unless we decide to let
you do it again."
,Work order/response form - CORRECT ANSWER A form for assigning maintenance work to
be done. With some planning, it can be used— • To document owner and tenant requests • To
assign maintenance tasks to both maintenance staff and contractors • As a response form to be
returned to an owner or tenant, indicating that work was completed or confirming that it was
assigned • As a basis for allocating charges, when appropriate A work order/response form has
several benefits. It— • Identifies whether the need is an emergency or not • Requires attention •
Allows follow-up to evaluate satisfaction • Provides a means of monitoring costs • Provides a
history of the repairs that have been made • Documents any problems with contractors reported
by owners or tenants • Indicates if the work is a recurring problem necessitating further
evaluation Most software programs have work order/response forms as part of their system.
Treasury bonds - CORRECT ANSWER Investment option that matures in more than 10
years. Treasury bonds are issued in denominations from $1,000 to $100,000. They are also
interest-bearing with interest paid every six months. When the bond matures, the buyer receives
the full face value. Treasury bonds are among the safest investment options for community
associations because payment is guaranteed by the government.
Treasury notes - CORRECT ANSWER Investment option that matures in one to 10 years.
Treasury notes are issued in denominations from $1,000 to $100,000. They are also interest-
bearing with interest paid every six months. When the note matures, the buyer receives the full
face value. Treasury notes are among the safest investment options for community associations
because payment is guaranteed by the government.
Turnover - CORRECT ANSWER That date upon which homeowners gain control of their
association from the developer. Typically, turnover occurs at an annual or special meeting of the
homeowners.
U. S. Bankruptcy Code - CORRECT ANSWER The purpose of bankruptcy laws is to help
honest people and businesses find a way to pay their debt or get a fresh start. Bankruptcy laws
help people who can no longer pay their creditors start anew—by liquidating assets to pay their
debts or by creating a repayment plan. Among many other corrections and revisions, and with
the strong lobbying efforts of CAI staff and volunteers, the Bankruptcy Prevention and
Consumer Protection Act passed in 2005 contained a small provision benefitting community
associations. It clarified that associations have the authority to collect assessments that come due
after the date the homeowner filed for bankruptcy.
,Umbrella association - CORRECT ANSWER Governance structure where there is more than
one residential community association grouped together. Often there is a hierarchy with
independent subassociations under an umbrella association Also known as a Master Association.
Words Definition
Veterans Administration (VA) - CORRECT ANSWER One of four entities—including
Fannie Mae, Freddie Mac, FHA and VA—that have an impact on community association
insurance obligations. Federallyestablished secondary mortgage institution that sets requirements
that community associations have to meet if owners are to participate in their financing or
repurchase programs. Federal agency regulates and influences such items as the amount of
insurance a community association must carry, procedures for financial operations, procedures
an association must follow to dissolve, and requirements for the upkeep of property.
Volunteer or self-management - CORRECT ANSWER The community association is
managed by volunteer members of the board itself or by committees under the direction of the
board. While there are no out-ofpocket management fees, continuity can be difficult because of
volunteer turnover and inconsistent service. Professionalism depends on the skills and experience
of those who volunteer. Other management options include hiring an associationemployed
manager or management company.
Ad hoc committees - CORRECT ANSWER This committee's purpose is to deal with a one-
time issue and make recommendations to the board within a specific time frame. The board
should use a resolution to establish an ad hoc committee and clearly state the charge and
expected outcome to the committee. Ad hoc committees may be formed to review parking
regulations, develop investment guidelines, or to renovate a lobby, for example.
Advertising injury - CORRECT ANSWER Advertising injury provisions in commercial
general liability insurance (CGL)include language providing coverage to the community
association with respect to damages resulting in "misappropriation of advertising ideas or style of
doing business" or "infringement of copyright, slogan, or title." Community associations with
newsletters, directories, and websites that contain advertising and use online, magazine or
newspaper articles without reprint permission have this exposure.
Agenda - CORRECT ANSWER An agenda is more than an announcement of the order of
business for a meeting. It is a meeting management tool. Meeting agendas follow a standard
format, largely based on parliamentary procedure
, Aggregate amount - CORRECT ANSWER The total amount that the insurer will pay out
under an insurance policy. This is a common feature of liability insurance policy.
Agreed amount endorsement - CORRECT ANSWER Provides for an agreed upon limit of
property insurance. An "agreed amount" endorsement can also suspend the coinsurance clause.
Coinsurance is a standard element in most property policies that obligates the insured to maintain
a certain amount of property insurance on the entire property or per structure, based on a stated
percentage, usually 80% - 90%. If the insured does not maintain this percentage, the insured will
not be reimbursed for the full loss of the property.
