1. Importance and Basics of the Homeowners Association
The number of Americans who live in a condominium, townhome or urban residential subdivision that is governed by a homeowners association has grown by leaps and bounds in the last two decades and promises to become an even more significant part of our real estate market in the future. Although difficult to determine, the value of the investment in a property with a homeowners association is impacted by the manner in which the association operates.

American lifestyles have changed dramatically in the last 100 years. The agrarian landscape at the turn of the last century gave way to a residential single-family housing craze all across the country. When the busy lifestyle of the industrial, family, changes quickly occurred with our housing needs, There became a need for new living styles and new home designs with less maintenance. Aluminum and vinyl siding were the precursors of this new age destined to reduce maintenance cost and time required by homeowners to care for their property.

The need to change to community living situations which share responsibility started with retirees but has moved into nearly every group of home seekers looking to reduce the time spend on lawns and home repairs. The time devoted to recreation, relaxation and family activities has benefited those who live in this style of community.

2. The Lifestyle Change
The change in living styles all began with the condominium craze of the late 60’s. The role of the electronic media has certainly played a big part in changing our lifestyles. The television has broadened our horizons and made information available on how others live and work. This form of communication has given viewers the opportunity to see others enjoying life through spectators sports and has given way to participation in these activities to literally thousands of Americans. Today’s buyers is demanding a lifestyle that allow time for leisure activities and has impacted the way we look at property purchases. The typical owner whether young, old, with or without financial means is changing their lifestyle. No more slavery to suburban living. Second homes have also created a need for association living. Owners can now have the property they buy managed by the association and ready to be used for pleasure on demand. The American Dream of home ownership has been in transition now for nearly thirty years.

History does have a way of repeating itself. Records of home ownership indicate community living during the Roman Empire. Rules for conduct and ownership are a part of the record of this ancient happening. Throughout the history of Europe, community living has been a part of a number of societies and for a number of reasons.

Lifestyle change is a significant factor driving our housing market. The economics of the changing community is affecting buyer purchasing choices. For example, the early retirement of “baby boomers” now inheriting the wealth of a previous generation has created a demand for second homes and resort purchases. Freedom from responsibility of the care and maintenance is a part of this purchase decision as from responsibility of the care and maintenance is a part of this purchase decision as well as recreation or leisure activities associated with community homeowners association living styles. Association-managed property has also benefited investors seeking to make a profit on their real estate investment. Minimal management during time of ownership reduces management and maintenance expense for investors.

Coupled with all of the above is the vast knowledge and communication available through the digital media. Property values, amenities, and associated information is readily available to the savvy buyer in today’s market. The information age is yet to unfold itself completely – who knows what it will bring. Certainly, homeowners associations need to have good communication within their organization. There is no doubt it will be facilitated by the digital medium we are using.

3. Homeowners Association Documents – Overview/Purpose
Homeowners associations are governed by a set of directions contained and organized to create rules for a mode of operation. The general term applied to written information about specific associations is called: “Documents”. They are composed of the following:

The Articles of Incorporation – They set-up the association as a corporation under the laws of the state. Most often it is a non-profit corporation. Members are liable for the actions of the corporation.

Declarations (AKA: Covenants) – This instrument is also referred to as the master deed and is a document that is recorded and spells out how the association is organized. Any use restriction would be included in this section.

By-laws (How to Operate) – This section of the document defines how the affairs of the association will be run based on the Articles of Incorporation and the Declarations of the association. By-laws are further defined by the house rules.

House Rules (Rules and Regulations) - Generally a part of the by-laws, the house rules are often separated and readily available or posted somewhere on the premises.

