They’ve got a lofty title — “HOA Governing Documents” — and when you buy in a managed community, you’ll be asked to read and agree to these documents.
Reading them is beyond boring; understanding them enough to decide whether you agree with them is a challenge.
If you’re not sure about anything in the HOA documents for your new Southern Maryland condo or home, we suggest that you run the package by your attorney.
In the meantime, let’s try and clear up some of the most confusing documents and terms that you’ll be asked to read and agree to.
What is an HOA reserve?
Each month, the HOA collects dues or fees from each homeowner, a portion of which is set aside in a “reserve” account to cover unexpected expenses. Examples of these expenses include repairing a leak in the community’s clubhouse roof or to replacing a faulty pump in the swimming pool.
Reserve funds are separate from operating funds. The latter are spent on routine expenses, such as landscape maintenance in the common areas.
Every few years, the association should conduct a reserve study to forecast how much money they should have in the reserve fund. This study is conducted by experts, and each homeowner in the community should know the figure that is determined.
Most professionals agree that an HOA’s reserve funds should be no less than 70 percent of the reserve study’s recommendation.
What are special assessments?
When there isn’t enough in the association’s reserves to fill a need, it may levy a special assessment to cover the shortfall.
For example, after a heavy storm, homeowners begin complaining of roof leaks. The condo community’s roof is at the end of its life and sustained too much damage from the storms to be repaired. It must be replaced.
The reserves are underfunded, so the HOA will go to the homeowners to get the money for the new roof.
What is the CC&Rs?
One of the most important documents you’ll receive when buying a home in a Southern Maryland managed community is the HOA’s CC&Rs, short for “Declaration of Covenants, Conditions, and Restrictions.”
The contents of this document dictate the rights and obligations of the homeowners governed by the HOA. The CC&Rs may include a description or diagram of the boundaries of the common areas and each unit.
It is also in these documents that you will learn how the HOA deals with enforcement of the rules and how it resolves disputes.
If the association doesn’t use a Rules and Regulations document, you may find the rules of the community within the CC&Rs.
The governance of the HOA corporation belong in the HOA bylaws, not the CC&Rs.
Rules and Regulations
Not all HOAs have a separate Rules and Regulations document, which is primarily used to manage common areas. For example, there may be a schedule for swimming pool use.
They may also dictate how the homeowners can use their property, such as landscaping restrictions, paint color restrictions, pet restrictions, and parking rules.
These are not suggestions, but rules, and anyone buying a home in the community must agree to abide by them. This is why it is so important to read all the documents. The last thing you need is to find out after you buy a home that you can’t live in it the way you had hoped.
Why did I receive Association Meeting Minutes?
One of the most informative parts of the HOA documents package are the HOA meeting minutes. Here you’ll learn about common complaints and how the association deals with them.
Not only will they tell you a lot about the people who live in the community but also how well the association runs.
For instance, if the meeting minutes reflect homeowners’ continued pleas for rules enforcement, it’s a sign there may be problems with the association.
Living in a Southern Maryland managed community isn’t for everyone. In the plus column, a well-run homeowners association helps maintain property values. Depending on the board, however, an HOA can become tyrannical and intrusive.
It’s all in the documents. Read them before you agree to live there.
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