HOAN FAQs
BOARD OF DIRECTORS
Q: We have new homeowners who seem interested in serving on the Board. Is it advisable to have them serve on a committee first before nominating them to the Board?
A: Prospective board members who have previously served satisfactorily on committee(s) and are qualified would be ideal for filling board openings. On the other hand, prospective board members who have never served on a committee should not be automatically disqualified because they may have specialized skills and or may have served with their previous HOA. Nonetheless, the HOA bylaws should govern how board members are nominated and elected. Some communities have bylaws that allow for establishing a nomination committee to screen prospective board members and oversee the electoral process.
** Ask the Expert Topic! **
Q: We are holding our annual meeting soon and will be electing two directors. The board decided several years ago that nominees must submit a “Request for Nomination” two weeks in advance of the Annual Meeting endorsed by two other unit owners. We don’t accept nominations from the floor of the meeting. This has eliminated single issue candidates and grandstanders. But what if only two nominations are submitted? Does the president declare their election by default, or does someone need to make a motion to elect the two by acclamation?
A: Your nomination procedure is illegal unless it is described in your governing documents (doubtful). Even single issue, self-serving members have a right to run for the board. The nomination procedure could easily be interpreted as an attempt to suppress dissent. (You pretty much admit that already.) The election process should follow normal procedures which includes being nominated at the meeting and no requirement to be endorsed by others. If there are two positions and only two candidates, the president may ask for a motion to elect the candidates by acclamation. If he receives the motion, a second and a unanimous vote, there is no need to distribute ballots. However, if there is dissent, ballots should be distributed and counted.
Q: We have a president who solicits co-owner involvement when the board is discussing business at a board meeting. Should co-owners be allowed to participate in board discussions as if they were a board member? Should a board meeting be conducted like a town hall meeting where everyone can speak? It is my contention that a board meeting is for the board to conduct its business without co-owner input.
A: Your interpretation is correct. Board meetings are designed for the directors to discuss and make decisions about HOA business. There are occasions when co-owner input is appropriate but not as a general rule. A member forum should be held prior to the start of the board meeting to allow input and questions. But once the board meeting is called to order, guests are there to listen, not participate.
** Ask the Expert Topic! **
Q: If the board is meeting and agrees to an action, but does not follow Roberts Rules of Order (motion, second and vote) but instead all simply agree, is that action legal?
A: If state statute or your governing documents require use of Robert’s Rules, the board needs to use them in the board and member meetings. Otherwise, agreeing to something as you describe is okay so long as the minutes clearly describe what the board agreed to. However, a simplified version of Robert’s Rules is highly recommended to keep the meeting organized and to ensure a balanced and meaningful discussion with a purposeful outcome. Without it, meetings can easily become bull sessions with little accomplished.
Q: Our board likes to do a lot of business by email so now revising minutes is being done by email. By the time the minutes get back to me (board secretary) they have been rewritten by various board members to change wording or to add items not discussed. The president is the worst offender. My understanding is that minutes are taken and prepared by the secretary. Then, corrections and additions are to happen at the next board meeting. Is this correct?
A: Minutes should be revised only at a board meeting, not by way of an email circuit. Of course, as secretary, you need to make sure you are taking complete and accurate minutes. There are some things that belong and others that don’t. Minutes should record board actions not discussions.
CLUBHOUSE
Q: What are other charging for clubhouse rentals?
A: Clubhouse rentals typically range from $100 – $500 per day or event. Security deposits typically run about the same.
** Ask the Expert Topic! **
Q: Our governing documents prohibit the use of clubhouse for any for-profit event. Many of our residents would like to have classes such as aerobics, art etc. However, the instructors would charge, and the board says that these types of functions are not allowed. Are there any guidelines to permit this type of use but still prohibit use for events where the primary intention is to sell something or other commercial uses?
A: If many owners support classes in the clubhouse and are willing to pay the cost, the board should establish criteria which allows such events. The events should not monopolize the clubhouse in a way where nonparticipating owners are overly restricted from using the facilities.
LEGAL & LIABILITY
What is POA?
Click here for information on POA.
Q: What is the process of adopting the Property Owners’ Association Act(“POAA”)?
