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Condo Management Services - FAQ

Frequently Asked Questions about Condominium Associations


1. Do condos have to be made accessible to the disabled?

The 1990 Americans with Disabilities Act does not require strictly residential apartments and single-family homes to be made accessible.  But all new construction of public accommodations or commercial projects (such as a government building or a shopping mall) must be accessible.  New multi-family construction also falls into this category.

In all states, the Federal Fair Housing Act provides protection against discrimination for people with physical or mental disabilities.  Discrimination includes the refusal to make reasonable modifications to buildings that aren’t accessible to the disabled.

Two educational brochures, “Housing Rights” and “Discrimination is Against the Law,” are available through the Department of Fair Employment and Housing by calling (800) 884-1684.

2. Can condos ban smoking?

A homeowners association’s board of directors can restrict smoking if it applies to indoor common spaces such as hallways or recreation rooms.  Outdoor spaces are a different story, say legal experts.  Any restriction would probably hinge on local laws (i.e. if a city banned smoking outdoors, a homeowner association probably could restrict smoking in its outdoor spaces).

Typical covenants, codes and restrictions (CC&Rs), which govern condo associations, give the board authority to make and enforce reasonable rules for the use of common property.  But that would not apply to interior spaces owned by smokers themselves, Resources:

  • Common-interest development brochure available free from California Department of Real Estate, Book Orders, P.O. Box 187006, Sacramento, CA 95818-7008; (916) 227-0938.
  • Various Internet sites specializing in common-interest developments, such as those operated by the Community Associations Institute and CIDNetworks.

3. Can a condo association ban nudity?

Could you sun bathe in the nude on your own balcony?  Not necessarily.  In a condominium development, a balcony is not considered private property but common property assigned to your exclusive use but a common area nonetheless.

Covenants, codes and restrictions (CC&Rs) usually spell out what activities and cannot be conducted on common property.  Some associations prevent people from barbecuing on their balconies or hanging large plants from the railings.  However the larger issue of regulating personal conduct is not so clear-cut.  It literally depends on what side of the fence you’re on.

If the sun bather can be seen from a public vantage point – not by someone who must climb a tree or peer through binoculars – then the rule probably would be considered reasonable, say legal experts.

Incidentally, there are places where nudity is tolerated but again, only out of public view.

4. Where do I get information on condo association laws?

Resources:

  • “The Condominium Bluebook” by Branden E. Bickel, B&B Publications, San Francisco, CA; 1994; call (415) 433-1233
  • Community Associations Institute, Alexandria, VA; (703) 548-8600.

5. Where do I get information on condos?

The major interest group for condominium projects and other so-called common-interest developments is the nonprofit Community Associations institute, 1630 Duke St, Alexandria, VA 22314; (703) 648-8600.  Also, check the Internet where CAI operates an informative site as does CIDNetworks.

6. How are fees and assessments figured in a homeowners association?

Homeowner’s association fees are considered personal living expenses and are not tax-deductible.  If, however, an association has a special assessment to make one or more capital improvements, condo owners may be able to add the expense to their cost basis.  Cost basis is a term for the money an owner spends for permanent improvements throughout their time in the home and is used to reduce eventual capital gains taxes when the property is sold.  For example, if the association puts a new roof on a building, the expense could be considered part of a condo owner’s cost basis only if they lived directly underneath it.  Overall improvements to common areas, such as the installation of a swimming pool, need to be considered on a case-by-case basis of any owner who can show their home directly benefits from the work.

To find out more about how the IRS views condo association fees, look to IRS Publication 17, “Your Federal Income Tax,” which includes a section on condos.  Order a free copy by calling (800) TAX-FORM.

7. Are condos a good investment?

Condominiums have held their value as an investment despite economic downturns and problems with some associations.  In fact, condos have appreciated more in the last few years than when they first came on the scene in the late 1970’s and early 1980’s, experts say.

While there are lots of reports about homeowner’s association disputes and construction-defect problems, the industry has worked hard to turn its image around.  Elected volunteers who serve on association boards are better trained at handling complex budget and legal issues, for example, while many boards go to great lengths to avoid the kind of protracted and expensive litigation that has hurt resale value in the past.

Meanwhile, changing demographics are making condominiums more attractive investments for single homebuyers, empty nesters and first-time buyers in expensive markets.

8. What is a house worth?

A home is worth what someone will pay for it.  Everything else is an estimate of value.  To determine a property’s value, most people turn to either an appraisal or a comparative market analysis.

An appraisal is a certified appraiser’s estimate amenities, energy efficiency, the quality of the value of a home at a given point in time.  To make their determination, appraisers consider square footage, construction quality, design, floor plan, neighborhood and availability of transportation, shopping and schools.  Appraisers also take lot size, topography, view and landscaping into account.

