HOA Terms – A Glossary of Terms & Definitions

Disclaimer: This HOA Terms Glossary is for informational purposes only and is not legal advice. For specific legal guidance, please contact Pursiano Law LLP for a free consultation.

Unlock the essentials of HOA terms with our insightful guide. Navigating Homeowners Association (HOA) terms & definitions are crucial, especially when communicating with residents and vendors unfamiliar with the jargon. Whether you’re a seasoned HOA board member or newcomer, staying abreast of fundamental terminology is key to effective community management.

Explore our comprehensive list of basic HOA terms to enhance your knowledge and become a more informed and effective representative for your community.

If you find yourself living in, or managing a homeowners association-controlled property, it’s essential to know your legal options should the necessity ever arise. Pursiano Law LLP has over 100 years of combined homeowners association law experience and has your back every step of the way. Schedule a free consultation and let’s get to the bottom of how we can help you assert your rights.

HOA Terms and Definitions

While you likely know that HOA stands for “Homeowners Association,” having a clear, succinct understanding is invaluable. Be prepared to explain HOA concepts effortlessly with our comprehensive glossary of industry terminology.

Stay informed and ready for any questions about homeowners association terms and definitions that may arise in your community. Explore our resources to enhance your knowledge and confidently navigate the world of HOAs.

HOA Terms & Definitions: A

Accrual Method of Accounting

The Accrual Method of Accounting precisely monitors the financial activities within a homeowners association (HOA). This method meticulously tracks revenue and expenses, offering a detailed view of current and past finances, encompassing capital reserves, credits, an deficiencies. Although more intricate and demanding technical expertise, Accrual Method of Accounting ensures accurate financial oversight that is essential for managing an HOA’s fiscal health and operations.

Adjoining Property

A property or parcel of land that is located next to or shares a boundary with. another property.

Administrative Fees

Administrative fees are disbursed by the HOA to its management company, covering essential administrative costs such as paperwork, phone bills, staffing, and various office-related expenditures. Additionally administrative fees may be directed to third-party vendors for professional services beyond routine maintenance task. Delve into the intricacies of HOA administrative fees to gain a comprehensive insight into the financial responsibilities of homeowners associations.

Alteration of Improvements

Improvements involve physical modifications to a property’s exterior, such as altering structural design, adding solar panels, repainting, or modifying balconies. Homeowners Associations (HOAs) often enforce architectural standards to regulate these changes. Owners must seek approval before proceeding with alterations, ensuring compliance with HOA guidelines. Explore the realm of property modifications while adhering to HOA architectural standards to create a harmonious balance between individual preferences and community aesthetics.

Architectural Guidelines

Rules and standards established by the homeowners or community association to regulate the design, appearance, and aesthetics of buildings, structures, landscaping, and exterior modifications within the community.

Articles of Incorporation

The Articles of Incorporation is a legal document filed with the Secretary of State to identify the Homeowner’s Association (HOA) as a nonprofit organization. This document will usually contain the Association’s registered office, purpose, powers, membership, voting rights, the liability its directors have, and its dissolution clauses.

Assessment

The periodic fee or charge levied on homeowners by the HOA or community association to cover the costs of maintaining and operating the common areas and providing community services as laid out in the Articles of Incorporation.

Association Manager

The role of an Association Manager is pivotal in guiding the governing body on administrative, managerial, and operational aspects. Responsibilities may include managing financial activities per the management agreement, overseeing property inspections, assessing bids for association services, supervising maintenance and contractor performance, approving payments, and liaising with the state agency overseeing community associations. An Association Manager plays a crucial role in ensuring the seamless functioning of the association and fostering effective collaboration between the community and its governing body.

Association Management Company

Engage the expertise of an Association Management Company, selected by an HOA Board of Directors or community, to deliver diverse services. These encompass fee and assessment collection, subcontractor oversight, financial advice, and report preparation. Additionally, an association management company may contribute to general maintenance, issue resolution, and legal counsel. Elevate your community’s functionality with the multifaceted support of an association management company, ensuring seamless operations and comprehensive assistance in financial, maintenance, and legal domains.

HOA Terms & Definitions: B

Board of Directors

Comprising officers overseeing the conduct and management of affairs, the HOA Board of Directors, commonly referred to as the “Board,” includes both inside and outside independent contractors. The Board may appoint a member as the chairman or chairwoman. Depending on the management agreement, certain responsibilities of the Board may be delegated to a managing company, streamlining operational efficiency and enhancing the collaborative governance structure within the community.

