The governing documents are an essential tool in the proper administration of any HOA. They spell out important processes for association business, guide board member decisions, and exist as a contract between the HOA and homeowners.
The documents that constitute the governing documents of a property owners association are:
- Plat Instruments: Include a map of association and shows rights of access to easements.
- Declaration of Covenants, Conditions, and Restrictions (DCCRs or CC&Rs): Establishes property improvement rules, assessments, foreclosure abilities, etc.
- Articles of Incorporation: Create HOA as a separate legal entity.
- Bylaws: Explain rules of governance and how the HOA is to be run.
- Rules and Resolutions: Cover any board-adopted policies that enhance provisions found in other governing documents.
The plat instruments are the highest in the governing document hierarchy, followed by the DCCRs, then the Articles of Incorporation, and then the Bylaws, along with any rules or resolutions adopted by the board of directors. However, keep in mind that federal, state, and local law take precedence over all of these documents.
Each section of the governing documents is vital to running any association and should be given careful consideration. Below are some do’s (and don’ts) for creating, or updating, your governing documents:
- Consult an expert. Hire an attorney that specializes in homeowner’s association law to help write and file the governing documents.
- Plan ahead! The Articles of Incorporation and Declaration should be filed before any development begins, and the remaining governing documents need to be filed and in place before even one home is sold and closed by an individual homeowner.
- Think about the future. How will these rules affect the management of the association after the developer transfers power to the homeowners? How will board members or homeowners be able to amend the documents down the line?
- Be reasonable. Consider all aspects of community living such as parking, basketball goals, pets, noise, lawn maintenance, garbage cans, rules for private streets (if applicable), and lot improvement.
- Allow for board-created resolutions. If necessary, these resolutions should further explain the rules of the neighborhood. Provide a process for how this should be done.
- Consider the quorum requirements. The quorum for board and annual meetings needs to be attainable. Allow for reasonable contingencies if a quorum is not met.
- Clearly state assessment processes. Detail how much and how often homeowners must pay dues along with the consequences of non-payment. There is very specific language that should be used when writing this section of the Declaration, which an HOA attorney will know.
- Make enforcement fair. The enforcement procedures and appeal process for non-compliance with the documents need to be reasonable and clearly outlined.
- Budget for amendments. Strive to complete all amendments at the same time to save time and money.
- Communicate with homeowners. Provide a copy of the documents to homeowners and make online copies easily accessible.
- Procrastinate! The governing documents are the backbone of your project and need to be created and filed first.
- Restrict board power. If the rules are too specific, the power of the board could be inadvertently limited.
- Overuse legal jargon. Homeowners need to be able to read and understand the rules of the association.
- Inhibit amendments. Make it possible for the board or homeowners to amend the governing documents if needed.
- Include overly elaborate rules. Ensure that no regulations are difficult to enforce or interpret.
- Be too ambiguous. While the language shouldn’t be too restrictive, it also shouldn’t be so unclear that future board won’t know how to handle the day-to-day business of the association.
All in all, it’s important to know what to do, and what not to do, when creating or updating your governing documents. Remember to be proactive, direct, and realistic, and to avoid being passive, vague, and constrictive. When in doubt, ask an expert about it! Here at Spectrum Association Management, we’re ready to provide you with refreshingly different service.
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