A: This is dependent upon what your Association’s governing documents require. Some governing documents allow the Board of Directors to unilaterally vote to adopt the POAA without a membership vote. Other governing documents require a certain percentage of membership approval. Upon obtaining the requisite approval, the amendment adopting the POAA must be recorded in the appropriate land records in which your Community is located and proper notice must be sent to all Owners.
Q: Is there a cost for adoption the Property Owners Association Act?
A: Yes, there is usually a cost association with adopting the Property Owners Association Act (“POAA”). These costs include, but may not be limited to (1) the legal fees for the Association’s attorney to draft the Amendment; (2) the cost of recording the Amendment to the Declaration in the county land records; and (3) the cost to provide the requisite notice to all Owners of the Amendment.
Q: Can HOAN help/assist/advise in re-writing contracts with community management companies?
A: Contracts with community management companies are legal documents. It is recommended that your Board of Directors review any potential management contract with your Association’s legal counsel before signing. Due to the legal nature of community management contracts, HOAN cannot advise or assist in the negotiation of any contracts.
Q: Our board has taken to publishing names of delinquent members in the HOA newsletter and board meeting minutes. Is this advisable?
A: There are many reasons why members don’t pay their fees and the solution varies: Millie is on disability, Joe’s Social Security is inadequate, Mary just lost her job, Bill declared bankruptcy, Gertrude has been trying to sell her condo for two years and Arnold is withholding payment until repairs get done on his unit. What happens if the collection information the board posts is not correct? This kind of misinformation libels someone who may sue for defamation of character. Your board is ill advised to pursue this collection tactic. It is totally unnecessary and mean spirited. With a properly designed and enforced Collection Policy, there are effective ways for the HOA to get the job done without humiliation.
Q: I need information on HOA policies and procedures with regards to fining. Can you help me?
A: Generally, the board has the authority to enact reasonable rules and enforcement procedures. They should include: 1. Clear definition of the issue (parking, pets, failure to pay HOA fees) 2. Consequences for failing to obey like fines or curtailing use of amenities 3. Appeal process Fines need to be reasonable. Any rule or resolution that is contemplated by the board should be reviewed by an attorney that specializes in HOA law in your state for compliance with your governing documents, state, and federal law.
PROPERTY MANAGEMENT
Q: Are there community property management companies that do drive through inspections and send out violation notices?
A: Yes, many community property management companies perform inspection and notification services. Property management company contracts typically include inspection and violation notice provisions but the company sometimes does not follow the provisions. It is the HOA Board’s responsibility to ensure management inspection and notice procedures are followed because maintenance of the neighborhood is critical to the subdivision’s property value. The HOA Network provides a listing of prospective community property management companies for HOA Network members. We do not endorse these companies. Therefore, HOAs would have to do their own due diligence. Click here for the vendor list.
Q: We recently got a professional reserve study done. Our Budget Committee took the information and plugged it into a spreadsheet that will allow us to postpone the need for a professional study revision. The substitute study changes some of the assumptions, like reducing the recommended reserve contribution and the inflation rate. By doing this, we can lower our annual contributions significantly. Our reserve study provider has recommended annual updates. What are the pros and cons of updating the reserve study? How would we update our substitute study and how long could we use it and still be confident that it was fairly accurate?
A: Artificially manipulating the reserve study numbers to reduce contributions for current members is a violation of the fiduciary duty the board has to all members, current and future. When it comes to paying for major repairs and replacements (the main purpose of a reserve study), there is no free lunch. Shorting reserves today will require making up the shortfall later, usually by special assessment. Special assessments are always unfair to some because they are being required to pay for something that should have been paid for by owners that sold and are long gone. The other mistake frequently made with reserves is failing to fund each component fully. An example of full funding is a $10,000 component with a 10-year useful life should have $1000 per year reserved to be fully funded. Reserving less than $1000 a year will create a shortfall which must be made up later. But since reserves often include money for long life components like roofing, there is an illusion that there is more money than needed to pay for things in the short term. Boards that fall into the trap convince themselves that reducing reserves by a third, or a half, or two thirds is just as good as full funding. New math? In fairness to all members, current and future, and to eliminate special assessments which are unfair to those that must pay them, full funding of reserves is the only reasonable approach. Annual updates are critical to keeping a reserve study accurate. The cost of an annual no site inspection update is usually nominal. A site inspection update is highly recommended at least every three years to verify component condition and useful life. You should stay out of manipulating the reserve study yourselves. It has obviously been a self-serving exercise so far that is bound to result in a significant short fall. You paid for an objective and professional reserve study and you should follow these recommendations.
