Legally, an HOA or homeowners' association is a small business and like any small business, this legal entity must file specific legal paperwork.
Articles of Incorporation
Articles of incorporation must be filed with the secretary of state. Although publicly available, these articles of incorporation do not contain much information other than name, location, and purpose of the incorporated community.
Association Bylaws
The bylaws assign the right of the board to draft rules that are binding to all homeowners in the association. Essentially, bylaws establish the rights and responsibilities of the HOA (incorporated entity) and also set the rules for enacting future rules. Essentially, bylaws declare the rights of the association—through a duly elected board of directors. This board of directors is given the responsibility of protecting the community by creating future rules and collecting assessments. Most homeowners' associations are governed by an elected board of directors by a vote of the dues-paying members.
Homeowners must be vigilant participators in their HOA, monitoring the board members and making certain that the bylaws are the true measure that governs the procedures of the board, as board members do not have a right to operate outside of the clearly established dictates of the bylaws.
Included in these bylaws are the absolute terms that dictate the HOA executive board members terms of process and procedures.
Example list:
1) Number of HOA members permitted on the board,
2) Number of board members to qualify as a legal vote
3) Frequency of elections
4) Term limits for board members
5) Who can step-in and vote for a board member
Covenants, Conditions, and Restrictions
Known as the CC&Rs of your community. These documents establish matters such as the color of homes, maintenance, and parking. Many states require that the associations CC&Rs be published with the county recorder.
Violating the CC&R may result in a penalty for the homeowner if the warning goes unheeded. If left unresolved, as permitted by the CC&Rs—the board will issue a fine and offer the homeowner a chance to defend his due process rights. If the fine is still not paid, depending upon the state, the board may (or must) file a lawsuit and/or exercise a lien on the property.
Other Rules and Regulations
CC&Rs provide the general rules established for the community. Common rules may also be established, but these rules must not violate federal law or the neighborhoods CC&Rs. Financial Documentation
The bylaws are where the board establishes the collection of dues to each of the homeowners, and can increase on an annual basis depending upon need. Bylaws may also permit the board to require assessments for emergencies.
Those considering purchasing a home in a planned community should always take the necessary time to assess that community’s finances. Well-run association boards will keep a healthy reserve fund to pay for any potential emergency. However, if the community has a lack of funds on hand, rest assured that in case of an emergency, each homeowner will be charged an extra fee to pay for the emergency.
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