You’ve got questions. We’ve got answers.
What is a Community Association?
Why does my community have one?
More commonly known as a home owner association or condominium owner association, a community association (CA) is a legal entity created by a real estate developer for the purpose of developing, managing and selling a development of homes. It allows the developer to exit financial and legal responsibility of the community, typically by transferring ownership of the association to the homeowners after selling off a predetermined number of lots. It allows the municipality to increase its tax base, but reduce the amount of services it would ordinarily have to provide to non-homeowners association developments.
Most CA’s are non-profit corporations and are subject to state statutes that govern non-profit corporations and CA’s. State oversight of CA’s is inconsistent from state to state. Oregon and Washington are often considered among the strongest states for oversight.
The fastest growing form of housing in the United States today is common-interest developments (CIDs), a category that includes planned-unit developments of single-family homes, condominiums, and cooperative apartments. Since 1964, CA’s have become increasingly common in the USA. The Community Associations Institute trade association estimated that CA’s governed 23 million American homes and 57 million residents in 2006.
The States of Oregon and Washington, along with several other states throughout the country, have adopted laws requiring CA’s for communities with certain financial or substantive obligations and characteristics. Without going into great detail, your community almost certainly has one because local and state government required it to have one at the time of development and will continue to require the maintenance of common elements throughout your community in perpetuity (making the association essential).
What is a common element?
How can I identify what is “common” to all residents?
Common elements are items owned by the designated community as a whole or equal share. The most typical common element in a community is a “water quality facility” also known as a ditch or swale where storm water is collected and detained. These are a requirement of state and federal law, but the maintenance and ownership is placed on the association’s homeowners to reduce the expense to government.
Other readily identifiable common elements are clubhouses, pools, playgrounds, open-space, private parks, parking areas, private streets, siding, roofs and many other items. All of these items can be common to your property and are typically the domain of the CA.
Who controls the CA?
Who do I talk to if I have a question or concern?
Control of the CA is a fluid question dependent on the current stage of community development. Initially, the CA is controlled by the developer. The developer is responsible for having CCRs, By-Laws and a Reserve Study completed and recorded prior to the sale of homes or lots. Within these documents certain rights and responsibilities are assigned to the developer for the initial construction period. The developer typically controls the CA until a predetermined period of time, usually 50% or 75% of occupancy or sale of units within the community. Until the developer relinquishes control, he and his designees serve as the CA Board of Directors and are responsible for dealing with your concerns.
After the developer has relinquished his special rights as “declarant” of the community, a Board of Directors is selected from the members of the CA. If no one steps forward to participate on the Board of Directors, a court appointed receiver can be appointed to deal with the daily business of the association (expensive option). It is the responsibility of the Board of Directors to adopt a budget, hire or fire contractors, and generally oversee the day-to-day operations of the community.
What actual power does the Association and its Board of Director’s have to compel
participation in the CA?
Like a city, associations can provide services, regulate activities, levy assessments, and impose fines. Unlike a municipal government, homeowner association governance is not subject to the Constitutional constraints that public government must abide by. Some of the tasks which HOAs carry out would otherwise be performed by local governments. A homeowner association can enforce its actions by levying of fines and private legal action under civil law. In Oregon and Washington, CA’s have the right to lien a resident’s home to receive payment of past due assessments, fines and other liabilities that may be associated with a homeowner’s specific actions.
Association Boards appoint officers, and may create subcommittees, such as “architectural control committees,” pool committees and neighborhood watch committees. Association boards are made up of volunteers from the community who are elected by owners at the annual meeting to represent the association and make decisions for all homeowners.
What does an association management firm like Blue Mountain Community Management do?
While a Board of Directors for a CA is responsible for day-to-day operations, the duties and responsibilities of day-to-day association management are time consuming and complicated. Association management firms like Blue Mountain Community Management take on the responsibility of all day-to-day activities and functions at the direction of the Board of Directors. Professional level services for CA billing accounts payable, accounts receivable, contractor management, insurance and compliance are often desired by a community and its Board of Directors because it allows the Board to focus on policy issues and longer range budgeting concerns or other larger items of interest. Association management firms are recognized for having a grasp of association law (although they usually are not attorneys and should not attempt to act as one) and stay current with changes in the law. All of these tasks have a direct value and they are the reason many associations choose management firms for day-to-day functions.
What are CCRs and By-Laws and how do they affect me as a member of an association?
Covenants, Conditions and Restrictions (CCRs) and By-Laws are the governing documents for your Association. CCRs outline the rules and regulations of the community and By-Laws generally determine how the rules and regulations will be administered and by whom. Additionally, many Associations adopt other rules and regulations beyond their CCRs that may restrict or prohibit certain activities further than the CCRs but the CCRs serve as a baseline for association government.
Ok, so the CA is a requirement to govern common elements, but I have to pay for it too?
Not surprisingly, all of these common elements cost money and in some cases it’s a lot of money. While planned communities of single family detached houses may have low monthly, quarterly or even annual dues, some associations pay hundreds or even thousands of dollars per month for common elements. Pools take maintenance, clubhouses need repair and streets need to be resurfaced periodically. All of these things cost money and managing the process costs money too. This is what you pay for and should have been notified of at the closing of your home by a realtor or title agent prior to final purchase.
