Agent
Someone authorized by the principal to act for or in place of the principal; an agent is entrusted with another’s business.
Alternative Dispute Resolution
Mediation or arbitration as opposed to litigation.
Articles of Incorporation
Document filed with the states which sets forth general information about a corporation. This filing creates the corporation. The bylaws contain the rules of the corporation.
Assessment
Dues payable by members of an HOA, usually due monthly. Assessments are determined annually in advance by the board of directors of the HOA during the budgeting process.
Association
A non-profit corporation created to manage a common interest development.
Board of Directors
Governing body of the corporation/association. Directors are elected by the members of the association. The directors and officers have a duty to comply with the governing documents of the HOA as well as all applicable laws.
Board Meeting
Any congregation of the a majority of the board members at the same time and place to hear, discuss and/or deliberate upon any item of business scheduled to be heard by board of directors, except for matters to be discussed in executive session.
Bylaws
The rules adopted for governing a corporation/association. The bylaws address elections of directors as well as officers, holding of board meetings, and the powers of directors and officers.
Covenants, Conditions & Restrictions (CC&Rs)
See Declaration
Common Areas
The common interest development except for the separate interests. California law requires an association to maintain the common areas other than exclusive use common areas unless otherwise provided for in the CC&Rs. Common areas typically include, but are not limited to landscaped areas, driveways, pools, elevators and courtyards.
Common Interest Development
Includes any of the following:
A condominium development
Planned development
Stock cooperative
Condiminium
An undivided interest in real property, the common area, with a separate interest in space called a unit, the boundaries being defined in the condominium plan.
Under California law, condominium associations are responsible for the repair and maintenance of common areas where wood destroying organisms are found unless the CC&Rs state otherwise.
Davis-Stirling Common Interest Development Act
Refers to sections 1350 – 1376 of the California Civil Code. These sections address common interest developments.
Declarant
The person or persons who signed are established by the CC&Rs (normally the development builder).
Declaration
AKA CC&Rs (Covenants, Conditions and Restrictions) is a document that sets forth restrictions on the use of any portion of the common interest development intended to be enforceable equitable servitudes. Unless stated otherwise, these servitudes may be enforced by any owner of a separate interest as well as the HOA.
Directors & Officers Liability Coverage
Insurance coverage that protects the board members in lawsuits due to actions taken on behalf of the HOA. It also covers errors and any omissions made by board members.
Easement
The right that someone has on the land of another. Ex: walking from land parcel A to land parcel B.
Exclusive Use Common Area(s)
A portion of a common area established by the CC&Rs for exclusive use of one or more, but fewer than all of the owners (why?) of a separate interest.
Unless the CC&Rs state otherwise, the following areas are exclusive use common areas:
- Awnings
- Balconies
- Doorsteps
- Exterior Doors
- Exterior Door Frames and Hardware
- External telephone wiring used to serve a single separate interest
- Patios
- Porches
- Screens
- Shutters
- Windows
- Window Boxes
Under California law, owners of the adjacent separate interests must maintain the exclusive use common areas.
Executive Session
A confidential portion of board meeting. Refer to ‘Open Meeting Act’.
Fiduciary
The legal, moral and ethical obligations of a person to fulfill their responsibilities to another. In a HOA, directors of the HOA have a fiduciary duty to act in the best interest of the HOA.
Governing Documents
The CC&Rs, Bylaws, Rules and Regulations and Articles of Incorporation (or Articles of Association).
Insurance Coverage Forms
1. Guaranteed Replacement Cost Coverage with Full Building Code Upgrade: insurance that pays the replacement cost, without regard to policy limits and includes costs resulting from code changes. The amount of recovery will be reduced by any deductible.
2. Guaranteed Replacement Cost Coverage with Limited or No Building Code Upgrade: insurance that pays the replacement costs without regard to policy limits, but limits or excludes costs resulting from code changes. The recovery amount will be reduced by any deductible.
