1. What is the difference between a Condominium, a Homeowners’ Association (PUD) and a Co-op?
a. Condominium – In a condominium the unit owner owns a unit (the interior portion and other areas) in fee simple, the same way a free-standing single family home is owned. The exterior is owned in partnership with all other unit owners in the Association. The Declaration will identify exactly where the joint ownership ends and the fee simple ownership begins. This will vary from Association to Association. The majority of maintenance responsibilities for the grounds and exterior of the building are conducted by the Association. A condominium may or may not be incorporated.
b. Homeowners’ Association (PUD) – Each owner owns the entire unit, interior and exterior, up to a dividing point with the next unit. The ground underneath the home, as well as, in most cases, a certain distance in the front and rear of the unit, i.e. lot, is also owned by the unit owner. Any common ground or amenities are owned by the Association with individual, separate deeds. The exterior building and grounds maintenance responsibilities of the Association can vary dramatically from nearly nothing to almost complete maintenance as if it was a condominium The specific maintenance responsibilities of the Association are identified in the Declaration. Most Homeowners’ Associations are incorporated.
c. Co-op – A co-op must be a corporation. The corporation owns the structure and owners purchase stock in the corporation in order to be permitted to occupy one of the apartments. In this instance many of the exterior and some of the interior responsibilities for maintenance are handled.
2. Why to I pay a monthly fee?
Monthly fees, frequently called assessments, dues, maintenance fees or other names, are the main resource for any Association to pay for the services that each owner is entitled to based on the Association’s legal documents. Fees can vary dramatically from $50 to $100 a year for a single family homes homeowners association that may only take care of the entrance monuments and pay for insurance, to several thousand dollars per month for an exclusive high-rise building association with a full staff. It is important to understand the services that you receive for the fees that you pay and not to compare those fees to another association that does not receive the same services. The cost of running a swimming pool, for instance, will vary based on the size of the pool, the number of people that use it, how long it is open each day, whether it is operated by a volunteer committee or an outside contractor and if pool monitors are on duty. So, in conclusion, please read the association’s legal documents and budget carefully to better understand your fee structure and the association’s responsibilities.
3. What is a community association?
Three features make community association homes different from traditional forms of home ownership. One is that you share ownership of common land and have access to facilities such as swimming pools that often are not affordable any other way. The second is that you automatically become a member of the community association with all other homeowners, and as such must abide by the association rules. The third feature is that you will pay an “assessment” (a regular fee, often monthly) that is used for upkeep of the common areas.
The community association operates and maintains shared common areas/facilities. Of course, you’ll pay your share of the expenses and, as an association member, you’ll have a voice in the association’s decisions. The association may have one of a variety of names: homeowners association, property owners association, condominium association, cooperative, common interest community, or planned unit development. To simplify matters, that are all frequently referred to using the umbrella term, community association or CA.
4. Why do I need to purchase a resale certificate when I sell my home?
Because it is required by law! According to Pennsylvania law, Pennsylvania Consolidated Statutes, Section 101, Title 68, Real and Personal Property, in the event of a resale of a unit by a unit owner other than the Declarant, the unit owner shall furnish to a purchaser before execution of any contract for sale of a unit, or otherwise before conveyance, a copy of the declaration (other than the plats and plans), the bylaws, the rules and regulations of the association and a certificate containing seventeen statements of fact including:
(1) A statement disclosing the effect on the proposed disposition of any right of first refusal or other restraint on the free alienability of the unit.
(2) A statement setting forth the amount of the monthly common expense assessment and any unpaid common expense or special assessment currently due and payable from the selling unit owner and any surplus fund credits to be applied with regard to the unit.
(3) A statement of any other fees payable by unit owners.
(4) A statement of any capital expenditures proposed by the association for the current and two next succeeding fiscal years.
(5) A statement of the amount of any reserves for capital expenditures and of any portions of those reserves designated by the association for any specific project.
(6) The most recent regularly prepared balance sheet and income and expense statement, if any, of the association.
(7) The current operating budget of the association.
(8) A statement of any judgments against the association and the status of any pending suits to which the association is a party.
(9) A statement describing any insurance coverage provided for the benefit of the unit owners.
(10) A statement as to whether the executive board has knowledge that any alterations or improvements to the unit or to the limited common elements assigned thereto violate any provision of the declaration.
(11) A statement as to whether the executive board has knowledge of any violations of applicable governmental requirements or knowledge of the existence of any hazardous conditions with respect to the unit, the limited common elements assigned thereto or any other portion of the condominium.
(12) A statement of the remaining term of any leasehold estate affecting the association and the provisions governing any extension or renewal thereof.
(13) A statement as to whether the declaration provides for cumulative voting or class voting.
(14) A statement as to whether an agreement to terminate the association has been submitted to the unit owners for approval and remains outstanding.
(15) A statement of whether the association is a master association or is part of a master association or could become a master association or part of a master association.
(16) A statement describing which units, if any, may be owned in time-share estates and the maximum number of time-share estates that may be created in the association.
(17) A statement of whether the declarant retains the special declarant right to cause a merger or consolidation of the association and, if so, the information describing such right which was supplied by the declarant, if any.
5. What is the role of the Executive Board?
A community association may be a not-for-profit or it may be an unincorporated association – in many ways, a business. As its governing body, the Executive Board is responsible for making sure that the association is properly maintained, that its bills are paid, and that its funds are account for.
