Part 2 – CC&Rs – Understanding Governing Documents for HOAs
Living in a homeowners association, you’ve likely heard people use terms such as “Bylaws,” “Rules” or “CC&Rs.” What do they mean? An Association is actually a registered non-profit corporation in the state of Minnesota – and to be so, they have an important set of legal governing documents. Much like our country has a Declaration of Independence, Constitution, Bill of Rights, etc to function as a nation, an association has a similar document framework to act as a common interest community. The purpose of this article is to give you, as a member of a homeowner association, a basic understanding of this set of documents.
Although all HOAs are slightly different, their governing documents will typically all contain the following:
* Articles of Incorporation
* Declaration of Covenants, Conditions and Restrictions *CC&Rs)
* Bylaws
* Rules and Regulations
The Declaration of Covenants, Conditions and Restrictions (CC&Rs)
After a developer has established an association and incorporates it, then they must file an important document with the County that lays out the rights and responsibilities of the association and the people within it. It is truly the “meat” of the association’s set of governing documents – and it sets the framework for every other document after it. Some of the common components of the Declarations include:
* Definition of Unit boundaries
* Identifying “common areas” and components
* Listing of maintenance responsibilities (ex: owners maintain inside of “unit” and association “common areas”)
* Overall rights of owners (ex: unit leasing or pet)
* Owner restrictions (ex: residential use only and not business)
* Overall rights of association (ex: rule creation)
* Insurance requirements
* Assessment procedures and requirements (special assessments, monthly assessments/”dues”)
* Association’s powers to collect dues
The Declaration of Covenants is, in essence, the contract between owners and the Association. It is an incredibly important and powerful legal document.
Each governing document serves a specific purpose, yet they all interact with one another to create and maintain a community homeowner association. By purchasing in an association, you created a legally binding contract between yourself and the association. That “contract” is the important documents listed above. Hopefully this breakdown is helpful. You can access these documents on your association’s website through www.sharpermanagement.com
Part 1 – Articles of Incorporation – Understanding Governing Documents for HOAs
Living in a homeowners association, you’ve likely heard people use terms such as “Bylaws,” “Rules” or “CC&Rs.” What do they mean? An Association is actually a registered non-profit corporation in the state of Minnesota – and to be so, they have an important set of legal governing documents. Much like our country has a Declaration of Independence, Constitution, Bill of Rights, etc to function as a nation, an association has a similar document framework to act as a common interest community. The purpose of this article is to give you, as a member of a homeowner association, a basic understanding of this set of documents.
Although all HOAs are slightly different, their governing documents will typically all contain the following:
* Articles of Incorporation
* Declaration of Covenants, Conditions and Restrictions *CC&Rs)
* Bylaws
* Rules and Regulations
Articles of Incorporation
A homeowner’s association is a non-profit organization and must file paperwork with the Secretary of State’s Office before a developer sells any property within the HOA. Everyone who purchases property in the HOA becomes a member of the Association. The Articles of Incorporation are typically brief and contain basic information such as an Association’s name, location, and purpose.
Each governing document serves a specific purpose, yet they all interact with one another to create and maintain a community homeowner association. By purchasing in an association, you created a legally binding contract between yourself and the association. That “contract” is the important documents listed above. Hopefully this breakdown is helpful. You can access these documents on your association’s website through www.sharpermanagement.com
Natalie Martynow Joins the Sharper Management Team
Eden Prairie, MN, (April 4, 2018) – Sharper Management is pleased to welcome Natalie Martynow to its team as our newest Community Manager.
Martynow brings many years of experience in property management to her new position with Sharper. She began her career as an Assistant Property Manager in the apartment field where she lived onsite in a 120-unit complex. This position gave her a first-hand look at the needs of residents and how important the role of the property manager is to a complex.
She later purchased an investment property in a 402-unit condominium association. To better understand how Association’s work, she began attending Board meetings regularly. She ultimately ran for a position on the Board and later became the President. Martynow enjoys working with people. “I am thrilled to meet and help the people in our associations.”
“Natalie brings a depth of experience and knowledge that will ease her integration into managing some of our larger and more complex community associations. We are excited to welcome her to our team of managers and look forward to a great partnership as she enhances how we take care of our clients,” states Matt Froehlich, owner.
Founded in 2010, Sharper Management is a locally-owned, mid-sized property management company offering a full suite of premiere services to homeowner’s associations of all sizes. Sharper Management currently provides services to the Minneapolis-St. Paul seven-county area.
For more information on Sharper Management services and employment opportunities, call 952-224-4777 or email to info@sharpermanagement.com.