A comparative market analysis is an informal estimate of market value, based on comparable sales in the neighborhood, performed by a real estate agent or broker.  Properties in public records.  These records are available at local recorder’s or assessor’s offices, through private companies or on the internet.

Other resources include:

  • The Home Sales Line allows people to use their telephones to find the exact selling price of houses anywhere in the state 24 hours a day.  Call 1-800-585-HOME.
  • Dataquick information Systems tracks home sales statewide and prepares reports for specific properties. Call 1-800-899-0152.
  • Go to Web sites such as http://www.homeshark.com and http://www.dataquick.com.

9. What are some of the differences between association and apartment management?

In a community association, REMS, Inc., works for many equal owners represented by the Board of Directors of their association, as opposed to the typical apartment property owner, who is a single entity.  In apartment management, the goals and objectives are outlined by one person or entity (usually the owner), while in a community association with many owners, there is diversity in interests and financial abilities.  This often makes it difficult to identify a single set of goals and objectives.  In a community association the owners live on the premises, which gives them an added incentive to be interested in the quality of life as well as the investment value of the property.  These owners have a daily awareness of the work the property manager does, unlike the owner of an apartment building who has to rely on written reports or occasional visits.

10. What are governing documents?

A community association’s governing documents encompasses all of the documents that regulate life in the community, including the state law declaration, bylaws, rules and regulations.  These documents establish the operation of the shared ownership of the property.

11. What is the law of agency?

The Law of Agency is a legal recognition of a relationship where one person or entity authorizes another person or company to act on its behalf.  Under this law, the management company hired by the community association merely acts on the behalf of the association, and is not an employee of the association.

12. What is the role of REMS, Inc. in relation to the law, the association’s documents, and the Board of Directors’ expectations?

REMS, Inc., has a number of different roles in community association management.  Although the enforcement of condominium law is primarily the responsibility of the Board of Directors, REMS, Inc., often assumes that role with legal counsel advising when necessary.  In addition, REMS, Inc. often advises the board their duties and rights regarding the enforcement of rules and regulations.

Although laws that affect community associations are all based on common laws regulation housing, the different types of community associations are affected in specific and different ways.  Condominiums are regulated by condominium law, while cooperatives generally are controlled by corporate and landlord-tenant law.  Some states have instituted specific laws to control homeowners’ associations and time-share developments.

All can also be included under corporate laws.  When individual owners rent community association units, those units may also be under landlord-tenant law.  Because there are so many variations and possible complexities, it is vital that managers “customize” their knowledge by acquiring copies of state laws and learning their application to the type of community association they are managing.

Understanding and Disseminating Governing Documents.  Governing documents set up the operation of the shard ownership of the property.  They may include the following documents.

Community Association Declaration (DEC) or Master Deed.  The function of this document is similar to the constitution of mini-governmental body.  It has been said that the declaration is similar to a city charter and its ordinances.  It is the basic governing document designed to reconcile the rights of individual property owners with the needs of the group in regard to the common areas.  It establishes an association of unit owners to administer the affairs of the community association and defines all terminology found in the document.  All unit owners are automatically members of this association.

Most states specify that the contents of the declaration in their law be patterned after Federal Housing Administration’s Model Statute, Form #3285.  The owner or developer of the property files the community association declaration (master deed) with the local land records office or deeds registrar.

The Dec describes and defines individual units and all common areas.  Plats of survey are attachments that show the boundaries of each unit.  The Dec also defines the percentage of ownership allotted to each unit.  Basis of calculation may vary, but usually included is the market value of the unit, the square footage of the unit, and the cubic footage of the unit.  Specifications given in the Dec can only be changed with approval of 100% of owners.

The ownership percentage establishes the basis for each unit’s assessment for its share in the general operating expenses of the property.  It also establishes the voting rights of each owner in most cases.  (Another basis is “one owner, one vote.”) In addition, these measurements become critical when the association provides the heating and cooling.

The Dec provides for the protection of the owners beyond that given by state law (the need varies with the effectiveness of state law).  The ability to pursue delinquent assessment payments is one particularly important area.  Because it’s possible for the declaration to conflict with state law (in cases where state law has been updated since the declaration was recorded), you must know both versions.  Some states “grandfather” older properties or require updating periodically.

Bylaws Attached to the Dec.  The by-laws are the framework for the daily operation of the community association.  They outline administrative procedures and formations, such as the composition and election of the Board of Directors, meeting the schedule, budget development, the process for levying regular and special assessments, and all restrictions and guidelines.  when conflict arise, the declaration takes precedence over bylaws.