This doesn’t mean that your Board runs the association by itself, from the ground up. It can and may delegate its authority to professionals – managers, attorneys, accounts and others – to conduct the day-to-day business of the community. But the contact points for those professionals are almost always the President and the other officers, whose decisions and action ideally are guided by their sense of fiduciary duty to their community.
Let’s begin at the top. In most (if not all) associations, the President is the Chief Executive Officer, the head of the corporation. The powers and duties of this position are far-ranging. It’s the President who most often talks to the manager, who finalizes meeting agendas and presides over meetings, and who, when necessary, serves as the spokesperson for the community.
The role of the Board Vice President is relatively simple. Please don’t take this to mean that this officer is unimportant. Far from it. The Vice President acts in the place and stead of the President in the event of absence, inability, or refusal to act. The Board may also assign additional duties to the VP as needed. Some Boards have more than one VP, each assigned to a different area (finance or operations, for example).
The primary role of the Secretary is the responsibility of taking the meeting minutes, or for making sure that the meeting minutes are not only taken but also kept in a safe place. The Secretary is also obligated to sign any documents that the Board approves. Finally, the Secretary is the Chief Record Keeper unless that duty is assigned to a professional (Management Firm, etc.).
Finally, we get to the bottom line. The Board Treasurer ensures that all monies are deposited in the appropriate accounts (reserves or operation), that bills are paid in a timely manner, that financial statements are prepared, that an annual audit is performed (if required), and that an annual budget is created and distributed to members. In every way, the Treasurer is the steward of an association’s finances.
It is common today that most of the Treasurer’s duties are assigned to professionals. As with the other officer positions, whenever necessary the Treasurer should rely on professionals. Very few Treasurers are CPA’s or have a background in association accounting. Andy they don’t have to. What is important is that the Treasurer understands the position and uses good business judgment when making decisions.
6. What is fiduciary responsibility?
Each Board member, officer or not, has a fiduciary duty to the members of the association.
Unfortunately, “fiduciary” is an overused word, and its meaning isn’t very well known. A fiduciary, according to Webster’s New World Dictionary, is “a person who holds something in trust for another”.
It is the obligation of Board members to work together with one goal in mind: to make their community a better place to live. The officers would lead the way. It’s not a popularity contest, nor is it even brain surgery. Rather it’s neighbors giving of their time to the community and making a difference.
7. Ten tips for Board Members
An officer is still a Board member. And any Board member can benefit from these 10 tips.
(1) Rely on the advice and recommendations of professionals.
(2) Read and understand your association’s governing documents.
(3) Educate yourself. Find out what is required to be an effective Board member.
(4) Refrain from micromanaging your manager or staff.
(5) Listen to the community. Don’t view your Board slot as a position of power but rather as one of service.
(6) Don’t get caught up in the wants and desires of special-interest groups.
(7) Look at the big picture. Work toward achieving the goals and mission statement of your community.
(8) Work together. Be respectful of your fellow Board members’ opinions and decisions. Some votes won’t be unanimous, and that’s okay. It’s not personal – it’s just business.
(9) Conduct yourself in a professional manner. Board meetings aren’t social events.
(10) Relax. Don’t take everything – including yourself – so seriously. Remember that you’re a homeowner volunteering your time.
8. If I am not happy with my community association, can I withhold my assessment and put it in an escrow account?
No. Under Pennsylvania Statute the escrowing of funds is specific to rental property, not community association property. By failing to pay your assessments when due, the homeowner will be liable for late payment and collection costs. It is far better to pay your assessment and see other resolution to the issues your encountering such as meeting with the Board of Directors.
9. As part of the resale packet I received a number of legal documents, what do they mean to me?
Declaration – The Declaration is the superior document that creates the community association and will identify what is common area or common property vs what is privately owned. It also identifies common services, insurance needs, and other declaratory information such as establishing assessments. This document can only be revised or modified by a vast majority vote of the owners.
Bylaws – The Bylaws, previously called Code of Regulations, identify the operational procedures for the association; the powers and duties of the Board of Directors, how the Board is elected and the term of office, establishes requirements for the meetings of the owners and quorum requirements, and other operational procedures. This document can easily be revised or modified by a simple majority vote of the owners.
Rules and Regulations – The rules and regulations are established by the Board of Directors and may not conflict with the Declaration or Bylaws but will expand upon statements made or identify requirements not specified in those documents. The rules and regulations generally deal with parking, control of pets, architectural regulations, use of common amenities, etc. And since they are established by the Board, they can be revised or modified by the Board.
Policies / Resolutions – are established by the Board of Directors for consistency in operating the association. Some of these policies may have to do with how to process a maintenance request or how to proceed on the collection of assessments that are not paid on time and numerous other operational procedures.
10. I own by own home. Why do I have to ask permission to make changes to the exterior?
While homeowners look only at their own property, the Board makes decisions based on impact on the entire community. An individual owner may prefer a color of paint but it may not match the other units in the building. An owner wanting to install an out-building on their property or create a garden may not realize how this would impede the landscape maintenance or affect their neighbor’s property value if not maintained. Many associations were built with a certain style in mind and someone adding a deck or larger patio may not be aware and use the same style. It is the responsibility of the Board or committee to take all these factors into consideration when evaluating each alteration request to maintain the uniformity and architectural appeal of the community.