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Newly Elected to Your HOA Board? First Step: Understand Your Governing Documents

Your homeowner’s association annual meeting has been held and election of the new Board of Directors is complete. You’ve been elected to the Board. Congratulations! So, how can you be an effective Board member? One of the most significant ways to be an effective Board member is also one of the most basic: read and understand your governing documents.

That “book” of documents you received when you bought your home is more than just a doorstop. It is filled with information on how your association operates. Being familiar with your governing documents is the first step in becoming an effective Board member.

Understanding the Function of Each Document

Associations rely on multiple documents (often collectively referred to as an association’s “governing documents”) to establish a sense of order and to operate the association as the business that it is. Knowing the function of each document can help guide you in your search for information when a question arises.

Declaration

The Declaration is perhaps the most important of an association’s governing documents. It is the Declaration that imposes the obligation upon homeowners to pay assessments (dues), and imposes upon the association the obligation to perform maintenance on your home. The Declaration also includes certain restrictions as to what you may and may not do on your property—whether you may lease your home, whether you may have animals in your home, whether you may operate a business from your home, etc. The Declaration also includes the provisions related to the association’s obligation to insure your home, and your obligation to insure the interior and contents of your home. Finally, the Declaration also sets forth the association’s remedies for nonpayment of assessments.

Many people erroneously call the Declaration the “Bylaws.” As noted below, an association’s Bylaws serve a much different function. Knowing the proper terms for each of the governing documents demonstrates an understanding of your association’s governing documents and their respective functions.

Articles of Incorporation

The primary purpose for the Articles of Incorporation is to create the association as a nonprofit corporation. (With the exception of cooperative associations, the vast majority of homeowners associations are established as nonprofit corporations.) Typically, the Articles do not have significant impact on an association’s daily operations. However, the Articles for some older associations do include restrictions on, for example, borrowing authority of the association, so it is important that board members be familiar with the Articles.

Bylaws

The purpose of the Bylaws is to set forth the “rules” for day-to-day operation of the association as a corporation. The Bylaws include provisions regarding how many directors serve the Association, how directors are elected and removed, who is eligible to serve as a director, how meetings of the Association are called, what constitutes a quorum for Association and board meetings, etc. In older condominium communities, the Bylaws may include provisions that are now more commonly found in the Declaration, as well as these governance provisions.

Rules & Regulations

The Rules & Regulations regulate the day-to-day operations of the association as a community. Rules commonly address such mundane—but nonetheless important—topics as when garbage bins should be put out for collection and whether wind chimes are permitted. They may also address the process for seeking architectural approval for a change to the exterior of one’s home or the collection policy for delinquent assessments.

Of course, no director is expected to have the governing documents memorized—or even understand everything in them—but it is important that you read them. Part of a director’s job is to follow the governing documents and enforce them. If the directors have not read the documents, they cannot effectively do their job of operating the association.

Knowing When to Ask for Help – and Where to Turn

Finally, just as no director is expected to know or understand every paragraph of the governing documents, you are also not expected to know every aspect of association management or operations. Acknowledging that you need to seek advice from the association’s team of professionals—lawyers, accountants, insurance agents, managers, landscapers, etc.—is not a sign of incompetence. Rather, it is a recognition of the limitations of your knowledge and your desire to learn more. Your team of professionals is there to help you learn—and to avoid making mistakes, both minor and catastrophic. Seek their advice and counsel—and listen to what they have to say. They can help you learn how your governing documents relate to each other, to applicable laws, and to the overall successful operation of your association. Knowing the association’s team of professionals is there to offer guidance and counsel can help make your term on the Board less stressful, more rewarding—and more effective.

Having a general understanding of your association’s governing documents and knowing where to turn if you need help understanding them are the first steps in your journey to being an effective member of your association’s Board of Directors. Thanks for serving your community!

 

Nancy T. Polomis is a partner at Hellmuth & Johnson and chair of the firm’s real estate development practice. Her clients include builders, developers, condominium and townhouse associations, and individuals and entities involved in real estate transactions. Nancy can be reached at npolomis@hjlawfirm.com or at (952) 941- 4005.

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