Community Association Questions and Answers

Question:
"Can a lien be recorded to secure payment of a fine?"
Answer:
Yes. Although Civil Code § 1367.1 prohibits a monetary penalty (fine) imposed by an association as a disciplinary measure (as distinguished from a charge imposed as a means of reimbursing the association for costs incurred by an association) from being characterized or treated as an assessment that may become a lien against the member's lot or unit that is enforceable through nonjudicial foreclosure, there is another approach. That section does not prohibit the recording of a lien altogether. Such a recorded lien may be enforced through judicial foreclosure and may provide a basis for recovery of the fine amount through close of escrow on a sale.
Question:
"The association is facing a severe financial crisis because of so many foreclosures on the property. The board of directors cannot pay all of the monthly bills. What priorities should be assigned to the various obligations of the association?"
Answer:
If the state of the association's finances has reached true crisis levels, such that some of the monthly expenses must be deferred, health and life-safety obligations should be first priority. Short term operations expenses should take precedent over long-term obligations such as reserve contributions for future maintenance. Examples of health and life-safety considerations are the water bill, energy bills for the separate interests (if paid by the association) and security services. Fire and other catastrophic insurance would be next. Certain landscaping services as well as such things as pool maintenance could be deferred if the choice came down to the water bill and insurance vs. landscaping and pool maintenance.
Question:
"What type of insurance is typically carried by a condominium association?"
Answer:
Condominium and many Planned Unit Developments have a blanket insurance policy covering the buildings for fire and other casualties on or to the common area and the premium is paid from the assessments paid by the owners. Coverage for an owner’s personal property is not included. Liability insurance for claims against the association is included.
Question:
"Are there any limits on Special Assessments?"
Answer:
The Board of Directors of a Community Association can levy a special assessment of up to 5% of the association’s total budget without a vote of the members. By an appropriate majority, the members of the association can approve a special assessment in any amount.
Question:
"How much can the association raise monthly assessments?"
Answer:
Monthly assessments can be raised as much as 20% over the prior year without a vote of the members. By an appropriate majority, the members of the association can approve an assessment in any amount.
Question:
"What is a Special Assessment?"
Answer:
A homeowners association has the right to levy a special assessment under the provisions of the California Civil Code and the CC&Rs. If there isn't enough money in reserve accounts for a maintenance or repair expense, the association can raise the association assessments for a certain period of time or levy a special assessment to pay for it.
Question:
"What if you do not pay your assessment?"
Answer:
The association can take legal action to collect delinquent assessments by seeking a judgment against you in a court of law or force a sale of your unit.
Question:
"What are Assessments used for?"
Answer:
Assessments are used for operating expenses and for the reserve accounts. Operating expenses are the costs of running the common interest development and include such things as utilities, insurance, management, maintenance and repair.
Question:
"What are Assessments?"
Answer:
The owners in a common interest development pay Assessments to provide the funds necessary to operate the association in accordance with its budget. Assessments are normally paid monthly.
Question:
"What is the association’s budget?"
Answer:
The budget is the anticipated expenses for the association’s operation and reserve accounts for the year. It includes both Operating expenses and Reserve Accounts. The Operating expenses are typically the day to day costs of running the Association. The Reserve Accounts are used to fund long-term maintenance and repair projects like painting and re-roofing.
Question:
"Can a community association ban smoking?"
Answer:
A homeowners association's board of directors can restrict smoking if it applies to indoor common spaces such as hallways or recreation rooms. Outdoor spaces are a different story, say legal experts. Any restriction would probably hinge on local laws (i.e. if a city banned smoking outdoors, a homeowners association probably could restrict smoking in its outdoor spaces).
Question:
"Can there be special rules for pets?"
Answer:
A policy on pets would be stated in the CC&Rs or the Rules.
Question:
"What are the Rules?"
Answer:
The Rules govern behavior, use of, and activities on, the property of the association. They are usually enacted by a resolution of the Board of Directors.
Question:
"What are Articles of Incorporation?"
Answer:
Articles of Incorporation are filed with the state to create a corporation. Most Community Associations are non-profit, mutual benefit corporations, and were created by the filing of Articles of Incorporation.
