Running a Subdivision Association

Homeowners associations operate as nonprofit organizations and are responsible for a number of key elements within the subdivision or condominium. The association is typically charged with maintaining the common areas, managing the community’s finances, and, at the direction of the trustees, enforcing the bylaws.

Association boards are commonly responsible for the following items:

• Indentures – Assisting with formation of and amendments to indentures
• Governance – Formation of the association budget, assisting with governance matters and enforcing the association’s governing documents
• Assessments – Enforcing assessments, collecting unpaid assessments, filing a lien for non-payment of association assessments, or initiating foreclosure proceedings
• Management – Handling disputes between members and managing work performed in common areas by contractors.
• Common Areas – Resolving boundary disputes involving common ground, addressing an accident or injury on property/equipment owned by the association
• Lawsuits – Defending a lawsuit filed against the association or pursuing a claim against a contractor responsible for damage to association property
• Other Real Estate Issues – Assisting with the architectural review process or guiding the purchase or sale of property

Assessments & Notices

Monthly or annual assessments, collected from the members of the HOA, fund maintenance and improvements to the areas deemed common property of the association. The collection and distribution of these funds should be recorded in detail and reported to the Board via regular, written financial reports. Associations may wish to establish an operating fund to pay for the ongoing, regular operation of the association, and a reserve fund, to use for unexpected, infrequent, or expensive repairs or improvements.

Financial Control

The Board is required to maintain appropriate accounting records, including a balance sheet or statement of account accompanied by either a certified public accountant’s report or, if the accounting records were not prepared by a certified public accountant, a statement of the president or other person responsible for the corporation’s financial accounting records, stating:

• Their responsible belief as to whether the statement was prepared on the basis of generally accepted accounting principles and, if not, describing the basis of preparation; and
• Any respects in which the statements were not prepared on the basis of accounting consistent with the statements prepared for the preceding year.

While an association that is a nonprofit corporation has to maintain financial and accounting records, subject to limited exceptions, a member or a member’s agent or attorney is permitted to inspect the corporation’s records only at a reasonable time and location specified by the association, and only:

• Upon written notice or demand
• When delivered at least five business days prior to the date on which the inspection is requested
• With reasonable particularity as to the purpose and the records the member desires to inspect
• The records that are related to that purpose

An association is not obligated to conduct a resident’s research, but frequently the issue goes to one of assurances—assurances that the Board is being fair in enforcement and assessments.

Meeting Requirements

Association meetings vary widely from development to development. Some associations may choose to meet monthly, while others meet quarterly. For an annual meeting, at which board members are elected, the association must send a notice – noting the meeting time and place – to all members no less than 10 days (and no more than 30 days) in advance.

Association meetings – those meetings at which the board is conducting association business – should be recorded in meeting minutes. The minutes will preserve a summary of actions taken at the meeting. Once you have your minutes written, you need to preserve those minutes as they are a permanent record of proceedings of a homeowner’s association. It is advisable to scan your minutes into a PDF or other digitally read format and upload them to the cloud or have one or more backups. That way there will always be, it is hoped, another copy of your minutes. And, do not forget to add your current minutes to your digital repository in a timely fashion.

Enforcing Rules, Regulations, and Policies

As an operating entity, the association is bound by its bylaws, or indentures, that guide the trustees and residents. Associations and their Boards are duty-bound to enforce the bylaws fairly and collect and disburse funds in such amounts to provide for the necessities and amenities of the association.

Conclusion

With advance planning and careful guidance early in the process, the HOA board can actually save the association money and time by improving efficiency and health of the association and preventatively addressing issues before they become expensive problems. While every association is unique, Weiss attorneys have represented a wide range of entities and have the expertise necessary to assist in nearly every instance.