Board Meeting Minutes

Official written records of the discussions, decisions, and actions taken during board meetings, which serve as a historical reference and evidence of the board’s compliance with its duties.

Board Member

Dedicated to community service, HOA Board Members are volunteers contributing to the governance of the homeowner’s association. Among these volunteers, some may fulfill key officer roles such as president, vice president, secretary, and treasurer, collectively steering the association’s direction and operations.

Budget

An essential component of the financial strategy for any homeowners or community association is the HOA Budget. This vital document forecasts, income, expenses, and reserves over a specified period, typically an annual budget. Through meticulous planning, an HOA Budget ensures financial stability and facilitates effective resource allocation, providing a roadmap for the association’s fiscal health and sustainable community development.

Bylaws

Guiding the operation of an HOA Board, HOA Bylaws encompass a set of rules and guidelines. Within these bylaws are definitions for offices and committees associated with the Board of Directors, establishing a structured framework. They further provide directives on voting rights, meetings, notices, and various activities integral to the smooth operation of the HOA. HOA Bylaws serve as a foundational document, ensuring the organized and transparent governance within the homeowner’s association.

HOA Terms & Definitions: C

Capital Improvement

Capital improvement refers to significant renovations, upgrades, or additions to the common areas or community structures that enhance its value or functionality.

Capital Reserves

Referred to as “reserve funds,” “capital reserves,” or simply “reserves,” these funds serve as a financial pool for the HOA Board. Capital reserves are earmarked for significant repairs and replacements of major facilities, buildings, and equipment within the association. Typically, associations strategically accumulate these funds over time through a dedicated reserve account, ensuring a gradual buildup to address future capital expenditures.

Cash Method of Account

Utilizing the cash method of account, financial tracking captures income and expenses at the time of payment. In this straightforward system, financial reports exclusively mirror cash transactions, offering a simplified approach to accounting that emphasizes real-time cash flow.

Common Area

Encompassing all spaces within the community beyond individual homeowner units or lots, the common area in a development constitutes shared spaces. Examples of common areas range from sidewalks, community amenities, and development walls to entrance and exit gates, condominium hallways, and condominium elevators. These communal spaces contribute to the collective living experience, fostering a sense of community within the development.

Common Interest Community

A general term that encompasses various forms of shared ownership communities, including condominiums, cooperatives, and planned developments where owners collectively manage and maintain common areas.

Community Association Manager

Serving as the face of the HOA management company, the community association manager (referred to as the “Community Manger” or “CAM”) actively engages with the community, attending meetings and overseeing the follow-up on HOA fees. Working in close collaboration with the HOA Board, the community association manager provides guidance and support in fulfilling their functions. Additionally, they play a crucial role in addressing and resolving any complaints or issues that may arise within the community.

Constructive Notice

A legal notice that is assumed or implied, even if it is not directly communicated to an individual.

Covenants, Conditions & Restrictions (CC&Rs or Declaration)

The pivotal document known as the Declaration of Covenants, Conditions & Restrictions (referred to as the “CC&Rs” of “Declaration”) delineates the contractual obligations of the HOA. Operating as a fundamental component of the association’s governing rules, the CC&Rs provide guidelines for the governance of the association’s interests and its members. Additionally, the CC&Rs outline the obligations of individual members within the community.

Covenant Violations

Instances of covenant violations, also known as “Violations” or “Enforcement Issues,” arise when owners are found to be in breach of community rules and regulations.

Cumulative Voting

A voting method that allows association members to aggregate their votes and allocate them all to a single candidate or distribute them among multiple candidates.

HOA Terms & Definitions: D

Declarant

The individual, developer, or entity who initially creates the community and is responsible for drafting the governing documents and selling the properties.

Defamation

False statements or communications that harm the reputation of an individual or entity, leading to potential legal claims.

Defect

A flaw, fault, or imperfection in the design, construction, or materials of a property or its components.

Directors and Officer’s (D&O) Insurance

Directors and Officers (D&O) Insurance policies provide essential protection for the Board and its officers in the face of potential claims. This insurance typically covers defenses against claims related to wrongful acts of carried out on behalf of the association, offering a safeguard for the directors and officers in their roles.

Dispute Resolution Provision

A clause or section within the governing documents that outlines the procedures and methods for resolving disputes and conflicts that may arise between the association and its members.

Due Process

The principle of fairness and justice in legal proceedings, ensuring that individuals are given notice of actions or allegations against them and have an opportunity to present their case and defend their rights.