Audit & Tax Season
Did you know that community associations, as a registered non-profit corporations in the eye of the State of Minnesota, are required to file Federal and State taxes? It is also important to be aware of any requirements of your governing documents for an annual financial review or audit. If you are governed under MCIOA (Minnesota Common Interest Ownership Act), you are required to have, at minimum, an annual financial review. These two components – audits/review and taxes – are done simultaneously.
Financial reviews and audits do differ; however, they achieve the same goal. That is to have an independent, licensed CPA review the Association’s financials and the accounting practices of its management company.
Your property manager and staff at Sharper are working hard behind the scenes to provide the engaged CPA firm with all of the materials required. Bank statements, reports, invoices, etc. all must be provided. Be ready for your manager to ask for the Treasurer’s signature on tax docs. And lastly, know that it is very common for the CPA to file tax extensions, as reviews/audits are an involved process and can take time.
Construction Chat: The Spring Freeze Thaw Cycle
Soon the spring freeze/thaw cycle in Minnesota will mean things are on the move. Things you don’t want to move! Concrete heaves, asphalt buckles, retaining walls shift and bricks crack. The expansion/contraction process caused by ice/snow melting during the day, and then re-freezing at night, can put a tremendous amount of pressure on surfaces and structures.
There are a number of factors that contribute to the freeze/thaw cycle. Many are uncontrollable. Temperatures and melting are out of our hands. Soil conditions play a part; however, it is hard to change the natural soil content of the development. Grading/soil prep at construction are a factor; but again, it’s hard to do anything after the fact.
What you can review and correct, however, is drainage patterns that bring the water to these areas and surfaces. This is the ideal time of the year to assess some common contributing scenarios:
- Do rooflines drop water directly onto front stoops and sidewalks?
- Do downspouts push water into retaining walls or landscape beds?
- Do downspout extensions go out far enough from the building?
- Are there grading issues allowing water to pool on patios or sidewalks?
- Is curbing along the streets level, allowing water to flow to catch basins?
- Are there significant cracks and holes in asphalt allowing water to pool inside?
You are never going to solve all drainage problems. Nor can you eliminate the freeze/thaw cycle. But being proactive by reviewing drainage, and sometimes getting a little creative to redirect it, can save money on asphalt, concrete and other construction repairs. Now is the time to spring into action!
Board Tips – Open Meetings
What constitutes a Board “meeting” and Board “business” can become a very slippery slope. So much so that in 1994 when the Minnesota state legislature passed the Minnesota Common Interest Ownership Act (“MCIOA” or 515B), they sought to define and solidify requirements for how associations should operate with regards to Board meetings. Note that MCIOA applies to ALL condominium associations, regardless of when incorporated – and planned communities (example “townhomes”) incorporated after June 1, 1994.
While it might feel natural to meet informally as a Board, even if decisions are not being made, under MCIOA this is recognized as a Board meeting and therefore the Board must comply with Notice and Open Meeting requirements.
Notice – “To the extent practicable, the board shall give reasonable notice to the unit owners of the date, time and place of a board meeting.” Unless Bylaws or Declarations state otherwise in more specify, this “notice” requirement is fairly vague. Mailing and/or emailing notice to all members, as required for an Annual or Special Meeting, is not implied. The announcement of the next meeting date and/or inclusion in the Minutes from the previous meeting is satisfactory “notice.” Posting on bulletin boards, email notifications, newsletters, etc are also example practices, but not necessary.
Open Meetings – “Meetings of the board of directors must be open to the unit owners.” It really doesn’t get any clearer. Boards need to take heed in their practices of meetings. Informal meetings, “work shops,” “executive sessions,” whatever they may be called – if there is a quorum of Board members and they are discussing association business, it is a meeting. If it’s a meeting, Notice and Open Meeting requirements apply, and minutes should be kept.
Closed Meetings – there are only three categories of business that qualify a Board for closing a meeting to owners. 1.) if the association has employees and there are personnel matters; 2.) pending or potential litigation or arbitration issues; and 3.) criminal activity arising within the community and privacy of a victim would jeopardize an investigation.
The entire section of meeting requirements can be found at https://www.revisor.mn.gov/statutes/?id=515B.3-103
And once again, these Board meeting requirements only apply to associations that fall under
MCIOA. Nevertheless, they are state statutes for good reason and would be good practice for all associations to follow.
Legislative Changes Require Preventative Maintenance Plan
For community associations that fall under Minnesota State Statute 515B (known as “Minnesota Common Interest Ownership Act” – or “MCIOA” for short) there is a significant amendment that will go in to effect next year requiring associations to create and adopt a “written preventative maintenance plan” for all common elements. So, what does this mean and does it apply to your association?
What is a Preventative Maintenance Plan? Under this new law, associations, through its Board of Directors, will need to do the following for all recognized common elements:
1.) Create and approve a written preventative maintenance plan identifying all common elements; a maintenance schedule for servicing those common elements; and a maintenance budget for those common elements.
