Know Your Association’s Governing Documents and Their Hierarchy

In a perfect world, every homeowner or condominium association’s bylaws, CC&Rs and other governing documents would be crafted by lawyers so that they are fully in compliance with municipal, county, state and federal laws and do not contradict one another.

Know your association's governing documents and their hierarchy In the real world, this can never be the case. Occasionally, there are areas of conflict between various association governing documents and the law, or amendments that are made to one document without the necessary changes being made to the others so that everything is brought into alignment. For example, a dispute can arise when a resident points to a passage in the association rules and regulations that allows them to do something while the CC&Rs contain conflicting information.

When both parties can point to language in different documents that justifies their actions or non-actions, how can such differences be resolved? Is there an established order for which document takes precedence?

It turns out there is such an order of precedence, at least in most areas. Just as the Constitution trumps federal laws, and federal laws take precedence over state laws and so on, there is a similar order of precedence, or hierarchy, of documents when it comes to homeowners associations and condominiums.

Specifics vary by state but, in general, the hierarchy of documents looks something like this:

  1. City, county, state or federal laws. The higher the level, the greater the precedence. In some cases, laws may be written in such a way that various association governing documents are deferred to.
  2. Recorded plat, map or plan that is documented in the county recorder’s office. These plans help designate ownership plots and the geographical limits of the association’s jurisdiction.
  3. CC&Rs (or a declaration of condominium for COAs).
  4. Supplementary declarations.
  5. Articles of incorporation or corporate charter (if any exist).
  6. Bylaws.
  7. Rules and regulations.
  8. General resolutions.

This is the specific hierarchy of governing documents in California, under the Davis Sterling Act:

  • To the extent of any conflict between the governing documents and the law, the law shall prevail.
  • To the extent of any conflict between the articles of incorporation and the declaration, the declaration shall prevail.
  • To the extent of any conflict between the bylaws and the articles of incorporation or declaration, the articles of incorporation or declaration shall prevail.
  • To the extent of any conflict between the operating rules and the bylaws, articles of incorporation, or declaration, the bylaws, articles of incorporation, or declaration shall prevail.

Most if not all states impose similar governing document hierarchies.

Likewise, the hierarchy of governing documents also restricts the authority of association boards to infringe on the liberty of the owners, except within certain parameters defined by the law, the declaration and the CC&Rs. For example, except within very narrowly defined contexts, association boards cannot create a rule or regulation that infringes upon First Amendment rights, except where homeowners have ceded them.

Things get a little fuzzy when it comes to state laws that pass after the homeowner or condominium association documents were drafted. After all, the Constitution doesn’t allow state governments to shred existing contracts by force of law. Florida attorneys Gary and Ryan Poliakoff explain which takes precedence:

[It] depends on whether the statutory amendments are procedural (affecting simply how laws are carried out) or substantive (an actual change to rights or regulations). The Constitution prohibits states from passing laws that impair existing contract rights. So, for example, one could debate whether a state law that prohibits an association from restricting leasing of units would be applicable. If the no-leasing provision was in the declaration before the legislature passed its law, then the change is arguably an impairment of contract (with the contract being the actual declaration of condominium).

Some documents contain language that affirms that they are automatically modified by all legislative amendments. Lawyers refer to such clauses as “Kaufman” language, after the case that stated that if such a provision is contained within the document, then legislative changes do not impair the existing documents because applying these changes is strictly an interpretation of the document.

One important rule of thumb for governing documents: In general, whichever document gets recorded first is the one that usually governs. So, below the law, the top document in the hierarchy is the plat the developer files in the county recorders’ office defining the geographical limits of the development. The declaration usually comes after that. Once a homeowner or condominium association declares its existence, they usually go on to file as a corporation or other entity, and then go on to develop CC&Rs and bylaws, and so on down the chain.

Understanding the hierarchy of governing documents can help avoid or settle costly litigation and predict how a court may rule. This, in turn, can save associations and their members thousands of dollars in court fees.

Say what you will about lawyers, but practicing law – and even simply understanding legalese – is exceedingly tough. Unless you have a board member with some training or understanding of the applicable laws, how can your association expect to safely navigate through complicated legal situations like those presented by issues related to conflicting association governing documents?

There’s one simple solution available to homeowner and condominium associations in need of legal advisors – work with association management companies! In addition to providing better financial management, dues collection and governance, professional association managers help their clients comply with federal, state and local laws and avoid costly litigation.

Click the below button to get free, no-commitment quotes from association management companies in your area and learn how they can serve as your legal advisor, dues wrangler, maintenance mogul and more. Get a free quote from a professional association manager!

3 HOA Horror Stories – Don’t Let These Happen to You!

We try to keep abreast of news related to homeowner and condominium associations so as to stay current with the topics and issues association board members like yourself should be aware of. In the course of our daily headline skimming, we’ve noticed a disheartening trend: almost all association-related articles are extraordinarily negative in tone.

