Fences or flamingoes: Be sure you know your homeowner association rules
A new homeowner moves into a neighborhood governed by a private association, receives an invitation to a potluck that doubles as an annual meeting and shows up with a bottle of wine and a dish to pass.
Feeling welcomed by the new community, the new homeowner starts paying dues, volunteering to help with neighborhood improvement projects and voting on association matters. But what happens when the homeowner receives a large bill to pay “his share” of the replacement costs for a portion of a road maintained by the association that is washed out?
The homeowner goes back to the governing documents for the association, reads the rules and restrictions, and finds out he was never really a member of the association at all. A fight ensues with his new neighbors and the association, which claims the homeowner behaved like a member, performed acts like a member, paid dues and received benefits like a member, and now must pay for the road replacement — like a member.
A closer reading of the governance documents — which no one has read in years — spells out that the homeowner and a dozen or so of his neighbors were never intended to be members of the association. Further, these houses never used the section of the road being replaced and were supposed to be assessed smaller fees for only a portion of the road maintenance.
Of course, at this point, the situation has devolved into a contentious mess with hard feelings on all sides. This could all have been easily prevented, though, with a little due diligence before that first potluck.
Members, budgets and rules
Homeowners associations are growing in popularity. In 1970, approximately 2.1 million residents were members of 10,000 or so community associations, according to the Foundation for Community Associations. In the past 40 years, those numbers have skyrocketed to 63.4 million members in more than 323,000 associations. These associations include homeowners associations, condominium associations, road maintenance associations and cottage associations.
These associations are typically responsible for maintaining and controlling common amenities for the use of all members. For example, private roads, parks, ponds and even clubhouses fall under the responsibility of the homeowners association.
But no two homeowners associations are the same. Each is based on a unique set of governing laws, rules and restrictions that can, over time, grow hazy as new people move in or association leadership changes. “That’s the way we’ve always done it” becomes the standard — but is often incorrect.
Whether you serve as a member of the board of directors of an association or are an individual owner, get the basics down upfront:
Who are the members? Obtain and carefully review a title commitment for the property to determine if the association has rights relating to the property in question. If a person isn't a member, there is no need for that person to go to association meetings or pay assessments.
If you are a member: Understand the rules and restrictions. If the bylaws state that you aren't allowed to put up a fence or plant a pink flamingo in your yard, don’t violate the rules. Otherwise, expect the association to send you a nastygram — or, even worse, file a lawsuit to get you to follow the rules.
Understand how the budget works: You need to understand how assessments are created by the association and carefully review the annual budgets of the association. Does the association have funds set aside in case there are major repairs or replacements to the road or other amenities? These details should be reviewed prior to buying the property. If there are no funds, understand that you could have a large assessment to pay in the future if a road needs to be repaired or another major improvement needs to happen.
Be sure the association follows its rules: If you are involved with an association, be sure it follows its rules — or changes them to better fit the needs of the members. The association also needs to carefully review its governing documents to be sure it clearly understands the rules and restrictions that it was established to follow. Associations should only be following clearly established rules and avoid doing things because that’s how “we’ve always done them.”
Rob Davies is a partner at Warner Norcross & Judd LLP where he concentrates his practice on real estate and commercial finance law with an emphasis on leasing, developing, financing, acquiring and selling real property. He can be reached at firstname.lastname@example.org.