Mike Explains: Homeowner's Association

Imagine, if you will: you have a building with over a hundred units, all independently owned. How do you operate that building? Who decides when it gets painted, in what color? Who decides what temperature to have the pool? Some people might want it cold to save money. While some people, who use it more, might want it warmer. Everybody has a different agenda.

So, how can you ever operate a community full of people with similar but different priorities? Simple, it's called the homeowner's association.

What Is a Homeowner's Association or an HOA?

Is a non-profit corporation that's set up to run a common interest development. A common interest development can be a condominium complex, a stock co-op, or even a development of single-family residences that share common spaces like parks and roads.

An HOA is, essentially, a quasi-government set up to run and operate a community of homes owned by separate individuals with a common ownership interest.  

The CC&R's and Bylaws

They are like our Constitution. The bylaws lay out the rules of governance i.e., things like election rules, who serves on the board of directors, what their jobs & requirements are, etc. The CC&R's (which stands for Covenants, Conditions, and Restrictions) are the overlying rules that the members/owners have that agreed to abide by as a term of the ownership and they run with the property.   

CC&R’s can be changed, but just like our Constitution it typically takes a supermajority vote with is not easy to do.

HOA’s also have your standard Rules and Regulations which are not part of the CC&R’s. These Rules and Regulations are much easier to change. In California, the proposed changes must be posted with sufficient notice and then a simple majority vote by the Board of Directors is all that is needed.

The HOA Manager

They can be thought of as a combination between the police and the city manager. As the city manager, they help carry out the day-to-day operating of the business part of the HOA. Like the police, they're there to help enforce the rules, post notices of violation, etc.

Another way the homeowner's association resembles a government is the board of directors is very similar to a city council. They hire, potentially fire, and give direction to the HOA Manager.

Perhaps the biggest similarity is the HOA Board answers to the owner-members, which is much like the city council answering to the voters. So, if the owner-members don't like the decisions that the board of directors is making, they can vote them out, being this the ultimate power, just like our government.

HOA Assessments

The government has taxes. Homeowner associations have monthly assessments and special assessments. So, paying your HOA dues is essentially like paying your community taxes. Just like taxes, somebody must pay the bill.

Now, what rules does a homeowner's association answer to? Well, in the state of California, it is governed by something called the Davis Sterling Act and that lays out the rules that homeowner associations must abide by.

So, if you feel like you want to run for Congress or City Council but don't want to go through the trouble, maybe join your HOA board.

I know this is a lot, and I hope this explanation helps. When you need a professional, please reach out to the Mike Dunfee Group.

Dunfee Real Estate Services, Inc.

DRE # 02026232

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