Commonly asked questions about Community Associations:
A Community Association is a not-for-profit, private organization with mandatory and automatic membership for all homeowners. It is a business and is operated as such.
Governing Documents define the legal structure and operation of the Community Association.
The typical Governing Documents are:
- Recorded plat or plan (to show the precise location of units, lots and/or common area)
- Declaration, Covenants, Conditions & Restrictions (CC&Rs), master deed, proprietary lease, or occupancy agreement (note that the master deed, proprietary lease, and occupancy agreement only apply to cooperatives)
- Articles of Incorporation
- Board Resolutions (Rules and Regulations)
- Illinois Condominium Property Act
The general hierarchy of authority for governing documents is a loose one because not all documents address all issues involved in operating a Community Association. The bylaws and board resolutions must be consistent with the Declaration. Generally, the Declaration would control if there is a conflict with any of the other documents. Resolving such a conflict will depend on the specific facts and legal issues involved. The Illinois Condominium Property Act supersedes any discrepancies in your documents.
Articles of Incorporation (if incorporated)
- Bring the corporation into existence
- Define its basic purposes and powers
- Indicate whether stock will be issued
- Indicate whether there will be a board of directors and if so, identify the initial board
Declaration, CC&Rs, or Master Deed
- Defines the portion of the development owned by the individual owners and those owned by the Community Association, if any
- Creates interlocking relationships binding all owners to one another and to the Community Association for the purposes of maintaining, governing and funding the development
- Establishes protective standards, restrictions and obligations in areas ranging from architectural control to prohibitions on various activities in order to promote harmonious living
- Creates the administrative framework for the operation and management of the Community Association, although many of the specific administrative details are spelled out in the bylaws
- Provides the mechanism for financial support of the Community Association through assessments
- Provides for a transition of control of the Community Association from the developer to the owners
Proprietary Lease or Occupancy Agreement (for Co-ops)
- Identifies the premises that the stockholder is permitted to occupy exclusively
- Defines the term of the lease and the rent (sometimes called the maintenance fee or carrying charge) that is payable by the stockholder
- Defines the events which would result in the termination of the proprietary lease
- Sets the requirements for membership in the Community Association
Sets the requirements for membership meetings
Voting rights of member owners
Procedures for electing the board of directors; qualification of directors
Procedures for the board of directors to elect offices
General powers and duties of the board
Provision for indemnification of officers and directors, except in cases of gross negligence or willful misconduct
- Enacts rules and regulations
- Formalizes board decisions
In a Condominium Association, a person has individual ownership of a unit and ownership of the common (shared) areas based on a percentage assigned to the owner’s unit. In a home or property owner’s Association, a person has ownership of the home and the lot it sits on while the Association has title to the common (shared) property.
In a cooperative corporation, a person owns stock in the corporation while the entire project, including common facilities and all units, is owned by the corporation. As a shareholder, a cooperative member has the right to occupy a unit and has a proprietary lease.
The basic authority in a Community Association lies with the owners. In order for the Association to govern effectively, the owners elect a board of directors to act on their behalf. The governing documents delegate most of the Association’s decision-making powers to a board. Most daily operating and policy decisions are left to the board.
The Board of Directors is elected by the Association members unless otherwise specified by the governing documents. The Board manages the Association business by making decisions and setting policies. The Board has a fiduciary responsibility that includes hiring a management company to operate the property and implement the policies of the Board, and provide a balanced budget for operating expenses and provide for a reserve fund for replacement of capital items.
A Community Association provides amenities, services and other conveniences to its members. The collective buying power of owners allows services to be obtained for a lower cost, resulting in substantial savings. Maintaining the integrity and appearance of common areas allows owners to enjoy higher standards and resale values.
The Management Company is independent from the Association. Often the Board of Directors will hire a company to assist and guide them in their duties to the Association. Typical responsibilities might include; the collection of your monthly assessment, facilitate and recommend contractors and vendors, prepare monthly financial reports, processing homeowner inquiries and concerns, problem solving, meeting attendance and notice, and a lot of consulting. The Management Company is an independent contractor, not an employee of your Association and is paid in accordance with contractual arrangements negotiated by the Board.
The assessment, sometimes called “dues” is the monthly fee each member pays to cover the operating costs of the Association. These include janitorial services, landscaping, pools, roofs, hallways, painting, various administrative costs, utility expenses, common area insurance, reserve funding, and more. When you purchase a home in an Association, thereby agreeing to become a Member, you also agree to pay this assessment for as long as you are a Member. You should receive a copy of the budget for your Association when you purchase your home and then prior to the start of each fiscal year. If not, contact your management company to find out how you can obtain a copy. The budget will outline in detail how your Assessments are allocated.
Initially, the “Budget” is established by the developer of the complex. Thereafter, the budget is determined by the Board of Directors. This is done annually in accordance with the Associations governing documents prior to the beginning of each fiscal year. The budget will determine how much money it will take to effectively operate the property and provide for reserve fund allocations, and thus, the amount each owner will have to pay for that fiscal year.
Withholding payment of the assessment is not going to solve any problems. In fact, not paying your assessments will create severe problems – for you and for the Association. The Association has several legal remedies in the event an owner does not or cannot pay the assessment. There may be additional fees charged to you by the Association including late charges and for any legal counsel assisting the Association in the collection of unpaid assessments. It is very important that you contact your management team immediately if you should run into problems in this area. The legal fees incurred for collections will be charged to you.
Your Association will be very strict on exterior changes of nearly every type, whether you are painting, installing a new door or porch light, sometimes even the planting of flowers and trees may require approval from the Board. Some Associations have an Architectural Control Committee as part of the board of directors to receive, approve or decline and process a homeowner’s request for change. Some do not, in which case you would submit your architectural change request to the Board of Directors (via the Management Company). Your request might be approved or it might not be approved, depending on the change proposed. The Board may request additional information from you if they are to make a fair, sound determination. You should refer to your CC&R to obtain the details for architectural review provisions at your Association prior to the start of any work.
An owner may choose or need to rent his/her home. Of course, if the Association permits this, there may be some restrictions. You should refer to the CC&Rs and Rules and Regulations or ask your property manager for any restrictions in renting. It is also recommended that you check with your lending institution, as many home loans are contingent upon a homebuyer residing at the property on which they have granted a loan. Owners who rent their units are encouraged to screen prospective tenants in detail. Renters are expected to abide by the same rules and guidelines as owners, and it is the owner who will bear the consequences of any violations of the rules and use restrictions, should they occur. Rosen Management Services has a department that can assist you in renting your home.
For more information on these services, contact Saar at 773-313-0025 x36 or email@example.com