CC&R’s- COVENANTS, CODES & RESTRICTIONS & GOVERNING DOCUMENTS
Overview of Governing Documents
Recorded Map, Plat, or Plan
A map or plat or plan is recorded in the local land records before any lots or units shown on it are sold. The purpose is to show the precise location of each lot or unit, as well as the common areas.
Declaration, CC&R, or Master Deed
Defines the portions of the development owned by the individual owners and those owned by the Community Association, if any.
Creates interlocking relationships binding all the owners to one another and to the Community Association for the purposes of maintaining, governing, and funding the development.
Establishes protective standards, restrictions, and obligations in areas ranging from architectural control to prohibitions on various activities in order to promote harmonious living.
Creates the administrative framework for the operation and management of the Community Association.
Provides for a transition of control of the Community Association from the developer to the owners. The developer records the declaration in the land records before any of the real estate is transferred to any other owner.
CC&R’S – COVENANTS, CODES & RESTRICTIONS
Agreement among Owners that regulates the use, administration and maintenance of the property. Recorded document. Non-negotiable. Crafted by Developer.
Articles of Incorporation
The articles of incorporation:
- Bring the corporation into existence.
- Define its basic purposes and powers.
- There are a number of benefits to incorporate a Community Association.
- Limits the liability of individual owners for actions of the Community Association.
- Entitles the Community Association to the rights granted to all corporations under state law. This could be useful in areas such as financing, obtaining insurance, or bringing suit against another party.
- Makes it easier to deal with other parties, such as utility companies or vendors.
Bylaws are formally adopted governing regulations for the administration and management of a Community Association. Bylaws address such topics as:
- Requirements for membership in the Community Association.
- Requirements for membership meetings.
- Voting rights of member owners.
- Procedures for electing the Board of Directors.
- General powers and duties of the Board.
- Provision for indemnification of officers and directors – except in cases of gross negligence or willful misconduct.
Rules & Regulations
What’s the difference CCRs and Rules & Regulations?
See the brief definition of CCRs above. The Board cannot modify the CCRs. There is a rigorous legal process to amend CCRs, however, it is uncommon for there to be a genuine need to amend CCRs.
Rules & Regulations are adopted by the Board,
They may be modified by the Board.
They are usually more specific than CCRs.
They must be consistent with applicable Federal and State Laws, and with the Governing Documents.
A copy of the Association’s Rules and Regulations is part of the package you received when you purchased your property.
Rules and regulations are established by means of board resolutions. A resolution is a motion that follows a set format and is formally adopted by the Board of Directors.
There are four types of resolutions for a common interest community.
Policy Resolutions. These are resolutions that affect owners’ rights and obligations. Examples: Rules for the use of common areas; architectural guidelines; enforcement procedures.
Administrative Resolutions. These are resolutions that address the internal operations of the community association. Examples: Collection procedures; Operating procedures; Where board meetings will be held.
Special Resolutions. These are resolutions stating board decisions that apply a policy or rule to an individual situation. Examples: Decision about an alleged rule violation; Authorization of a lawsuit.
General Resolutions. These are resolutions which involve routine events. Examples:
Adoption of the annual budget; Approval of a contract. Source: Community Associations Institute.
Definition of a Community Association
A Community Association has three defining characteristics.
- Membership in the Community Association is mandatory and automatic for all owners.
- Certain documents bind all owners to be governed by the Community Association.
- Mandatory lien-based economic charges or assessments are levied on each owner in order to operate and maintain the Community Association.
Source: Community Association Institute
Purpose of a Community Association
A Community Association exists to provide for:
- The governance, business, and communal aspects of
- Administering, maintaining, and enhancing a residential real estate development
- Through the establishment of a system of property rights, binding covenants and restrictions, and rules and regulations.
Sources of LegalObligations for a Community Association
A Community Association derives-its legal obligations from several sources:
Federal, state, and local statutes, regulations, and case law (court decisions)
Legal documents unique to the Community Association that bind the Community Association and its owners
Standards set by professional bodies. An example is auditing standards set by the American Institute of Certified Public Accountants (AICPA).