The declaration and how it binds a buyer, assessments and the lien that secures them, board elections and the standard directors are held to, architectural review, rule enforcement and fines, records inspection, reserves and special assessments, and amending the governing documents.
A common interest community is created by recording a declaration in the county land records. The covenants inside it are treated as equitable servitudes that run with the land, so they bind every later owner regardless of notice, agreement or signature. The declaration sits above the bylaws and the rules in the hierarchy of governing documents, and a provision in a lower document that conflicts with it is unenforceable to the extent of the conflict.
Rental restrictions are usually adopted by amendment to the declaration. Statutes in several states provide that an owner is not subject to a leasing prohibition or restriction unless the provision was effective before the owner acquired title, or the owner consented. Narrow carve-outs allow associations to regulate short-term rentals and limit the number of rentals per year for everyone. Statutes elsewhere impose a floor on how restrictive a cap may be.
A director must act in good faith, in a manner believed to be in the best interests of the corporation, and with the care an ordinarily prudent person in a like position would use, including reasonable inquiry. Directors may rely on officers, counsel, accountants and committees they believe competent. Courts will not review the wisdom of a decision made on that basis, but the protection falls away for self-dealing, bad faith, failure to investigate and failure to enforce the documents at all.
Most statutes require directors to be elected by secret ballot under a prescribed procedure: advance notice of the nomination deadline, a further notice before ballots are distributed, an independent inspector of elections, and a public count. Quorum is set by the governing documents or by statute, and ballots returned by mail or electronically usually count toward it. Several states have replaced proxy voting with directed absentee ballots that cannot delegate discretion.
A reserve study identifies the major components an association must repair or replace, estimates the remaining useful life and replacement cost of each, and models a funding plan. Percent funded expresses the reserve balance as a share of the fully funded balance, which is the accrued portion of those future costs. Statutes commonly require a visual inspection at set intervals, annual review of the study, and disclosure of the results to members with the budget.
Association boards must generally meet in open session with notice to members. Statutes then list the matters that may be taken in executive session: litigation, formation of contracts with third parties, member discipline, personnel matters, and meeting with a member about assessment payment. Some statutes require closed session for specific decisions such as foreclosure. Matters discussed in executive session must generally be noted in the minutes of the next open meeting.
Statutes define association records and give members a right to inspect and copy them within stated periods, commonly ten business days for current-year records and longer for older ones. The association may withhold or redact narrow categories: information likely to lead to identity theft or fraud, privileged material, personnel records, and disciplinary or executive session content. An unreasonable refusal can produce fee shifting and a civil penalty for each denied request.
Before imposing discipline or a monetary charge, an association must generally give the owner written notice a set number of days in advance, stating the date, time and place of the hearing and the nature of the alleged violation, along with a statement of the right to attend and be heard. Several states require the hearing to be before an independent committee whose rejection of the fine is final. Selective enforcement, defective notice and failure to allow a cure are the usual defenses.
An assessment lien generally relates back to the recording of the declaration, which would put it ahead of every later mortgage. Most states reverse that result for first mortgages, leaving the association subordinate except for a limited priority slice. Some states express the slice as a fixed number of months of common expense assessments; others cap the mortgagee's exposure at the lesser of a period of assessments or a percentage of the original mortgage debt.
An amendment to a declaration takes effect only after approval by the percentage the declaration requires, certification in a signed and acknowledged writing, and recording in each county where the property lies. Bylaws are amended by the members and are usually not recorded. Statutes cap how high a declaration may set the threshold, protect certain matters with a unanimous or mortgagee consent requirement, and in several states allow a court to reduce a threshold that cannot be met.
Where the governing documents require approval before an owner changes a separate interest or the common area, statutes commonly require a fair, reasonable and expeditious procedure with prompt deadlines, a stated maximum response time, a decision made in good faith that is not unreasonable, arbitrary or capricious, a written decision, and an explanation plus a reconsideration route if the request is denied. Deemed approval clauses in the documents are enforced according to their terms.
Statutes commonly limit a board to a stated percentage increase in regular assessments and to special assessments aggregating no more than a stated percentage of budgeted gross expenses in a fiscal year, unless the members approve. Approval is usually by a majority of a quorum voting by secret ballot. An emergency exception permits assessments beyond the cap for court-ordered expenses, threats to health or safety, and unforeseeable extraordinary expenses supported by a written board resolution.