Question:
"What are Bylaws?"
Answer:
Bylaws are the rules by which the Community Association governs itself. They include rules for the Board of Directors, Elections, and Meetings.
Question:
"What are Conditions, Covenants, and Restrictions (CC&Rs?)"
Answer:
The CC&Rs are the rules by which govern the use of property within a Common Interest Development. They are a document which is recorded against each owner’s interest in the property.
Question:
"What are the Governing Documents in a common interest development?"
Answer:
The Governing Documents usually consist of the CC&Rs, The Bylaws, the Articles of Incorporation, and the association Rules.
Question:
"What is the Common Area?"
Answer:
The Common Area is that undivided portion of a Common Interest Development that is held (owned) by all of the owners in common. In a condominium it is the entire building other than the individual "Units". In a Planned Development it is all of the property outside of the boundaries of the individual "Lots".
Question:
"What are the boundaries of the Separate Interest in a Condominium?"
Answer:
In a condominium, the separate interest, or "Unit" is usually bounded by the unfinished surfaces of the interior walls, ceiling, and floors. It normally includes all of the fixtures within the unit and sometimes includes the walls which separate the various rooms in the unit.
Question:
"What is a Separate Interest?"
Answer:
The Separate Interest in a Common Interest Development is that portion of the development owned exclusively by each individual owner. It is called a “Unit” in a condominium building or a "Lot" in a Planned Development.
Question:
"What is a Loft?"
Answer:
A loft refers more to an architectural style than a form of ownership. Traditionally a loft has been defined as a unit with high ceilings with an upper level that looks down to the lower level. Often lofts are conversion projects from older industrial or warehouse buildings. Typically lofts are condominiums or Co-ops.
Question:
"What is a Co-op?"
Answer:
A Co-op, also known as a Stock Cooperative, is a housing community in which a corporation owns the entire real property, both the common area and the dwelling units. The shareholders or members own a share or shares of stock, or a membership. Ownership of a share or membership entitles that person to lease and live in an apartment or other dwelling unit in the community for as long as he/she owns the share or membership.
Question:
"How do the building maintenance responsibilities differ between a condominium and a Planned Unit Development (PD)?"
Answer:
In a condominium building, the association is generally responsible for virtually all of the physical elements of the building with the exception of internal fixtures and appliances and non-load bearing walls within a unit. In a Planned Development, the association, if it has any maintenance duties for private property, is usually responsible only for the exterior waterproof envelope of the building, but not for the structural or interior elements of the building, like framing, foundations, plumbing or wiring. Sometimes, an association is also responsible for front yard landscaping. In both cases, the CC&Rs will specify who (owner or association) maintains what and if silent, the Association's obligation will only be to maintain common area.
Question:
"What is the difference between a Condominium and a Planned Development?"
Answer:
There are many, but the main difference is how the "Common Area" is defined. In a condominium building all of the physical components of the building are "Common Area" except for the "air space" within each unit. In a Planned Development, the Common Area is usually everything outside of the physical footprint of the building's foundation.
Question:
"What is a Townhouse?"
Answer:
A Townhouse is an architectural style and not a legal form of ownership. The legal interest is usually referred to as a "Lot" much like that of a detached single family home. Townhome-style dwellings can also be condominiums. With a townhome you own your portion of the building on the lot, which is usually attached to several other "lots". While architecturally a single townhome is usually of two-story construction, most townhomes in California have a ground floor entrance and are not stacked. Townhomes are usually part of what is known as a Planned Development (PD).
Question:
"What is a Condominium?"
Answer:
A condominium is not an architectural style but rather a form of legal ownership. This interest is often known as a "unit". With a condominium you own the air space within your walls, floors and ceiling with a common ownership interest in the remainder of the building--the common areas--which are shared by all owners, usually on a percentage basis.
Question:
"What is a Community Association?"
Answer:
A Community Association (also known as a "homeowners association") is the organization that manages a common interest development. It is usually a corporation and manages the development through a board of directors and often with a professional community association manager.
Question:
"What is a Common Interest Development?"
Answer:
A common interest development is real property that combines individual ownership (separate interests) with property held and managed in common among all of the owners (common area.)

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