Key HOA Documents and Concepts
Homeowners associations are governed by various documents that can confuse owners and even HOA board members. The nature of the HOA itself is often misunderstood. Here is a primer:
Common Interest Community. Colorado law uses the term “common interest community.” It comes from Colorado’s main statute regarding HOAs, called the “Colorado Common Interest Ownership Act,” or “CCIOA” (pronounced “Kiowa” like the Native American tribe). A common interest community is real estate described in the declaration in which, by owning a unit within the real estate, the owner is responsible for taking care of other real estate in the declaration. So, this definition includes the “traditional” single-family detached dwellings, but also condominiums, patio homes, and road associations.
Declaration. Every neighborhood with an HOA has a “declaration,” also known as the “covenants” or the “CCRs.” Colorado law uses the term “declaration.” The declaration is the document or documents that get recorded in the real property records where the neighborhood is located. The declaration must be signed by the developer and creates the common interest community. It will describe the actual real estate included in the community and will have other key provisions like the obligation of owners to pay assessments and restrictions on the individual lots. Amending the declaration can only be done with the consent of at least a majority of all the owners, up to 67%. This makes amending a declaration difficult.
Association. The association is the legal entity that does all the work to implement the declaration, such as collecting assessments, enforcing covenants, and taking care of “common elements,” that is, things like the pool, greenbelts, roads, etc. Usually a homeowners association is set up as a non-profit corporation, but it does not have to be. The association is not the common interest community itself. So, while people often say they “live in an HOA,” it would be more accurate to say that you “live in a neighborhood with an HOA.”
Bylaws. The bylaws is the document that governs the internal workings of the association. Typically, the bylaws describe the association’s board of directors, officer positions and duties, terms, elections, etc. The bylaws also provide procedures for having board meetings, annual member meetings, and special meetings. Usually bylaws can be changed via a vote by the board of directors of the association.
Responsible Governance Policies. Colorado law requires that HOAs have certain “responsible governance policies.” They include a policy regarding enforcement of the rules, and a policy regarding collection of assessments and fines. The Colorado legislature is constantly changing the law to make the enforcement and collection policies ever more complicated and burdensome. The board of directors can adopt or change these policies.
Rules and Regulations. An association is free to adopt rules, regulations, or policies regarding matters other than the responsible governance policies. An example would be rules regarding the pool, or the use of a lake. An association can also adopt rules or policies to clarify matters in the declaration, however, the association cannot adopt rules as a way of changing the declaration. If the rules are inconsistent with the declaration, the declaration will control.
Management company. Larger communities governed by a homeowners association usually hire a management company to handle some or nearly all of the association’s duties. The management company is not the HOA. Rather, it is HOA’s agent hired to act on behalf of the HOA.