When was the last time you heard something positive in the news about a homeowners association?
It seems that homeowners associations are often perceived in a negative context, particularly when any media attention is involved. The truth is, according to a 2005 survey conducted for Community Associations Institute (CAI) by Zogby International, about 71% of survey respondents reported having a positive experience living in a common interest development (http://realestate.findlaw.com/owning-a-home/homeowners-association-basics.html). As you may have heard, the HOA Information and Resource Center of the Department of Real Estate has been busy receiving complaints and concerns with respect to HOA Management in Colorado and recently compiled its first Annual Report. The findings seem to indicate that the majority of those who report a negative experience in a common interest development feel uninformed by a perceived lack of transparency with the HOA’s governance. We at Diversified pride ourselves in promoting transparency, educating Board Members and homeowners alike, and ultimately bridging the gap between homeowners and the association. Diversified Property Management aims to address this problem by opening the doors of communication, being easily accessible by direct phone lines, and likewise making information available and up-to-date through our website: www.diversifiedprop.com.
Sometimes the lack of transparency happens before the HOA is even involved. This can be just an oversight in the closing process. A buyer under contract is legally entitled to access a copy of the HOA Governing Documents with a 72-hour review period. You still have a chance to back out of the contract within that 72-hour period if there is any part of the Governing Documents that you just can’t live with. For example, if you happen to have a large boat and the covenants prohibit recreational vehicles from parking on the premises, then you will have to make a decision—whether it is to find a way to comply with the rule by selling the vehicle or storing it at an offsite location, or back out of the contract. You are legally entitled to make an informed decision about purchasing a new home and the mutual agreement you would enter as an automatic member of the HOA upon assuming ownership of the property. The problem is, many people do not take the time to read these documents. Our job at Diversified Property Management is to uphold our fiduciary duty (in other words, to follow HOA laws, business practices, and each HOA’s Governing Documents) entrusted to us by the Board of your HOA. We want to do everything we can to educate our homeowners about this mutual agreement. Typically, however, your first contact with us usually occurs after you close on the home. Diversified Property Management does make your association’s information available to third party agents, either through our user-friendly website, or direct availability by phone. We just don’t know a home is being sold unless we are notified, usually by a title company.
We would like to give a brief overview of the governing documents and what you need to know to be informed about your homeowners association. These are listed in order of precedence:
Declaration of Covenants, Conditions and Restrictions (CC&Rs) – These are often referred to as “the Covenants,” “the Declarations” or simply “the CC&Rs.” The most comprehensive and informative document for homeowners, board members and managing agents to know, the CC&Rs are recorded with the state during the initial phase of a community’s development, and they govern how the community’s real estate is used. Boards and Managing Agents often think of the CC&Rs as the association’s reference manual. Information in the CC&Rs includes:
- A description of the property, common areas, easements
- Use restrictions, such as vehicle storage, nuisances, pets, leases etc.
- Mutually exclusive responsibilities and obligations of the Association and those of the Homeowners, including those with respect to assessments, insurance coverage, maintenance, etc.
A homeowner should most familiarize with the CC&Rs when considering a home to purchase because, ultimately, the CC&Rs determine what can and cannot be done with the real estate.
Bylaws – The Bylaws describe the governing principles of the Association. The Bylaws may cover specifics including how the Board is appointed— how many members, length of term, how elections are conducted, how often it meets, what the quorum is, etc. Think of the Bylaws in terms of the key ideas: meetings, elections, Board Member appointment, officers and responsibilities.
Rules and Regulations – Some HOAs have established a separate document devoted to use restrictions in order to clarify the CC&Rs. The Rules and Regulations may not contradict or be more restrictive than the CC&Rs. Sometimes architectural and landscape guidelines are included in the Rules and Regulations, as well as pet policies, parking rules, specifics about sign displays, etc.
Architectural Control or Design Guidelines – Some HOAs have more specific documents focused on exterior modifications and home improvements. This document may enumerate specifications for types of exterior modifications including fences, landscape requirements, sheds, etc.
Policies and Resolutions– An Association may establish separate policies that only address one specific issue. The Colorado Common Interest Ownership Act (CCIOA) has established requirements that homeowners associations established after 1992 enact a series of nine policies: 1) Adoption of Policies, 2) Collections, 3) Meetings, 4) Examination of Records, 5) Enforcement, 6) Conflict of Interest, 7) Reserve Fund & Investments, 
Reserve Study, and 9) Dispute Resolution.
“What if there are contradictions in any of these documents?” Glad you asked. If a conflict arises, federal laws would supersede all others, followed by state and local laws, then by the hierarchy of documents: Covenants, Articles, Bylaws, Rules and Regulations, Policies (SB-100 policies fall under state legislation).
One of the most important things we at Diversified Property Management try to do for our homeowners is encourage participation in the association’s business, attend meetings, and most importantly to familiarize with the Association’s governing documents. We also provide training and educational opportunities for our Association Members. It is, after all, our highest goal to provide services that create and enhance thriving communities. Let us help make your HOA experience a positive one. Questions, comments or suggestions? Contact us. We’re here to help.