HOA Terms & Definitions: E

Easement

A legal right that allows a person or entity to use a portion of another’s property for a specific purpose, such as access or utilities.

Enforcement Action

Legal actions or measures taken by the association to enforce compliance with the governing documents or address violations by homeowners.

Exclusive Use Common Area

A portion of the common areas that are designated for the exclusive use of a specific homeowner or group of homeowners.

HOA Terms & Definitions: F

Fiduciary Duty / Responsibility

The legal obligation of board members and association officials to act in the best interests of the association and its members, exercising care, loyalty, and good faith.

Fine

A monetary penalty imposed by the association on homeowners for violating the governing documents or rules and regulations of the community.

Foreclosure

The legal process by which a lender or association may seize and sell a property to recover outstanding debts or unpaid assessments.

HOA Terms & Definitions: G

General Liability Insurance

General liability insurance serves as a vital shield for an HOA, safeguarding against claims of personal injury and property damage that may arise. This insurance coverage is essential in mitigating the financial risks associated with unforeseen incidents within the community.

Governing Documents

The comprehensive set of regulations that govern the community, tailored to the specific type of association, is collectively known as Governing Documents. These encompass state laws, the Declaration of Covenants (CC&Rs), Master Deed Conditions and Restrictions, Bylaws, HOA Rules and Regulations, as well as Plats of Survey and Easement Agreements. These Governing Documents form the legal framework that guides the functioning and management of the community association.

Grandfather Clause

A provision that allows existing homeowners or conditions to be exempt from new rules, regulations, or restrictions that are subsequently implemented.

Grievance Procedure

The established process for homeowners to file complaints, concerns, or grievances with the association, typically involving written submissions and dispute resolution steps.

HOA Terms & Definitions: H

Homeowners Association or HOA Definition

A homeowners association (HOA) holds the authority to enforce the CC&Rs (Covenants, Conditions & Restrictions) and oversee the management of common areas and amenities within the development. Initially established by a real estate developer, an HOA is formed to develop, manage, and sell homes within a community. Upon the sale of a predetermined number of lots, ownership of the HOA typically transitions to the homeowners. As a voluntary association, an established HOA collaborates to safeguard property values and enhance the neighborhood, often operating as a non-profit corporation governed by state laws.

HOA Management Company

An HOA board frequently engages in the services of a community association management company, commonly referred to as an HOA management company. This professional entity is appointed to provide guidance and support in executing tasks that volunteer board members may find challenging to fulfill effectively.

HOA Member

An HOA member, or Homeowners Association member, refers to an individual who owns property within a community governed by a Homeowners Association (HOA). By virtue of property ownership, individuals automatically become members of the HOA and are subject to its rules, regulations, and financial obligations. HOA members typically have voting rights in the association, allowing them to participate in decisions affecting the community’s management, rules, and major expenditures.

HOA Reserve Study

An HOA reserve study is a comprehensive financial analysis that assesses the long-term capital needs of a homeowners association (HOA). The HOA reserve study evaluates the condition of major components, estimates their remaining useful life, and calculates the necessary reserve funds. This study ensures the HOA has adequate financial reserves to cover future repair or replacement costs for items like roofs, roads, and common area amenities, promoting responsible financial planning and sustainable community management.

HOA Terms & Definitions: I

Implied Warranty of Habitability

The implied warranty of habitability is a legal doctrine that imposes an obligation on landlords to provide rental properties that meet certain basic living standards. This warranty implies that the leased premises must be fit for human habitation and reasonably safe. Landlords are generally required to maintain essential services such as heating, plumbing, and sanitation. If a landlord fails to uphold the implied warranty of habitability, tenants may have legal remedies, such as the right to withhold rent or pursue legal action for necessary repairs.

Indemnification

The act of compensating or protecting an individual or entity from financial loss or legal liability.

Inspection

The process of examining or assessing the condition, quality, or compliance of a property or its components.

HOA Terms & Definitions: L

Lateral Support

The legal right and obligation of property owners to provide support to adjacent properties, including shared walls, fences, or other structures.

Lease Restrictions

Limitations or guidelines imposed by the association on leasing or renting units within the community.

Legal Notice

Formal communication or notification sent to individuals to inform them of their rights, obligations, or actions taken by the association.

Lien

A legal claim or encumbrance placed on a property to secure the payment of a debt or obligation.

Limited Common Elements

Areas or amenities within a community that are designated for the exclusive use of specific units or homeowners.