RENTALS
Q: If more than half of a community is rental properties, what can be done to put a leasing cap into the Declaration?
A: The best option may be to “grandfather” in the current rental properties so that they are exempt from the leasing restrictions for a specified period of time (i.e. the remainder of the current lease or the remainder of their Ownership of the Lot/Unit). Owners who use their Lot/Unit as a rental property are not going to approve an amendment that restricts their ability to lease. However, if they will be exempt from any leasing provisions, those Owners are more likely to approve a leasing amendment.
Q: Our covenants already speak to not being able to use your home for business. Does restricting Airbnb fall under that?
A: It likely does. Many Associations, property management companies, and law firms take the position that short-term rentals (i.e. Airbnb, VRBO, etc.) fall under the restriction of business uses within a Community. There is case law in Fulton County where a condominium unit rented out on Airbnb was considered a “business use”. However, it is not best to rely on a business use provision alone. Having a clear provision in the Declaration against short-term leasing is the best practice. Additionally, there may be an argument that short-term rentals are prohibited in certain areas under the local zoning ordinances. Check your local zoning ordinances for the definitions and restrictions on “business” uses in your relevant zoning division and consult with your Association’s legal counsel for advice on your specific Association.
Q: If an HOA amends their documents and 75% of owners vote “yes” to adopt rental restrictions and 25% of owners do not vote at all, do those who vote no or do not vote at all have to comply with the new restrictions?
A: First, it depends if the vote meets the requisite approval under the governing document. Assuming the amendment receives the requisite amount of votes and properly adhered to all notice requirements, this question would then depend on if the Association is a condominium or subject to the Property Owners Association Act (“POAA”). If the Association is a condominium that is subject to the Georgia Condominium Act, any amendment which is validly adopted would apply to all Units and Owners. If the Association is a Homeowners Association that IS subject to the POAA, a validly adopted amendment would be applicable to all Lots/Units and Owners. If it is a Homeowners Association that is NOT subject to the POAA, the amendment would only apply to those Units/Lots and Owners who affirmatively voted for the amendment. Please consult with your Association’s legal counsel for advice as to whether a specific amendment applies to all Owners in your Association or not.
SIGNS
** Ask the Expert Topic! **
Q: Our governing documents describe allowable signs as either for sale or for rent. Since no other types of signs are described, some interpret to mean no others are allowed. This seems overly restrictive. What about open house, garage sale and political signs? How about holiday decorations and flags?
A: The main purpose of sign restrictions is to limit their number, size, theme, and longevity. There should be provision for the other types of signs you mention since they are common activities. Holiday decorations and political signs should also be allowed as time honored traditions. Simply control the number, size, location, and time limit. Flags can come in many forms, but the US flag has federal protections. Its best to have a sign, flag, and decoration philosophy rather than an extensive list of acceptable or unacceptable items. The philosophy should stress curb appeal and good taste. Since we all know that some lack taste, the board may need to intercede on a case by case basis. The board may need to compromise when confronted by an intractable resident rather than squander precious emotional and financial resources trying to enforce the rules.
SOCIAL EVENTS
Q: Is it ok for HOA to host event where alcohol is served?
A: Click here to view article.
TAXES
Q: How are HOA property tax valuation assessed?
A: The Cobb County Board of Tax Assessors adopted the following policy, with the exception of category b, on April 18, 1990, due to an appeal that was taken to court by a Homeowner’s Association, in which a nominal value of $100 was placed on the amenities.
- Category A – Recreational area in the name of the developer will be valued according to Georgia’s State Revenue codes.
- Category B – Recreational area in the name of a nonprofit Homeowners Association – the membership is either voluntary or mandatory and sell memberships outside the subdivision will be valued according to Georgia State Revenue codes.
- Category C – Recreational area in the name of a nonprofit Homeowners Association – the memberships are voluntary and do not sell memberships outside the subdivision will have a nominal value of $100 placed on their amenities.
- Category D – Recreational area in the name of a nonprofit Homeowners Association – memberships are mandatory and do not sell memberships outside the subdivision will have a nominal value of $100 placed on their amenities.