Homeowners' associations ("HOAs") are usually non-profit corporations, set up to maintain a certain standard of quality in a neighborhood or condominium building. Associations are made up of individual property owners and their aim is to keep property values in a condo development or subdivision as high as possible. HOAs are created under and are regulated by state law. They conduct their operations according to their governing documents, which are called bylaws, articles and declarations and covenants, conditions and restrictions (CC & Rs).

HOAs and Common Interest Developments

A homeowners association can be a nonprofit corporation or an unincorporated association created for the purpose of managing a common interest development. A common interest development is a real estate project that has common areas, in which all owners have rights, and separate ownership interests, such as individual condo units. These developments include such things as:

  • A high rise condominium
  • A planned unit development with separate home sites
  • A planned residential development
  • A community apartment project
  • A stock cooperative, in which owners have long-term leases for their units

Most real estate projects require that each owner of a unit (or comparable separate interest) be a member of the homeowners' association so that assessments can be collected for each unit. Membership is usually automatic when a unit is purchased. Mandatory membership can be enforced by the association.

A homeowners' association represents the interests of separate owners in the common interest development. Associations are responsible for the following:

  • Managing and maintaining the improvements and common areas
  • Administering the rules and regulations governing use of recreational facilities
  • Making and enforcing assessments of owners for maintenance and improvement expenses
  • Making decisions regarding violations of the covenants, conditions and restrictions of the development

Regulation of HOAs

Common interest developments and their homeowners' associations are regulated by state law. In some states, developers are required to provide information about the development to the state department of real estate. The state real estate commissioner issues a public report after finding reasonable arrangements as to the management and control of the development. The reasonable arrangements regulations impose requirements as to the form and powers of homeowners' associations.

In addition to state regulations, existing homeowners' associations are governed by the association's articles, bylaws and declarations, which are the governing documents for an association. Homeowners' associations formed as non-profit corporations will have a board of directors (elected by the members), are required to have annual meetings, and are required to keep meeting minutes, as well as records and annual budgets. Unincorporated associations have similar requirements.

Another document that governs the actions of a homeowners' association is the Declaration of Covenants, Conditions and Restrictions ("CC& Rs"). This is a document which individual property owners sign when they purchase a unit, and it sets out restrictions on what the owners can do with their property. The rules of the homeowner's association should be included in this document.

Formation

Homeowners' associations are created under state law. A homeowners' association that is a nonprofit corporation is set up under the state's nonprofit corporation law. An unincorporated association is formed by agreement of the members. This agreement for a homeowners' association may be found in the declaration or in separate articles of association and bylaws.

A homeowners' association begins its activities at the first meeting of property owners. A governing board for the HOA will be elected from the group of owners at the first meeting. After that, the board meets to elect its officers and to consider how the association should be run. Control is passed from the property's developers to the board. The board then makes the decisions for the association. Board members serve for the time specified in the articles or bylaws, and elections are conducted according to the same documents.

Questions for Your Attorney

  • Can my homeowners' association sue me if I refuse to pay fees which they assessed against me?
  • What happens if the bylaws of a homeowners' association conflict with provisions of the Declaration of Covenants, Conditions and Restrictions?
  • Are the board members of a homeowners' association bound by any ethical requirements?
  • Are there limits on the power of a homeowners' association board to make rules?