HOA Terms & Definitions: M

Maintenance Responsibilities

The obligations and duties of the association and homeowners to maintain and repair different areas and components within the community.

Material Alteration

A significant change or modification to the common areas or exteriors of the buildings that may impact the appearance, structure, or value of the properties.

Material Fact

A fact or information that is considered significant and would likely influence the decision-making of a reasonable person.

Meditation

A non-adversarial dispute resolution process in which a neutral third party assists the parties in reaching a mutually acceptable agreement.

Membership Meeting

A gathering of association members to discuss, vote on, and make decisions regarding community matters.

HOA Terms & Definitions: N

Nuisance

Any activity of condition that interferes with the use and enjoyment of property by others, causing annoyance, discomfort, or harm.

Non-Compliance

Failure to adhere to or comply with the governing documents, rules, regulations, or obligations of the association.

Nonprofit Corporation

A legal entity formed for the purposes other than generating profit, such as managing a homeowners association (HOA) or community.

Notice

Formal communication or written notification provided to individuals to inform them of specific information or actions.

HOA Terms & Definitions: O

Occupancy Restrictions

Limitations or guidelines imposed by the association on the number of occupants within a unit.

Official Records

The collection of association documents, books, financial records, meeting minutes, and other materials that must be maintained and made available for inspection by association members.

Open Meetings

Open meetings within an HOA are gatherings where both board members and residents are permitted to attend. Generally, the board concludes and open meeting and transitions into a closed or executive session to address confidential matters like litigation, contract formation, member discipline personnel affairs, or assessment payment issues. This distinction allows for transparency in decision-making while respecting the privacy required for certain sensitive discussions within the Homeowners Association.

Operating Reserves

Funds set aside by the association for ongoing maintenance, repairs, and operational expenses.

HOA Terms & Definitions: P

Parity Mortgage

A mortgage loan in which two or more properties serve as collateral, with each property having an equal and proportionate value and share of mortgage debt.

Property Insurance

Insurance coverage obtained by the homeowners association or community association to protect the common areas, buildings, and structures against risks such as fire, natural disasters, vandalism, or theft.

Property Manager

An individual or professional management company hired by the HOA or Community Association to oversee the day-to-day operations and administration of the community

Prohibited Use

Restrictions or limitations on the use or activities that are not allowed within the community or on specific properties.

Proxy

A written document that authorizes another person to act on behalf of a homeowner in a meeting to conduct official business and make valid decisions.

HOA Terms & Definitions: Q

Quorum

In HOA law, a quorum refers to the minimum number of eligible members or representatives required to be present at a meeting in order for official business to be conducted. It ensures that decisions made during the meeting are representative of the community’s interests. The specific quorum requirement is typically outlined in the HOA’s governing documents, such as the bylaws. Without quorum, the HOA may not have the authority to take certain actions or make decisions that require member approval.

HOA Terms & Definitions: R

Records Retention

The practice of preserving maintaining association records in accordance with legal requirements and established policies.

Recall

The process by which association members can initiate the removal of a board member from office through a special recall election.

Restrictive Convenant

A restrictive covenant is a legal obligation or limitation imposed on homeowners within a community, typically outlined in the HOA’s governing documents such as the Declaration of Covenants, Conditions, and Restrictions (CC&Rs). These covenants set forth specific rules and conditions regarding the use, appearance, and maintenance of properties within the community. Restrictive covenants aim to maintain a certain standard and consistency in the neighborhood, outlining guidelines that homeowners must adhere to in order to preserve the overall character and value of the community. Violations of these covenants may result in penalties or legal action by the HOA.

Right of First Refusal

The right of first refusal is a contractual provision that gives a particular party the option to enter into a transaction before the property owner can proceed with an offer from a third party. In real estate, this right is often granted in leases, contracts, or homeowners association (HOA) agreements. If the property owner receives an offer from a third party, they must first offer the property to the party with the right of first refusal under the specified terms before accepting the external offer. This right is designed to provide a specific party with an opportunity to match the terms of an incoming offer and acquire the property.

Rules and Regulations

Additional guidelines and requirements established by the association to supplement the governing documents and regulate specific aspects of community living.

HOA Terms & Definitions: S

Special Assessment

A special assessment is a one-time fee or charge levied on homeowners for unexpected or extraordinary expenses beyond the scope of regular assessments.