2.) The association then must provide owners with a copy (paper, electronic or simply access to it) of this maintenance schedule, plan and budget. The Board should review and amend this maintenance plan “from time to time” and provide owners with a copy of any changes.
3.) The association must then follow the Board’s approved preventative maintenance plan and schedule.
The purpose of this preventative maintenance plan is to ensure that associations are keeping the common elements in a good state of repair, helping to meet the anticipated life expectancy. An example of this might be to plan an annual inspection and routine maintenance of the roofing structure.
What this required “plan” actually looks like is quite ambiguous and undefined. Common, and especially Limited Common, Elements vary greatly from association to association. The first step may be to connect with an attorney to identify and solidify these elements. Attorneys and contractors will also have recommended tools to create a “plan” – such as a spreadsheet or inspection form.
What Associations Must Comply with This New Requirement? – All association that are subject to MCIOA. That means ALL associations, regardless of type, incorporated after June 1, 1994. ALL condominiums and cooperatives, regardless of when it was incorporated. Note: Be careful of the term “condominium.” Just because it looks like a townhome structure, does not mean it is incorporated with the State of Minnesota as a “townhome.” It may well be listed in the Articles of Incorporation as a “______ Condominium Association.” Finally, any townhome or planned community built prior to June 1, 1994 that has amended their governing documents and “opted in” to MCIOA.
There will be a number of resources, publications and probably further legal refinement of this new Preventative Maintenance Plan requirement throughout the year. Sharper will work to keep you all informed as definitions and tools become available. Here are suggested further readings on the subject from law firms that Sharper often utilizes.
http://www.hjlawfirm.com/blog/353-new-requirements-under-mcioa-preventative
Finally, Sharper has worked with the law firm of Roeder, Smith, Jaden, PLLC to help identify common elements and provide a schedule template that will satisfy these new statutory requirements for a flat fee of $500. Talk to your Community Manager if you are interested in this offering.
Resale Disclosure Documents
The Villas on Lost Lake Joins the Sharper Management Family
Eden Prairie, MN – (February 26, 2018) – Sharper Management is pleased to welcome the Villas of Lost Lake Association, in Mound, to the Sharper Management family. Located just off Lake Minnetonka, this 27-unit Association is centered by three-story townhome buildings with a pool and the shoreline perimeter flanked by custom built two-level townhome style buildings overlooking the bay. The Association also utilizes a dock with direct access to the property and water.
“The Villas on Lost Lake is a wonderful Association with equally beautiful homes,” states Dan Cunningham, Owner and President of Sharper Management. “The Board of Directors has done a wonderful job of self-managing in the past. As the Villas of Lost Lake continues to evolve and develop, Sharper Management is honored to be providing management services for them. We hope to further enhance the community’s governance and operation with our management services.”
Founded in 2010 and known for their reliable and committed approach to services for condominium and townhome associations in Minnesota, Sharper Management specializes in providing exceptional property management solutions. Offering a full-suite of premier services to the Minneapolis-St. Paul seven-county area, Sharper Management continues to expand their service area and looks forward to building more relationships throughout the Twin Cities.
How Associations Work – Your Board of Directors and Sharper Management’s Role
We often get questions regarding the role of Sharper Management (and management companies in general) in running an HOA. If you live in an HOA community, but have not served of its Board of Directors, you may also have questions. We hope the following information helps clarify some of the most common questions we receive.
Common interest communities (HOAs or CICs) are governed by an elected Board of Directors. This Board is comprised of owners in the community who has volunteered to serve. Board positions are not paid positions.
Your Association, through the governing Board of Directors and the powers outlined in the Governing Documents, is responsible for many duties.
To name just a few:
- Understanding, enforcing and amending the Governing Documents
- All financial management, including the collection of dues, setting operating and reserve budgets, establishing and maintaining a reserve fund for capital projects, paying contractors, and meeting statutory requirements for financial reporting
- Engaging in all necessary contracts required to service the community, such as grounds care and insurance
- Maintaining all common areas and amenities
As you can see, that is asking a lot of your volunteer Board members. One of the options your Board has is to engage a professional property management company to facilitate some of these tasks. While the ultimate responsibilities always remain with the Board of Directors, the property management company acts as an advisory group to the Board, an administrative arm to carry out the decisions made by the Board, and it performs the day-to-day financial transactions of the Association.
Some important distinctions to remember between the Board and a management company are;
- The management company carries out the directives decided upon by the Board
- Management is NOT a policy or decision making body
Sharper Management’s goal is to be Your Minnesota Neighbor in HOA and common interest community management. Ultimately, our job is to work with the Board to help maintain property value and enhance your experience of living in a common interest community.
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