Understanding My HOA
In part one of the series, we answered what it means to live in a neighborhood association. Basically, it means that you live in a distinct area and that area, along with each of the property owners within it, are subject to a set of rules and regulations. Those rules and regulations are commonly set forth in a document called a declaration and are enforced by a corporate entity – the association – which is controlled by a group of people called the board of directors who, typically, are elected by the property owners.
Different common interest communities exist, however, and there are subtle distinctions amongst those different communities – be it a homeowner, condo, or a cooperative association controlled community. Looking at each type of community in turn can help illuminate some of those subtleties.
What is a HOA?
Homeowner association controlled communities (“HOAs”) are a good place to start. For the most part, if you live in a common interest community which is made up of detached, single family homes which rest on their own distinct lots, more likely than not, you live in a HOA. HOA communities are controlled by Chapter 720 of the Florida Statutes.
In HOAs, like other common interest communities, the association is the corporate entity that is responsible for the operation of the community. As with most other common interest communities, that association is made up of the property owners within the neighborhood. The property owners are generally referred to as members of the association. Florida’s legislature granted associations the statutory authority to enforce the covenants and restrictions of the community, which includes the ability to collect assessments.
What restrictions exist within an HOA?
Covenants and restrictions for a HOA community, as are typically set forth in the community declaration, cover a number of topics. Most people know that these restrictions cover matters like the ability to park on the street, the need to keep your property in a good, aesthetically pleasing order, and the owners’ privileges on the community’s common areas. People don’t always appreciate that, in addition to the standard type restrictions, however, the covenants and restrictions also cover matters like common area maintenance and community amenity upkeep and servicing. Of course, the association incurs costs in enforcing the restrictions and in upholding its maintenance obligations. The association as a whole, that is, the owners collectively, is responsible for bearing those costs. And, they cover those costs through the collection of assessments.
Assessments, by definition, are the collections of fees taken by the association to fund the operations, amenities, and special needs of the HOA. Each owner in the community pays their proportionate share of the total amount of these HOA fees. These assessments, more often than not, are paid directly to the association – the corporate entity responsible for the community. The HOA fees can, however, be paid to the community’s developer or another entity depending on the age of the community and how the declaration may direct. The total amount of collections varies for each community based on that community’s particular needs. In most cases, the association’s board of directors will set a budget for the upcoming year which will include an allocation for the expected operating and maintenance costs and, if the board deems appropriate, an allocation for reserves to cover future big-ticket items. Further, for those items that aren’t necessarily anticipated by the board and/or for the items which arise sooner than the board anticipated, the organizational documents of many HOAs will allow the association to charge a special assessment to cover those unexpected costs.
While the contents of the organizational documents will differ amongst the various HOAs, the organizational documents of any given HOA typically include: (i) the declaration of covenants, (ii) the articles of incorporation, (iii) the bylaws, and in some cases (iv) the rules and regulations. Each of the documents serves a distinct role for the community but can overlap on certain topics.
The declaration of covenants, sometimes referred to simply as the “declaration”, is the primary document for the HOA – establishing the neighborhood boundary and the rules to which the neighborhood (and its respective property owners) are subject. The declaration is recorded in the public records of the county in which the neighborhood is located. Because of that, by law, the rules, regulations, and restrictions of the declaration “run with the land” – meaning that, subject to certain exceptions related to the passage of time, the declaration will continue to bind each property owner and those to whom the land is sold in the future.
The declaration, essentially, establishes the community. But, the articles of incorporation establish the entity that controls the community – the association. These articles establish the powers of the HOA; these powers typically relate to matters necessary to operate and carry out the necessary functions of the entity. The bylaws, relatedly, compliment the articles of incorporation. Where the articles establish the basic corporate structure and the powers of the HOA, the bylaws establish the procedures for carrying out the powers and responsibilities of the association. While HOAs are granted wide latitude with respect to the procedures that can be established in their bylaws, the Florida Statutes do mandate certain operational procedures with respect to certain topics – for example, the procedure for giving notice of meetings and who may be in attendance at those meetings.
Lastly, a set of separate rules and regulations can be created and are supplemental to the other organizational documents. Many people get confused about the role for these rules and regulations – thinking that they should be included in the bylaws or are not a standalone document. Remember, however, that the bylaws establish the rules for the operation of the association – that is, the corporate entity in charge of the neighborhood. The rules and regulations, though authorized by the bylaws, are different in that they establish restrictions on a wide range of topics – additional rules regulating everything from the course and duration of meetings to the hours of clubhouse access.
Sometimes, confusion arises as to which organizational document should be used when resolving a community dispute. When answering a question about the operation of a HOA, however, Florida Statutes Chapter 720 should be considered first. In the vast majority of cases, with limited exceptions, the Florida Statutes take precedence over what is contained in the organizational documents. Where the statutes do not address a particular issue or grant the right for the issue to be decided by the organizational documents, however, the governing documents should be considered. While all of the documents should be consistent and drafted to complement each other, over time as documents are amended, inconsistency may arise. In the event of an irreconcilable inconsistency, the organizational documents are given the following order of priority: the declaration, the articles, the bylaws, and the rules and regulations.
Now we have a little clearer picture of what it means to live in a HOA, specifically, as opposed to other common interest communities. In Part 3, we’ll take a closer look at why it is important to follow the HOA’s rules and what can happen to you if you don’t.