Copies of the bylaws must be provided to all owners.  They can only be changed or amended by a vote of the percentage of owners required in the Declaration—often 100%.  In some cases, mortgagees are also required to vote.

Rules and Regulations.  The rules and regs must be reasonable and consistent with the declaration and the bylaws.  They provide guidance for safe and efficient operations and are designed to assure compliance with laws and codes.  The rules may regulate public order and appearance and guide interpersonal relations among the residents.  The rules and regs also outline sanctions for violations.  They are adopted with other documents and are in place before units are sold.

The rules and regs can be amended at any time according to procedures allowed by state law, although a vote by a certain percentage of owners may be required.  Some states allow such changes by the Board of Directors.  Enforcement is the responsibility of the Board, but the real estate manager often assumes the enforcement role with advice of legal counsel as necessary.  The manager advises Board members on their rights and duties in enforcing the rules and regulations.

Examples of typical rules and regulations include:

  • Bicycles must be kept in proper storage areas, not stairwells
  • Balconies must be kept attractive and uncluttered
  • Pets must be walked in designated areas

Rules violations usually result from ignorance.  Communication and follow-up usually remedy the problem.  Since eviction is generally not possible, it is important to find alternative actions.  Send reminders to owners who violate regulations.  Accompanying fines stated in rules and regulations may be applied to those who consistently violate.  Establish a due process system that provides the opportunity for a hearing before the Board of Directors or designated committee.  Note that you may be involved as a witness.

Articles of Incorporation.  Many community associations choose to incorporate as nonprofit corporations to limit the Board members’ personal liability.  Many states provide for limited liability in their condominium law.  Articles of incorporation must be drafted and filed with the state along with designation of the initial Board of Directors and a registered agent.

As part of the incorporation process, some states require filing of an annual report and payment of an annual fee.  Standard incorporation procedure is governed by state statutes.  Incorporated associations are subject to and protected by both the governing documents and corporation law.  The federal government’s Securities and Exchange Commission may also have jurisdiction.

Applicable Federal Civil Rights Laws

Civil Rights laws apply to community associations in a combination of ways, reflecting the fact that community associations are indeed hybrid residential types.  There are some indisputable truths, of course.  Prohibitions against racial discrimination dictated by the original Civil Rights Act of 1866 apply without exception.  Equal Credit Opportunity applies to all housing equally.

For owners, the Fair Housing Amendments Act of 1988 applies to the sale of a unit in the same manner as any single family home, while the rental of the same unit is treated the same as leasing any apartment or home.  Federal law does not prohibit discrimination by owners of single family dwellings who are selling or renting their own units as long as they own three or fewer such homes.  The strict limitations of the law do apply to sales and rental procedures of individual units by Realtors® or other professional representation.

The Board is prohibited from discrimination in exercising its first right of refusal.  However, discriminations in advertising for sale or rental of housing is prohibited in any circumstance.

Associations may not declare “adult-only” communities, but they may choose and adhere to either the “55 or over” or “ 62 or over” exceptions to the family status provisions.  In these cases, all residents’ ages must be documented and copies of all owners’ driver’s license or other proof of age records must be maintained.  In communities designed for older adults,” significant facilities and services” meant specifically to meet the needs (physical or social) of older persons must be provided—such as transportation service, adult education, congregate meals, preventive and emergency health service.

Associations must abide by laws prohibiting discrimination against families with children.  They may not prohibit or limit use of the facilities by children except in cases where children’s safety is at risk.

Persons with disabilities must be allowed to make reasonable accommodations in both their own units and in common areas, at their own expense, as in any multifamily residence.  A variance must be made in per restrictions for assistance animals.  The Americans with Disabilities Act (ADA) does not apply except in commercial ventures undertaken by the association or when the association provides an on-site office with paid employees.  Regulations for all employment practices and commercial accommodations do apply.

REMS, Inc. as your Property Manager:

As your manager, we follow sensible guidelines when working with the Board and advising them on civil rights laws.  Being sure Board members are aware of all applicable laws-federal, state and local.  To protect both REMS, Inc. and the community association, we provide advisement as a service to the Board.  Guide the operations and the decisions of the Board towards compliance.  Support Board decisions as long as they are legal.  Maintain affiliation with an attorney specializing in community association law, and know when to recommend the services of an attorney to the Board of Directors.

In conclusion, residential common interest communities may take on a variety of characteristics, but the basic issues of management are the same.  Thorough understanding of the legal underpinnings of common interest communities enables REMS to be more valued by the association’s Board of Directors.  At the core of a successful management services to be provided, and communicating to the owners and the Board the nature of these services.