HOA Laws and Legal Documents: How to Read Them
Understanding how your HOA is governed does not require a legal degree or a licensed attorney. That said, if there are conflicts in the language, or you’re looking to change your governing documents, then an attorney will be beneficial. More on that later. First, let’s dive into how HOA’s are governed, the laws around them, the governing documents, and how this all applies to your associations.
Why are homeowner associations created in the first place?
In short, an HOA is established to maintain and preserve the common elements of the community. These common elements can vary depending on the type of association that you live in. Some associations are responsible for maintaining the exterior of the units and the roofs. This is more typical of a condominium and some townhome developments.
Other common elements may include roads, parking lots or garages, sidewalks, playgrounds, a community pool, fitness and recreational areas, and more.
As a member of the homeowner’s association, you are required to pay dues, or assessments. These fees go to the maintenance of the common elements, as well as ongoing operating costs for insurance, utilities, vendors, management, legal fees, accountant fees, etc. Hopefully (!) your HOA board is putting a portion of your assessment income into a special fund called a Reserve Fund that is used for future capital improvements.
In addition to paying assessments, you also agree to certain rules and restrictions as detailed in the covenants. These covenants are conveyed with your property. When you signed to purchase the home, part of your closing process involving signing that you understood you were buying a home in an association and agreed to the covenants as a part of that purchase. Your real estate agent should have provided the governing documents to you during the due diligence process. Many homebuyers will overlook this because they do not understand them, or don’t believe it’s important.
How is an HOA formed?
Before any fees are collected, the developer of the HOA will incorporate the association, usually as a non-profit corporation, in the state the HOA is located in. As a non-profit corporation, the association is now a legal entity and must adhere to all applicable laws.
Which laws apply to your HOA?
Generally speaking, the order of authority falls in this order:
- Federal Law (Federal Housing, discrimination laws, etc.)
- State law
- Local ordinances / laws
- Articles of Incorporation
- Covenants (sometimes called the Master Deed)
- Bylaws
- Board Adopted Rules and Regulations
Let’s start with federal.
Federal Housing Requirements and HOAs
The most important thing to remember here is that HOA’s cannot discriminate. Federal Housing typically gets into lender requirements, landlord rights, tenant rights, etc. However, when it comes to federal laws, homeowner associations cannot create rules or use language in their governing documents that restrict privileges or rights to ownership based on race, religion, sexual orientation, etc.
A not-so-fun fact: Some of the earliest HOAs were created in the early 1900’s to restrict people of color from buying a home in the neighborhood. Those associations are still around and some may even have the original language in their covenants. However, that language is clearly not enforceable. If the original governing documents were never amended, then any racist language that contradicts the FHA is illegal and cannot be enforced.
Non-profit Corporation Laws
As non-profit corporation, the association is required to abide by all laws pertaining to non-profits in their state, including financial reporting requirements, documentation, etc. These laws vary from one state to state another. Fortunately, all states now have their laws published online for easy access. There are some states that have little, or no law regarding homeowner and condominium associations. However, any HOAs that exist in those states are still required to follow the non-profit corporation laws in their state.
HOA Specific Laws
Next in line are any state laws created specifically for homeowner and condominium associations. Different states have different names for these. As an example, in California, the “Davis Stirling Act” is what governs homeowner associations. Other states may name these laws, or acts in different ways. Generally, you will see names like Homeowners Association Act, Planned Development Act, Condominium Act, Horizontal Property Regime, etc. A quick online search for “HOA Laws STATE-NAME” will most likely lead you to where you want to go.
Differences in State Laws
It’s important to understand that different states have different laws for associations. Some state may have laws that are more vague than others, while some are more specific. Some states will also use language that gives the association certain authority only if that authority is explicitly stated in the HOA governing documents. As an example, when it comes to fining a homeowner for violations, it may something like “a homeowner who is found to be in violation of their covenants may be fined by an amount not to exceed what is specified in their governing documents.”
Other examples may give the HOA a certain restriction. “The HOA may fine the homeowner for a violation but may not exceed an amount of more than $25 per day.”
Keep in mind these are just examples. You’ll need to check what your state laws say about these rules.
HOA Governing Documents
Next up, we have what everyone fights about at annual meetings and complains about when they buy a home – the governing documents.
The governing documents consist of:
The Articles of Incorporation (filed with the state)
Covenants Conditions and Restrictions
Bylaws
The Articles of Incorporation
Sometimes called the Articles of Formation, this is the legal document that the developer, or an attorney, created to file with the state the establishes the existence and purpose of the homeowners association.
The Covenants
The covenants are the rules and restrictions around the property and the common area. Sometimes this is called the CC&Rs, or Covenants, Conditions and Restrictions. You’ll also see names like “Declaration of Covenants” or “Declaration of Covenants, Conditions, and Restrictions,” or “Master Deed.” For now, we’ll just call them the covenants or CC&Rs.
Generally speaking, anything to do with maintaining the exterior of the home, restrictions on altering the home exterior, and the association’s rights to certain easements or common areas are defined in the covenants. Are basketball goals allowed? Is parking allowed on the street? Can we store trash cans outside? Does the association maintain the lawns? Can I keep chickens in my backyard (no you can’t…). Answers to questions like this are generally found in the covenants.
The Bylaws
Think of the Bylaws as the constitution of the association. The bylaws articulate “how” the association is governed. This includes defining the HOA board, HOA board positions, board responsibilities and authority, etc. It also tells you how to vote in board members, how to remove board members, the process and voting requirements to amend the governing documents, how often the board meets, how to call a special meeting, etc.
The bylaws generally do not get into property restrictions or rules. Those are usually found in the covenants. However, we have seen some conflicting language in the past where the covenants and bylaws address the same topic but have conflicting language.
Rules and Regulations
The bylaws will usually give the HOA board the authority to adopt certain rules and regulations. In the same way that our government passes acts into law, HOA board members can create rules that can be passed without a vote of the homeowners. However, rules that aren’t popular or easily enforced, can almost certainly lead to homeowners calling for a board member to be removed!
It is important to remember that if the board adopts certain rules or resolutions, then homeowners are required to follow them. However, if those rules conflict with anything with a higher authority (federal laws, state laws, covenants, bylaws, etc.), then those rules shall not apply because they are superseded.
What happens if there’s a contradiction in the documents?
In a rare situation, the association’s governing documents may have conflicting language. The covenants will address a topic, and the bylaws will also address the same topic. In the case of a conflict, the covenants supersede the bylaws.
In more rare situations, we’ve seen contradicting language within the same document. In this event, the board can adopt a resolution to which parameters will be followed. However, it may be recommended that the HOA seeks the help of an attorney to amend their documents to address the contradicting language.
Can my HOA’s documents be changed?
Yes they can! However, it’s not an easy process. In most cases, a super majority of the homeowners will need to approve any changes or amendments. This will usually be 66 and 2/3%, 75%, or in some cases, 80, 90, or even 100%!
This can be a challenging task to accomplish. You’ll need to refer to your governing documents (your Bylaws in this case) on what needs to be done. We also recommend getting an experienced HOA attorney that can help guide you through the process of drafting the amendment and presenting it to the homeowners for a vote.
Conclusion
HOA laws and governing documents can be confusing, but they don’t have to be. Just remember, that they exist for a reason and they ultimately serve two purposes: to protect the HOA and the rights of the homeowners as members of the association.
If you have questions about your particular situation, we’re happy to provide consultation (for a fee). If you need legal advice, or need help amending your governing documents, then you may want to consider an attorney.