Alternative dispute resolution (ADR) - CORRECT ANSWER An effective way to resolve
alleged violations. It involves submitting the alleged violation to a disinterested third party who
helps the parties reach an amicable solution. This person is not a judge or an expert in
community association law, but can assist in the resolution of the alleged violation.
Appeal - CORRECT ANSWER An appeal is a request for a review of a case by a higher
authority—if permitted by the governing documents, resolution or state statute. For example— if
the hearing panel is a committee, the board of directors acts as the higher authority. If the board
of directors is the hearing panel, the alleged rule violator must appeal to an authority outside the
community association—for example, alternative dispute resolution.
Arbitration - CORRECT ANSWER A process in which a third party—called the arbitrator—
renders a decision as to the respective liabilities of all parties. The object is not to reach a
settlement; instead the arbitrator ultimately makes a ruling. It is an adversarial process that
results in the same "win-lose" or "lose-lose" that you would see in litigation. Arbitration can be
binding or non-binding. A binding arbitration typically cannot be appealed. Once the decision is
rendered, unless you can prove fraud, the decision will be forever binding. A non-binding
arbitration is advisory in nature. The decision that the arbitrator makes does not have to be
followed. In that respect, it is like getting an opinion of your case from a neutral party, which
could result in a fair settlement figure.
Architectural guideline - CORRECT ANSWER A rule that applies to the appearance or
exterior of a lot, home, or unit. Community associations frequently develop architectural
guidelines that address fencing, decks and patios, landscaping, doors and windows, color of
exterior surfaces, and location of improvements upon lots, for example.
Questions and CORRECT Answers
Waiver of lien - CORRECT ANSWER Contract provision that gives up the right to make a
claim against the community association for payments not received. A waiver of lien should be
used when a project involves the heavy use of materials or subcontractors—e.g., some type of
construction project—and the community association wants to avoid the risk of having to pay for
materials or subcontractors if the contractor fails to do so. A performance bond, payment bond,
and waiver of lien all provide for the community association's financial protection if the
contractor should default.
Waiver of subrogation - CORRECT ANSWER A common insurance contract endorsement
designed to minimize a community association's property exposure to loss, the waiver of
subrogation prohibits the insurer from attempting to seek restitution from a third party who
causes any kind of loss to the insured. This type of arrangement is allowable under certain
circumstances where the insured could be held liable for a claim that is paid. In other words, a
waiver of subrogation is the endorsement that deletes the right of the association to seek
reimbursement for a covered loss from the owner who caused the damage. Also commonly
known as a "waiver of the transfer of recovery rights."
Waiver of the transfer of recovery rights - CORRECT ANSWER A common insurance
contract endorsement designed to minimize a community association's property exposure to loss,
the waiver of the transfer of recovery rights prohibits the insurer from attempting to seek
restitution from a third party who causes any kind of loss to the insured. This type of
arrangement is allowable under certain circumstances where the insured could be held liable for
a claim that is paid. In other words, a waiver of the transfer of recovery rights is the endorsement
that deletes the right of the association to seek reimbursement for a covered loss from the owner
who caused the damage. Also commonly known as a "waiver of subrogation."
Waiver provision - CORRECT ANSWER Contract provision that states that a waiver
(permission) by one party of any breach of contract (failure to fulfill a provision) by the other
party shall not act as a general waiver of future breaches. In other words, each party says to the
other, "If we let you slide on any contract requirement at any time, it doesn't mean we're letting
you slide on any other requirements, or even on that one a second time— unless we decide to let
you do it again."
,Work order/response form - CORRECT ANSWER A form for assigning maintenance work to
be done. With some planning, it can be used— • To document owner and tenant requests • To
assign maintenance tasks to both maintenance staff and contractors • As a response form to be
returned to an owner or tenant, indicating that work was completed or confirming that it was
assigned • As a basis for allocating charges, when appropriate A work order/response form has
several benefits. It— • Identifies whether the need is an emergency or not • Requires attention •
Allows follow-up to evaluate satisfaction • Provides a means of monitoring costs • Provides a
history of the repairs that have been made • Documents any problems with contractors reported
by owners or tenants • Indicates if the work is a recurring problem necessitating further
evaluation Most software programs have work order/response forms as part of their system.
Treasury bonds - CORRECT ANSWER Investment option that matures in more than 10
years. Treasury bonds are issued in denominations from $1,000 to $100,000. They are also
interest-bearing with interest paid every six months. When the bond matures, the buyer receives
the full face value. Treasury bonds are among the safest investment options for community
associations because payment is guaranteed by the government.
Treasury notes - CORRECT ANSWER Investment option that matures in one to 10 years.
Treasury notes are issued in denominations from $1,000 to $100,000. They are also interest-
bearing with interest paid every six months. When the note matures, the buyer receives the full
face value. Treasury notes are among the safest investment options for community associations
because payment is guaranteed by the government.
