HOA terms — there’s a lot to learn, especially when you have to explain things to residents and vendors who may not have the background to be familiar with them. Whether you are new to the HOA board or are a long time veteran, it is good to stay updated on the basic terminology that is used in the field of community management. To help you stay educated and be the best representative that you can for the community, here is a list of basic terminology for HOA board members.
In this glossary:
HOA Terms and Definitions
What does HOA mean? HOA means “Homeowners Association”, as you probably already know, but it’s always good to know of a short, succinct explanation on what HOA means, and the homeowners association definition the next time you get asked.
Here’s a list of HOA terminology and HOA industry terms that you may come across from time to time:
HOA Terms: A
Accrual Method of Accounting
The Accrual Method of Accounting is a way to keep track of financial activities, revenue earned and expenses incurred. This method is considered to be a more accurate way to track the current and past finances of an HOA, including its capital reserves credits and deficiencies. This method is also more complex and requires technical knowledge.
Administrative Fees
An HOA pays an administrative fee to an HOA management company for administrative costs, like paperwork, phone bills, staffing, or other costs that an office might incur. Administrative fees are also paid to third party vendors for professional services rendered outside the scope of their maintenance tasks.
Alteration of Improvements
Alteration of Improvements and improvements are physical modifications to the owner’s exterior of the property. Examples of these include changes to structure design, the addition of solar panels or satellite dishes, repainting, fencing, landscaping, window tinting and modifications to balconies. HOAs regulate exterior improvements in accordance with their HOA’s architectural standards, so owners may need to get approval before they can proceed with modifications. ”
Appreciation
Appreciation refers to the increase in the resale value of a property, specifically to the home’s increase in value over time.
Architectural Committee
see: HOA Architectural Committee
Articles of Incorporation
The Articles of Incorporation (the “Articles”) identifies the Association as a nonprofit corporation. The Articles are filed with the Secretary of State and will usually contain the Association’s registered office, purpose and powers, membership, voting rights, the liability of directors, and dissolution clauses.
Association Manager
The association manager advises the association governing body in matters that concern administrative, managerial, and operational processes. A manager can, depending on their responsibilities, account for financial activities covered by the management agreement, conduct onsite property inspections, solicit and evaluate bids for association services, supervise maintenance activities and contractor performance, authorize payment for association services, and coordinate with the state agency that supervises the community associations.
Association Management Company
An association management company is hired by an HOA Board of Directors or community to provide a variety of services. These may include collecting fees and assessments, subcontractor management, financial advice and reports preparation. An association management company may also be involved in general maintenance, problem resolution, and advice on legal matters.
HOA Terms: B
Board Of Directors
The board of directors (the “Board”) is made up of officers responsible for the conduct and management of its affairs. A director may be an inside director, or an outside independent, director. Some boards appoint one of its members to be the chairman or chairwoman of the body. Depending on the management agreement, some of the board’s responsibilities can be turned over to a managing company.
Board Member
Board members are volunteers serving on an HOA board. Some of them may occupy one of four officer positions—president, vice president, secretary, and treasurer.
Budget
A budget is part of the financial plan for an HOA which estimates income, expenses, and reserves for a specified period of time, e.g. an annual budget.
Bylaws
see: HOA Bylaws
HOA Terms: C
Cash Method of Account
The Cash Method of Account tracks income and expenses only as payments are made. Financial reports in this simple system only reflect cash transactions.
Capital Reserves
see: HOA Capital Reserves
Common Area
The common area of a development covers everything that is located within the community outside of the units or lots owned by the individual homeowners. Examples of common areas include sidewalks, community amenities, development walls, entrance and exit gates, condominium hallways and condominium elevators
Community Association Manager
The community association manager (The “Community Manager” or “CAM”) represents the HOA management company around the community, at meetings, or as they follow up on HOA fees. Community association managers work closely with an HOA board to advise and assist them with their functions. They also help respond to resolve any complaints or issues that come up.
Covenants, Conditions & Restrictions (CC&Rs or Declaration)
The Declaration of Covenants, Conditions & Restrictions (The “CC&Rs” or “Declaration”) defines the contractual obligations of the HOA. The CC&Rs form part of the association’s governing rules. It contains guidelines on how the Association and its Board of Directors should govern to protect the interest of the Association and its members. The CC&Rs also contains the guidelines on the members’ obligations as well.
Covenant Violations
Covenant violations (“Violations” or “Enforcement Issues “) occur when owners are found to be in violation of any community rules and regulations.
