Association Structure and Funds
In general, the distribution of power and authority within the HOA is determined by the governing documents. Where the governing documents simply give the association power to do or approve something without specifically requiring owner approval, the power can be exercised by the board of directors without owner approval. In practice, most governing documents require owner approval for a variety of major decisions including changing the items which the association is responsible to maintain, changing the owners’ assessment percentages, changing the unit or lot boundaries, and imposing leasing or resale restrictions.
The board of directors has complete control over all committees, officers, and managers. This means that the board decides who will serve in these capacities, and what authority they will have, subject only to restrictions in the governing documents. The board retains the power to override the decision of any committee, officer, and manager.
The Articles of Incorporation or “Articles” are usually short and often contain only the name of the homeowners’ association, the name of the association’s initial agent for the service of process (the person authorized to receive legal notices), and a statement that the association is a nonprofit mutual benefit corporation. Sometimes the Articles also include language about voting, directors, amendments, and dissolution of the association. Articles are required only when an association is incorporated. (Unincorporated associations sometimes have Articles of Association, but these are not required.) Articles are prepared by the developer’s attorney and filed with the secretary of state. The Bylaws describe the mechanics of association decision making and management. Bylaws vary widely in content and length, but usually include the following:
- Numbers and selection methods for officers and directors;
- Notice, meeting and voting procedures for owner and board decisions; and
- Association record keeping and reporting requirements.
The initial project Bylaws are typically prepared by the developer’s attorney and may be reviewed by a government agency at the time a condominium project or planned development is formed.
Director Election and Term
The governing documents can require that directors have certain qualifications provided the requirements are reasonable. In most associations, directors must be owners. In some associations, directors must be resident owners. In other associations, directors are required to be “in good standing” which means that they are not delinquent in payment of assessments.
The length of the directors’ terms is usually specified in the governing documents. It is not necessary for all directors to have terms of the same length, or for all directors’ terms to expire in the same year. Frequently, the governing documents provide for staggered terms, so that fewer than all the board seats are open at one time.
The governing documents generally specify the minimum number of directors (the “quorum”) that must be present for decisions to be made at a board meeting. When the governing documents do not specify a director quorum, a majority of directors shall be required for a quorum. A majority vote of the directors attending a meeting can make decisions unless the governing documents impose a higher voting requirement.
Incorporated associations are legally required to have at least a chairman of the board or president and a secretary. There may also be one or more vice presidents, and a chief financial officer or treasurer. Unless prohibited by the governing documents, one person may hold more than one of these offices however, the same person cannot be both the president and the secretary. The officers are typically not required to be directors. Unincorporated associations need not have officers.