Statute of Limitations

The statute of limitations in HOA law refers to the legally defined timeframe within which a party must initiate legal proceedings or bring a lawsuit related to a particular claim or violation. This limitation period varies depending on the nature of the claim, and it is set by law to ensure that legal actions are pursued in a timely manner. In the context of homeowners associations (HOAs), the statute of limitations may apply to various issues, such as disputes over covenant violations, breach of contract, or other legal matters. It’s essential for parties involved in HOA-related disputes to be aware of and adhere to the applicable statute of limitations.

Subrogation

Subrogation is the legal principle that allows an insurance company or party that has compensated for a loss to assume the rights and remedies of the insured and seek reimbursement from responsible parties.

Sunshine Law

In the context of HOA (Homeowners Association) law, the term “sunshine law” is not a specific legal term. However, it’s possible that the question is referring to transparency and open meeting requirements applicable to homeowners associations.

Some states have laws that impose certain transparency obligations on HOAs, ensuring that association meetings are open to members and that members have access to information related to the association’s activities. These laws may require advance notice of meetings, availability of meeting minutes, and access to certain records for homeowners.

It’s important to note that the specifics can vary by jurisdiction, and associations should be aware of any applicable state laws or local regulations related to transparency and open meetings in the context of HOA governance.

Surplus Funds

Surplus funds typically refer to funds that exceed the HOA’s budgeted or anticipated expenses for a specific period. These funds can result from various factors, such as cost savings, increased revenue, or efficient financial management.

Homeowners Associations (HOAs) often collect fees and assessments from homeowners to cover common expenses, such as maintenance, repairs, and community services. If the total amount collected exceeds the actual expenses incurred during a particular period, the surplus funds may be retained by the HOA. The surplus funds can then be used for future expenses, building reserves, or other community-related projects, as determined by the HOA board and in accordance with the association’s governing documents.

HOA Terms & Definitions: T

Title

The legal ownership or evidence of ownership rights to a property

Transition Period

The period during which control and management of the association shifts from the developer to the homeowners.

HOA Terms & Definitions: U

Uniform Common Interest Ownership Act (UCIOA)

The Uniform Common Interest Ownership Act provides a comprehensive legal framework for the creation, governance, and operation of common interest communities, which include condominiums, cooperatives, and planned communities.

The act typically covers various aspects, including the creation and content of declarations, the powers and responsibilities of homeowners associations (HOAs), unit owner rights and obligations, governance structures, and the handling of common elements or areas. It aims to provide consistency and clarity in the legal framework governing common interest communities across different states.

Uniform Electronic Transactions Act (UETA)

The Uniform Electronic Transactions Act (UETA) is a model law created by the Uniform Law Commission (ULC) in the United States. Its purpose is to facilitate electronic commerce by establishing the legal equivalence of electronic records and signatures with their paper counterparts. UETA provides a framework for the use of electronic records and signatures in transactions, helping to remove barriers to electronic commerce and promote the acceptance of electronic signatures in legal contexts.

Key provisions of UETA typically include the legal validity of electronic contracts, the acknowledgment that electronic signatures have the same legal effect as physical signatures, and general rules regarding the use of electronic records in transactions.

Unit Owner

A unit owner is the individual or entity that holds legal ownership rights to a unit or property within a condominium or cooperative community.

Use Restriction

Use restriction refers to limitations or guidelines imposed by the HOA or Community Association on the permissible uses of properties within the community.

HOA Terms & Definitions: V

Vendor Agreement

A vendor agreement is the formal contract or agreement between the association and a vendor or service provider that outlines the terms, scope, and conditions of the services to be provided.

Volunteer Immunity

Volunteer immunity is the legal protection or immunity granted to volunteers servings on the board of committees of the association from personal liability for actions taken in good faith and within the scope of their duties.

Voting Threshold

Voting threshold refers to the required number of percentage of votes needed to approve a specific action, decision, or amendment within the association.

HOA Terms & Definitions: W

Warranty

A warranty is a promise or guarantee, either express or implied, regarding the condition, quality, or performance of a product, service, of property.

Educating Yourself Further of the HOA Terms & Definitions with Pursiano Law LLP

Whether you are a member of a Homeowners Association or just a resident, continually educating yourself about your HOA is one of the best things you can do to assert your legal rights as a property owner. Knowing as much as you can about the various HOA Terms and Definitions can put your in a better position to represent your community. Pursiano Law LLP and their team of highly dedicated Homeowners Association Lawyers have the tools you need to keep you and your HOA board updated. Let’s connect over a free consultation today!