HOA Terms: D to G
Directors and Officers (D&O) Insurance
Directors and officers (D&O) insurance policies protect the Board and its officers in the event of claims against them. D&O insurance usually covers protection against claims of wrongful acts done on behalf of the association
Fiduciary Responsibility
Fiduciary responsibility refers to the ethical and moral obligation of the Board to make decisions for the benefit of everyone in the community in a fair and prompt manner.
General Liability Insurance
General liability insurance protects an HOA from personal injury and property damage claims that may arise.
Governing Documents
Governing documents make up all documents that regulate the community, as they apply to the type of association. Governing documents include state laws, Declaration of Covenants (CC&Rs), Master Deed Conditions and Restrictions, Bylaws, HOA Rules and Regulations, and Plats of Survey and Easement Agreements.
HOA Terms: H
Homeowners Association or HOA Definition
A Homeowners Association (HOA) has the authority to enforce the CC&Rs (Covenants, Conditions & Restrictions) and to manage the common areas and amenities within the development. An HOA starts as a legal entity formed by a real estate developer for the purpose of developing, managing and selling a community of homes. Once a predetermined number of lots have been sold, ownership of the HOA is usually transferred on to the homeowners.
An established HOA functions as a voluntary association of homeowners working together to protect their property values and to improve the neighborhood. Most homeowners associations in the U.S. are non-profit corporations and are subject to state laws that govern homeowners associations and non-profits.
HOA Assessments
HOA Assessments are additional fees, on top of regular HOA fees, that are typically used in the event of budget shortfalls, emergencies or unexpected costs. Usually, a board vote is needed to approve an assessment past a certain threshold, before charging homeowners additional fees.
HOA Architectural Committee
Also referred to as the Architectural Review Committee or “ARC”. The architectural committee has control of the architectural standards of the HOA community. They also manage the Architectural Review Committee (ARC) application and approval processes.
HOA Bylaws
HOA bylaws are the set of rules or guidelines related to the operation of an HOA Board. HOA Bylaws generally contain the definitions of offices and committees involved with the Board of Directors. The bylaws also include guidelines on voting rights, meetings, notices, and other activities involved with the operation of the HOA.
HOA Fees
HOA fees, sometimes referred to as assessments, are collected regularly. HOA fees can be collected monthly or yearly, and the amount varies from one community to another. The HOA fees fund association operations like insurance, landscaping, maintenance, and building up the HOA reserve.
HOA Fines
When an HOA rule or regulation is violated, a fine can be issued to a homeowner or board member. HOA fine amounts are usually specified in the governing documents and other local and state laws that cover homeowners associations.
HOA Management Company
A community association management company, or HOA management company, is often hired by an HOA board to advise and help carry out duties that the volunteer board members may be unable to fulfill.
HOA Reserve Account
Also known as “Reserve Funds“, “Capital Reserves” or “Reserves”. Capital reserves make up a source of funds that the Board can use to repair and replace major capital facilities, buildings, and equipment of the association. The association usually plans for a gradual accumulation of capital reserve funds through a reserve account.
HOA Reserve Study
An HOA Reserve Study is a planning report used for managing the HOA reserve fund. A reserve study typically assesses the current status of the HOA Reserve Account, then proposes a funding plan to build it up for later use.
HOA Terms: M to R
Member
An HOA member is a homeowner or unit owner. Membership in an HOA is automatically given when a person acquires ownership of a property in the development.
Open Meeting
Open Meetings are the HOA board meetings where the board members, as well as the residents, are allowed to attend. Typically, the board adjourns an open meeting to follow it up with an internal session to consider matters like litigation, the formation of contracts, member discipline, personnel matters, or any issues with the payment of assessments.
Quorum
A quorum is the minimum number of owners required to hold a meeting with legally binding decisions for the HOA. The number of owners required “to have quorum” is defined in the HOA’s bylaws.
Reserve Study
see: HOA Reserve Study
HOA Terms: Want to Learn More?
One of the best things you can do as a member of the board is to continually educate yourself about your HOA. Knowing as much as you can about some of these basic HOA terms can help you to represent the other homeowners in your community well. Need some training to keep you and your HOA board updated? Let us know, we’ll be more than happy to help!
RELATED ARTICLES:
- What Is The Best Accounting Method For HOA?
- The Three Methods of HOA Accounting for Accurate Bookkeeping
- How To Start An HOA For Your Community