4. Homeowners Association Terminology

a. Budget – a financial document presented for a vote of membership.
b. Common Expense – items outlined on the budget that benefit owners.
c. Assessment – a pro-rated share of common expenses for each unit owner.
d. Special Assessment – a special bill to unit owners for the pro-rated share of a special expense. This money may be held in reserve until enough is available to complete the special expense.
e. Dues – the fee payable to the owner association by each owner. This is usually monthly and is set forth by the budget.
f. Reserves – funds set aside by the board for large expenditures.
g. Common Area – portion of a complex or development owned by all owners.
h. Limited Common Areas – areas reserved for a specific unit owner.
i. Amenities – special common areas for a specific use of all owners such as: swimming pool, tennis courts, and clubhouse.
j. Board of Directors – persons elected by the membership who govern the affairs of the association outlined in the by-laws.
k. On-site Manager – an employee of the owner association or the management company and responsible for day-to-day operations.
l. Architectural Controls – rules governing the exterior appearance.
m. Voting Rights – the right of an owner to vote on matters defined in the documents.
n. Condominium – a unit comprised of air space in a multi-family complex.
o. Townhouse – a freestanding unit joined by common walls.
p. Unit – a portion of a complex which is owned by an individual named on a deed.
q. Undivided Interest – the right of ownership to common element.
r. PUD – a community of individual homes/lots with common areas of land that can be used by all owners.
s. Project – a complex under development and construction

5. Governing Homeowners Associations

Types of Ownership

In real estate there are many types of ownership available to the consumer. The more common types related to association management will be discussed briefly here to clarify their relationship to other owners who are a part of homeowner associations.

Condominium – This type of ownership is fee simple interest in a particular unit and an undivided interest in common areas of the complex. Each unit is made up of air space in the complex.
Townhouse – This type of ownership is a freestanding structure with walls that connect neighboring units. The land on which the unit stands is deeded to the unit owner. Common areas are owned and maintained by the homeowners association.

Planned Unit Development – This type of community has individual lots with individually owned homes or lots. Land that surrounds or connects to the individually owned lots is owned by the association membership made up of all lot owners and used as common area by all. All owners have an undivided interest in common areas.

What Buyers Need to Know about Homeowner Associations?

A complete set of current association documents should be provided for review prior to any offer being made on the property. Legal advice may be advised if the buyer needs interpretation.

A review of the financial information about the association should also be completed prior to an offer. The annual budget, notices or information about any pending assessments or dues increases should be shared with prospective buyers. A part of the financial check should include determining if reserve accounts are in place for anticipated repairs and maintenance. Low monthly dues are great but when will the real date for needed repairs and replacements be forthcoming? As an example: roof replacement, asphalt sealing or replacement, and paiting may be forthcoming.

A site map and floor plans are also very useful for buyers in order to see a visual layout of a complex. When buyers become interested in pursuing an offer on a property with an owners association, the names, addresses and telephone number of the association president or association management representative will be useful. The prospective buyer will need to become comfortable with the purchase. A wide variety of questions and concerns can be addressed in a relatively short period of time by just making a telephone call to one of these key people. A telephone call can also verify information already provided by the listing agent and allow buyers to move forward with an offer feeling more confident about ht purchase they may be about to make.

Source: North Carolina Association of Realtors^®

___________________ Homeowners Association         Date _______________

___Type of Ownership
            ___Condominium
            ___ Townhome
            ___ Planned Residential Community

___What amenities are offered?
            _______________________________________________________
            _______________________________________________________
            _______________________________________________________

___Access to amenities __________________________________________

___How is Insurance handled? ____________________________________

___ Most Recent or Amended Copy of the Association Documents
            ____The Articles of Incorporation
            ____Declarations (Master Deed)
            ____ By-laws
            ____ House Rules

___ Important names, addresses, telephone #’s
            Association President
            Name_____________________ Address __________________________
            Telephone number ____________________________

            Property Manager Representative
            Name _____________________ Address __________________________
            Telephone Number ____________________________

___Amount of:  Monthly Dues _________  or Quarterly Dues ___________

___Annual Budget/Financial Statements

___Recent/Pending Dues Changes:  Date ____________  Amount ____________

___ Any Special Assessments _________________________________________

___Copies of:    _____Board         ____Annual Meeting Minutes

___Personal Property that will convey  (attach separate list)

___Copies of Site Plans/Floor Plans