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Commonly Used Community Association Terms

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A

Accrual Accounting
A form of community association accounting in which revenue is tracked when it is earned instead of when it’s received. Likewise, expenses are counted as soon as the obligation for payment is incurred, instead of adding them when the invoice is paid. This paints a more accurate picture of an association’s financial status.

Alternative Dispute Resolution
This is any means of reaching a resolution to a dispute other than going to court. It is also referred to as ADR and may include solutions such as arbitration or mediation.

Arbitration
A type of ADR, arbitration is a method where both parties agree to be honor the ruling of an impartial third party in a dispute.

Articles of Incorporation
This is the basis for establishing a corporation, including a community association. This documentation is filed with the Secretary of State’s office.

Assessment
A fee imposed on all property owners within a community association to be spent on maintaining the common areas of the community and as well as other functions of the association. Assessments are legally binding and are established in the association’s CC&R’s. Assessments can be either regular, such as monthly or quarterly dues, or special, which usually fund a special project.

Audit
A rigorous review of a community association’s financial books and records. An audit generally involves a complete reconciliation of all vouchers, charges, and expenditures. An annual audit is normally required by the association’s declaration.

 

B

Board of Directors
In the context of community associations, this is a body of elected homeowners who make decisions to manage the association. Usually the board elects a president, or chairman, to lead the group.

Budget
A plan for the finances of a community association over the course of a specified period of time, usually one year.

Bylaws
A set of guidelines that regulate the way the association is run as well as the board of director’s actions.  Bylaws are drafted and adopted by the community association and can include certain rights, such as the right to hold meetings or vote.

 

C

Cash Accounting Method
This method, unlike accrual accounting, records income and expenses only when funds are transferred. This system is easier to learn and utilize, but only shows transactions that have already been processed.

CC&Rs
This stands for covenants, conditions, and restrictions, which are the rules for living in a community association. Also called the master deed, declaration, or governing documents, these documents are filed with the county property records.

Common Area
The parts of property (building and grounds) owned jointly by members of a community association.

Community Association
An association (usually incorporated as not for-profit) of property owners whose membership is required upon becoming a unit owner. Members of the association are required to adhere to governing documents and pay assessments for the upkeep of common areas and the provision of certain services.

Condominium
A development consisting of an undivided interest in a common area coupled with a separate interest in a unit.

Cooperative / Co-op
A multifamily community association composed of a residential structure of two or more units. The interior space belongs to an individual unit owner and the common areas, including the outside structure itself, are owned jointly by members.

 

D

Developer (Declarant)
The person or group who either signs the original declaration governing the development and association or acquires the original developer’s (declarant’s) rights.

Declaration
See CC&R’s

Directors & Officers Liability Coverage
In the case of a lawsuit against a community association, “D&O Insurance” protects the members  of the Board of Directors from liability, unless negligent or criminal acts are proven.

 

E

Encroachment
Any item, usually a tree or fence, owned by one unit owner but extending onto another owner’s property.

Executive Session
A portion of a board meeting that is confidential and attended only by members of the Board of Directors.

F

Fiduciary Duty
The duty of the members of a community association’s Board of Directors to act in the best interests of the association as a whole, even if that conflicts with personal interests.

 

G

Governing Documents
See CC&R’s

 

I

Indemnity
The act of holding harmless; protection from damage or loss. This applies to a Board of Directors and protects those in volunteer positions from being liable.

Injunction
A motion or request for a court-order to perform an action or refrain from performing an action.

L

License

Permission granted by an owner to another for the execution of work on the owner’s land.

Lien
A monetary claim made against a property for unpaid mortgage, taxes, contractor work, or other charges. A lien attaches to the property, not the owner, but must be recorded in the property records of the resident county.

 

M

Managing Agent
A person or entity hired to assist the board of directors in enforcing the documents and managing the assets, including funds, of the association.

Mediation
An informal proceeding during which a neutral third person works with both parties in a legal dispute trying to reach a resolution.

Mitigate
An attempt to alleviate trouble or cause damage to be less severe.

Motion
A formal request, usually in writing, for a hearing and decision on a specific issue.

 

N

Net Income
The amount of money remaining after deducting total expenses and expenditures from total income.

Net Loss
This occurs when expenses are more than income.

Notice of Noncompliance
Similar to a lien, this notice is sometimes authorized under the CC&Rs and may be recorded in the county property records to notify prospective buyers that the property is in violation of the documents.

Nuisance
Arises from a person’s use of their property in violation of rules, laws, or standards which obstructs or injures the rights of another and creates annoyance, an inconvenience, or discomfort. Examples of nuisance can be loud noises, odors, or vehicles in disrepair on a property.

 

O

Open Meeting
Any meeting of a community association’s Board of Directors in which any member of the association is allowed to attend. Opposite of executive session.

 

P

Priority of Liens
Liens are usually ranked in the order in which they are “perfected” or recorded. As a result, “first in time, first in line” is how liens are normally prioritized.

Proxy
A person appointed to act or vote on behalf of another person by representing them at a meeting of the association. Also refers to the written piece of paper granting that power.

 

Q

Quorum
The minimum number of owners required to hold a meeting of the association. The number of owners required varies according to the governing documents.

 

R

Recuse
To temporarily remove an association member or board member or disallow his or her participation in a particular vote or proceeding.

Remedy / Relief
Compensation sought by a plaintiff which can include money damages, injunctions, etc.

Reserves
Funds set aside by a community association for the future repair of, replacement of, or additions to major components the association is obligated to maintain.

Reserve Study
A study of the association’s reserve account requirements which identifies the major components for which the association has maintenance responsibility and their probable remaining useful life. It estimates the cost for the components and the total contribution necessary to finance those costs.

Review
An analysis of an association’s books and financial records that is less stringent than an audit.

Rules & Regulations
Rules the association’s board is authorized to adopt to implement and interpret the CC&Rs.

 

S

Statute of Limitations
A time period during which a complaint must be filed or it is not recognized.

 

T

Title to Real Estate
Ownership of land and the right to use it.

Title Insurance
Insurance provided by a title insurance company that reviews all recorded documents that impact the title of a particular piece of real estate. This title “search” discloses mortgages, liens, or other encumbrances on the property that would negatively impact the purchaser’s ownership rights.

Townhouse
A term used to describe an attached residential dwelling. A townhouse can be a planned development on a lot or a condominium.

Tract Map
A document recorded in the county real property records that shows the location of all lots within a tract and provides specific descriptions and dimensions.

Temporary Restraining Order / TRO
A court order obtained on short notice to stop a prohibited activity. It remains in effect until an injunction hearing can take place.

 

W

Waiver
The voluntary relinquishment of a right, claim, or privilege.

 

Z

Zoning
A comprehensive system of land use controls normally reserved for city or county governments.

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