24 May 2015

Governing Documents: Legal Documents #3

Posted by Orlando HOA Services

RulesThis title is a bit of a misnomer. Any documents from the HOA are legal documents, but I call CC&Rs, Articles of Incorporation, and Bylaws legal documents because they lay out the legal obligations of Homeowners and the Homeowner Association.

Right now I’m going to do two things: first, state a legal disclaimer regarding the information in this blog. I’m telling you in human language how these documents work within the HOA structure as I see it. Please do not use this blog as legal advice. I would not ever be so presumptuous as to give legal advice. Second, I would like to recommend a great website that gives all the rundown on the Davis-Stirling Act, which is the body of law that specifically covers Common Interest Developments. The website is: http://www.davis-stirling.com. Look at their site, use it for research, subscribe to their newsletter. The information is gold.

According to Davis-Stirling.com, the CC&Rs: “…describes the rights and obligations of the membership to the association and the association to the membership. CC&Rs generally cover the following: (i) restrictions on the use of property, (ii) member and association maintenance duties, (iii) enforcement powers, (iv) lender protection provisions, (v) assessments obligations and lien/collection rights, (vi) duty to insure, and (vii) dispute resolution and attorneys’ fees provisions.”*

So, in layman’s terms, CC&Rs tell you what both the HOA’s and your rights and obligations are once you buy into the association.  And here’s when I’m going to talk about Rules and Regulations. These are documents that are used to spell out specifically what are the parameters of any given issue that is covered in a general way in the CC&Rs.  Case in point: The CC&Rs will give the Board of Directors the right to establish architectural rules regarding any exterior alterations to your unit. Rules and regulations will specifically spell out what color you can paint your unit, what style and color windows you can install in your unit, etc. Often a Board is not aware of their obligation to establish Rules & Regulations. This can be problematic, as it’s difficult to follow the rules when they are not clear.

The Bylaws “…establish policies and procedures for the governing of an association. They set qualifications for the election of directors, their number and term of office, their powers and duties, the appointment of officers, when and how meetings are held, quorum and voting requirements, appointment of committees, etc.”*

In other words, they tell you how to vote, when to vote, who can serve on the Board of Directors, and what their powers are. This isn’t common practice, but I would like to see some provision in Bylaws that prevent “financially related parties” from serving at the same time on the Board of Directors. I have seen the results when business partners or family relations have created a voting bloc, especially on a small, 3-person board. The good of the HOA can go by the wayside and personal agendas take over. It isn’t pretty. Currently, this issue is coming to the forefront and I’m hoping it will be addressed in future iterations of the Davis-Stirling Act.

Articles of Incorporation: “…are only a few pages long and (i) identify the corporation as an association formed to manage a common interest development under the Davis-Stirling Common Interest Development Act, (ii) state the business or corporate office of the association, and (iii) state the name and address of the association’s managing agent, if any.”*

This just shows that your association is incorporated. You want incorporation because then you are afforded the protections of the Davis-Stirling act and the Corporations Code.

Do you need an expert? Orlando HOA Services can help your HOA stay fiscally healthy through sound financial management. Check out our webpage and blog at www.Orlando-HOA.com.

For great information on Davis Stirling law, check out www.davis-stirling.com

Next Blog: Building Community! 5/26/2015


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