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Life on the Lake

Community Associations

.While Community Associations come in all different sizes and forms from three homes to thousands of homes, some are bigger than a small town. They can be condominiums, cooperatives, single family homes, townhomes, manor homes it all depends on how the developer defined the association in the recorded declarations, by-laws, deeds and plat of survey. We won’t go into the legal definition of each type of Community Association and the state laws they have to comply with because we are not attorneys. If you are unsure of the laws your Community Association needs to comply with contact your association attorney. Just know that most states have special laws governing Community Associations.

One thing they all have in common is that the Homeowners elect a Board of Directors to make the decisions for the association. The Homeowners and the Property Manager can voice their opinion to the Board of Directors on issues that affect the association. Nonetheless the decisions are ultimately made by the Board of Directors. The Property Manager has to follow the directives of the Board of Directors and policies set up by the Board of Directors, for the day to day operations of the association.

The Board of Directors has to pay close attention to their declarations and by-laws along with state law. The Board of Directors derives their authority from the declarations and by-laws and state law. If the Board wishes to act on a matter outside their governing documents they can’t. For instance if a homeowner comes to the board and asks the association to remodel the inside of their unit. The Board has to decline unless the governing documents cover remodeling the inside of units. Now if the Board wants to remodel the inside of units and it’s not allowed in the governing documents, they have to go through the process of changing the declarations. That will require the homeowners to approve the change to the governing documents, usually two-thirds of the homeowners will have to agree. While this is a ridiculous example, homeowners do ask the Board to fix things inside their units that are not in the scope of responsibility given to the Board by the governing documents

Another thing all Community Associations have in common is they must be a not for profit cooperation and follow the laws concerning not for profit cooperation’s. They also have to file income tax returns every year even if they don’t owe any taxes. Taxable income is from coin laundry rooms, cell tower rental or other income. We recommend you have an accountant that is familiar with Community Associations or not for profit cooperation’s, fill out your tax forms every year. The accountant can tell you what is taxable and what is not. Avoid problems with the IRS at all costs.

I have not even come close to describing all of the complexities of managing a Community Association. I hope the information above has been helpful. Any suggestions or comments e-mail me at jameskrech@pmgrs.com   Author James T. Krech

 

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