Here are three HOA horror story-related articles that have been published in the last week alone:

Orange Park, FL

HOA horror stories - don't let these happen to you!“It’s a dictatorship,” one resident of the Spencer’s Plantation neighborhood said of its HOA board, which stands accused of illegally ignoring a unanimous recall vote and leveling absurdly large fines up to four times the size of annual dues for minor infractions like having a leaning mailbox.

Litigation or binding arbitration seems inevitable, especially since one homeowner has already received a restraining order against a board member.

Carlsbad, CA

An HOA board was forced into damage control mode when the manager of a unit turned into a vacation rental kicked a family out after lying that a series of complaints had been lodged against them, thereby ruining their “once-in-a-lifetime summer vacation.” The HOA board felt compelled to reach out to a local news station once the station opened an investigation based on the family’s experiences to side with and apologize to the family.

Ruskin, FL

Complaints from several surly residents of a gated community prompted its HOA board to shut down an 11-year-old boy’s lemonade stand. The pint-sized business, started with funds from the boy’s own pocket, only lasted two hours before being forcibly shuttered. “Sometimes I think they just go a little bit too far,” the boy’s father said of the HOA board. “I would hope that something as innocent as that could be overlooked at least for a day.”

The conclusion to draw from these horror stories is simple: managing an association is hard work, and there is plenty of room for conflicts to arise and abuses of power to occur. Even a competent and ethical association board member like yourself can be drawn into time-consuming and headache-inducing conflicts as a result of this fact.

This is one of the primary reasons approximately 75 percent of homeowner and condominium associations are managed by association management companies. The average professional association manager is an infinitely more talented conflict resolver, legal advisor and financial manager than the average elected association board member.

To avoid inadvertently inviting nasty articles to be written about your community – and, more simply, to save time and avoid stress – click the below button to get free quotes from local association management companies and learn what they can do for you.

Get a free quote from a professional association manager!

Are You Cashing in on the Hot Q3 2015 U.S. Rental Market?

One only needs to skim business news headlines to learn just how well the U.S. rental housing market is currently treating rental property owners.

A recent New York Times article, “More Americans Are Renting, and Paying More, as Homeownership Falls,” explained how an average of 770,000 new home-renting households have been created annually since 2004, the highest such rate since the 1980s. A Bloomberg Business article titled “Blame Middle-Aged Americans for the Red-Hot U.S. Rental Market” reported that vacancy rates have significantly fallen and rents have substantially risen when compared to last year, and that almost 60 percent of the 22 million new households that will form between 2010 and 2030 will rent their homes.

Between the strong and ever-increasing demand for rental housing, falling vacancy rates and swelling rental prices that can currently be found in housing markets throughout the U.S., what more could a rental real estate owner ask for? There’s no question about it – 2015 is a wonderful time to own rental properties.

Here are three top-performing U.S. rental markets that are likely to become even more lucrative for rental real estate owners as a result of these housing market trends:

Houston

Q3 2015 Houston rental market updateThis has been a better year for Houston rental property owners than it has been for the local oil industry.

According to MarketWatch, Houston rents are “climbing and pricey, fueled by an impressive jump in new jobs in recent years and a shortage of homes for sale.” A recent report by a real estate market research company found that Houston rents are increasing at the seventh-highest pace in the country. See a list of Houston property managers >>

Las Vegas

Q3 2015 Las Vegas rental market updateWhile Las Vegas property values and rents were annihilated by the 2007-2008 housing bubble burst, market conditions there have since become quite favorable for rental real estate owners. Las Vegas property values appreciated almost 13 percent last year, the highest such appreciation rate in the U.S, and average rents increased at a healthy clip of just over 4 percent. Impressive local job growth and a revitalizing downtown should keep demand for Las Vegas rental housing strong for years to come. See a list of Las Vegas property managers >>

Orlando

Q3 2015 Orlando rental market updateSince 2004, more new U.S. renters have been Baby Boomers than members of any other age group, even Millennials. It shouldn’t come as a surprise, then, that Florida housing markets – and Orlando in particular – have become significantly more lucrative for rental real estate owners in recent years.

Orlando property values have appreciated close to 10 percent in the last year alone, and the local job growth rate, 4.29 percent, is almost twice as high as the national average. Taken together, these stats indicate exceptionally high current and future housing demand for Orlando. See a list of Orlando property managers >>

Have you been able to cash in on the “red-hot” U.S. rental market? If your rental income has remained stagnant in recent years, or has only increased slightly in spite of the nationwide surge in demand for rental housing, then you must act now to avoid leaving more money on the table.

Click the below button to get a free, no-commitment quote from one or more property management companies in your area and start a conversation that could have a huge and lasting impact on your finances.

Get a free quote from a professional association manager!

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