3. Replacement Cost Coverage: insurance that pays replacement costs up to policy limits based upon like or equivalent construction. The amount of recovery will be reduced by any deductible.
Lien
A recorded claim against a property, including Assessment Liens, Deeds of Trust and any unpaid taxes.
Management Agreement
A contract between an HOA and a management company which sets forth the rights and obligations of both parties. These agreements may be “full service” or “financial service” contracts. Some management companies provide more services than others.
Mechanics’ Lien
A right provided by law to individuals and businesses that make improvements to real property and who are not paid. Mechanics include any worker or business that supplies building materials or labor for the construction or improvement of any real property.
Open Meeting Act
Refers to the Civil Code Section that permits any member of an HOA to attend board meetings, except when the board adjourns to executive session to consider litigation, matters relating to the formation of contracts with third parties, member discipline, personnel matters, or to meet with a member, upon the member’s request, regarding the member’s payment of assessments.
Operating Rule
A regulation adopted by a board of directors that applies to the management and operation of any common interest development or the conduct of the business of the HOA.
Planned Development
A common interest development other than a condominium, or stock cooperative. The common area is often is often owned by the HOA, however, may also be owned in common by the owners of the separate interests. The separate interest is a lot, parcel, are or space, not a unit.
Under California law, in a planned development, each owner of a separate interest is responsible for the repair and maintenance of that separate interest as may be caused by the presence of wood destroying organisms (termites and dry rot) unless the CC&Rs indicate otherwise.
Proforma Budget
Annual budget for an HOA which estimates revenue and expenses along with a summary of the HOA’s reserves based on the most recent reserve study. A copy must be distributed to all HOA members not less than 30 days nor more than 90 days prior to the beginning of an HOA’s fiscal year.
Proxy
The power granted by one person to another to represent them for voting purposes. A proxy form is used by a homeowner unable to attend a homeowner meeting so that a quorum can be achieved at the meeting.
Reserve Study
A written report which identifies all of the major components which the HOA is obligated to repair, replace, restore or maintain having a remaining useful life of more than two years and less than 30 years as of the date of the study. The report estimates the remaining useful life of each component as well as the amount of funds the HOA must set aside each month (reserves) in order to have the cash available to make all necessary repairs and replacements. Under California law, most HOAs are required to obtain a reserve study at least every three years.
Reserves
Funds set aside for repairs and replacements to be made by an HOA as determined by a reserve study
Separate Interest
1. In a condominium project, an individual unit or separate interest in space
2. In a planned development, a separately owned lot, parcel , area or space.
3. In a stock cooperative, the exclusive right to occupy a portion of the real property.
With both condominiums and planned developments, the transfer by sale or foreclosure of a separate interest, includes the automatic transfer of the owner’s undivided interest in the common area or membership interest in the HOA. Under California law, the owner of each separate interest is responsible for it’s maintenance.
Special Assessment
An assessment made usually for a special project or in response to a large unbudgeted expense.
Stock Cooperative
A project in which a corporation is formed for the purpose of holding title to the property and where the shareholders of the corporation receive a right of exclusive occupancy in a portion of the property (either an apartment, space or home site). The shareholder’s interest in the corporation is evidenced by a share of stock or a membership certificate.
Structural
Refers to the load-bearing components of a building as opposed to the screening or ornamental elements. Structural lumber is generally, at least a 2 x 4.
Townhouse
Not a legal form of ownership but rather an architectural style. A townhouse may be a condominium or planned development. They are multi-level homes, usually built in rows with individual garages. The homes are not stacked one on top of another so that no owner lives above or below another.
Undivided Interest
Refers to the type of ownership interest that the owner of a separate interest has in a common area. In a condominium or other planned development, this undivided interest consists of a tenancy in common which means that each owner having an undivided interest may use all or any portion of the common area, subject to any restrictions established by the Declaration or CC&Rs.