Homeowner associations may compel homeowners to pay a share of common expenses, usually per-unit or based on square footage. These expenses generally arise from common property, which varies dramatically depending on the type of association. Some associations are, quite literally, towns, complete with private roads, services, utilities, amenities, community buildings, pools, and even schools. Many condominium associations consider the roofs and exteriors of the structures as the responsibility of the association. Other associations have no common property, but may charge for services or other matters. Assessments paid to homeowner associations in the United States amount to billions of dollars annually.
What is a Reserve Study?
Why do I pay for “Reserves?”
A reserve study is a document created by a third party (in most cases) during the development period. The purpose of the reserve study is to identify all common areas within your development, assign those elements an initial cost for replacement and then create a thirty (30) year schedule for replacement and repair. Once all common elements are included in a reserve study, it creates a numerical value, indexed by an inflationary factor that leads to a monthly amount to be paid by the resident in order to build a reserve account. This reserve account will be where funds are derived from when it comes time to replace or repair a common element in your CA.
For example, let’s suppose your community has a private street 50 feet long and 24 feet wide. This private street will not be maintained by the local government (hence the name private) therefore, the residents are responsible for the maintenance and replacement of the road. Construction estimators (typically computer programs used by insurance companies) stipulate that a road needs to be “sealed” with an emulsifier every 6 years in order to maximize the road’s effective life. Furthermore, the road will need to be re-paved every 24 years.
The reserve study takes this road and its costs plus inflation into consideration and then splits the needed contribution for the road’s future maintenance over the membership, assigning a monthly contribution to each owner. This way, when repairs are needed, funds are readily available. The State of Oregon requires a reserve study and funding of the reserve study is mandatory as well. The State of Washington requires an initial study, but does not require funding.
What is compliance and what are some examples of compliance issues?
CA’s provide people with shared neighborhood values an opportunity to enforce regulations, consistent with overriding statutory constraints, to achieve a community representative of such values. In doing so, an HOA inherently restricts the freedoms that would otherwise exist for its members based on municipal codes. For instance, a degree of conformity is often required in exterior appearance of single family homes and there are often time limits and/or restrictions to activities generating noise. There are pre-existing rules in the form of CCRs and bylaws that a buyer has a right and an obligation to view before purchasing in a community, that also prescribe methods for modification of these regulations.
These bylaws are largely limited in various degrees by state laws, with some overriding federal judicial or statutory limits. In every association, board members and officers are chosen by election from its property owner-members, with the ability in some states for the membership to remove board members even during term.
Many homeowners’ associations include management of a community’s recreational amenities, maintained for exclusive use of its members. This can allow an individual homeowner access to a maintained pool,
clubhouse, gym, tennis court or walking trail that they may not be able to otherwise afford or desire to maintain on their own.
What do I need the association manager to do?
What should I expect from the association manager once we hire their organization?
Not all association managers are created equal. The range of services varies depending on your provider and the cost associated with services fluctuates significantly as well. Most associations are looking for an association manager who will focus on the basic daily functions of the association, which including billing, compliance with community rules, delinquency tracking, lien services, and financial compliance. There are many different tasks that fall under these functions, but these are the primary concerns of most associations.
You and your residents should expect delivery of services in an efficient and timely manner. You should also expect an open line of communication for residents and directors of the association with their community manager. Except in the case of holidays or special circumstances, no association request should go without acknowledgement for more than 24 business hours.
You should also expect transparent billing and financial statements. Some association managers use complicated billing forms, time consuming requests and archaic budgeting practices. At Blue Mountain Community Management, our services are automated, constantly monitored and corrected immediately if an issue occurs. We offer full financial services including operating and reserve account management, lock-box services and monthly financial reports.
How do I ensure I get excellent association services?
The best way to get the best price for services is to determine exactly what services you are seeking and then bid the project out to three or four different association management firms. You will immediately notice three things:
Some association managers will not be interested in your business because your association is not big enough for them to manage. At Blue Mountain Community Management, we offer management services to any association, no matter their size.
Some association managers will offer a package of services for a set price, but will not lower the price or offer flexibility if you do not desire the services included in the package. At Blue Mountain Community Management, we offer a service package, but we also offer “cafeteria style” management services where you select what service you need and we quote your needs based on the actual time and cost of service delivery. We offer flexibility to make an informed decision.
Some association managers will quote you a price, but neglect to point out additional fees, charges and financial incentives that favor their organization. At Blue Mountain Community Management, we clearly spell out our basic fee and minimize additional service requests; we also never charge any additional fee without prior approval or authorization.
What if I cannot understand these quotes I am getting or I am not able to
decipher “association management” speak?
You certainly wouldn’t be the first person to struggle with these issues. Blue Mountain Community Management will beat any (reasonable) written rate or price structure. Just show us a copy of the contract and we will provide you with a lower price with identical services for the life of the contract.