Turnover - CORRECT ANSWER That date upon which homeowners gain control of their
association from the developer. Typically, turnover occurs at an annual or special meeting of the
homeowners.
U. S. Bankruptcy Code - CORRECT ANSWER The purpose of bankruptcy laws is to help
honest people and businesses find a way to pay their debt or get a fresh start. Bankruptcy laws
help people who can no longer pay their creditors start anew—by liquidating assets to pay their
debts or by creating a repayment plan. Among many other corrections and revisions, and with
the strong lobbying efforts of CAI staff and volunteers, the Bankruptcy Prevention and
Consumer Protection Act passed in 2005 contained a small provision benefitting community
associations. It clarified that associations have the authority to collect assessments that come due
after the date the homeowner filed for bankruptcy.
,Umbrella association - CORRECT ANSWER Governance structure where there is more than
one residential community association grouped together. Often there is a hierarchy with
independent subassociations under an umbrella association Also known as a Master Association.
Words Definition
Veterans Administration (VA) - CORRECT ANSWER One of four entities—including
Fannie Mae, Freddie Mac, FHA and VA—that have an impact on community association
insurance obligations. Federallyestablished secondary mortgage institution that sets requirements
that community associations have to meet if owners are to participate in their financing or
repurchase programs. Federal agency regulates and influences such items as the amount of
insurance a community association must carry, procedures for financial operations, procedures
an association must follow to dissolve, and requirements for the upkeep of property.
Volunteer or self-management - CORRECT ANSWER The community association is
managed by volunteer members of the board itself or by committees under the direction of the
board. While there are no out-ofpocket management fees, continuity can be difficult because of
volunteer turnover and inconsistent service. Professionalism depends on the skills and experience
of those who volunteer. Other management options include hiring an associationemployed
manager or management company.
Ad hoc committees - CORRECT ANSWER This committee's purpose is to deal with a one-
time issue and make recommendations to the board within a specific time frame. The board
should use a resolution to establish an ad hoc committee and clearly state the charge and
expected outcome to the committee. Ad hoc committees may be formed to review parking
regulations, develop investment guidelines, or to renovate a lobby, for example.
Advertising injury - CORRECT ANSWER Advertising injury provisions in commercial
general liability insurance (CGL)include language providing coverage to the community
association with respect to damages resulting in "misappropriation of advertising ideas or style of
doing business" or "infringement of copyright, slogan, or title." Community associations with
newsletters, directories, and websites that contain advertising and use online, magazine or
newspaper articles without reprint permission have this exposure.
Agenda - CORRECT ANSWER An agenda is more than an announcement of the order of
business for a meeting. It is a meeting management tool. Meeting agendas follow a standard
format, largely based on parliamentary procedure
, Aggregate amount - CORRECT ANSWER The total amount that the insurer will pay out
under an insurance policy. This is a common feature of liability insurance policy.
Agreed amount endorsement - CORRECT ANSWER Provides for an agreed upon limit of
property insurance. An "agreed amount" endorsement can also suspend the coinsurance clause.
Coinsurance is a standard element in most property policies that obligates the insured to maintain
a certain amount of property insurance on the entire property or per structure, based on a stated
percentage, usually 80% - 90%. If the insured does not maintain this percentage, the insured will
not be reimbursed for the full loss of the property.
Alternative dispute resolution (ADR) - CORRECT ANSWER An effective way to resolve
alleged violations. It involves submitting the alleged violation to a disinterested third party who
helps the parties reach an amicable solution. This person is not a judge or an expert in
community association law, but can assist in the resolution of the alleged violation.
Appeal - CORRECT ANSWER An appeal is a request for a review of a case by a higher
authority—if permitted by the governing documents, resolution or state statute. For example— if
the hearing panel is a committee, the board of directors acts as the higher authority. If the board
of directors is the hearing panel, the alleged rule violator must appeal to an authority outside the
community association—for example, alternative dispute resolution.
Arbitration - CORRECT ANSWER A process in which a third party—called the arbitrator—
renders a decision as to the respective liabilities of all parties. The object is not to reach a
settlement; instead the arbitrator ultimately makes a ruling. It is an adversarial process that
results in the same "win-lose" or "lose-lose" that you would see in litigation. Arbitration can be
binding or non-binding. A binding arbitration typically cannot be appealed. Once the decision is
rendered, unless you can prove fraud, the decision will be forever binding. A non-binding
arbitration is advisory in nature. The decision that the arbitrator makes does not have to be
followed. In that respect, it is like getting an opinion of your case from a neutral party, which
could result in a fair settlement figure.
Architectural guideline - CORRECT ANSWER A rule that applies to the appearance or
exterior of a lot, home, or unit. Community associations frequently develop architectural
guidelines that address fencing, decks and patios, landscaping, doors and windows, color of
exterior surfaces, and location of improvements upon lots, for example.
