Board members in a homeowner’s association (HOA) take on a lot of responsibility. These volunteers may not be administrative, financial, or legal experts, but they must develop these skills to build a thriving community quickly. For many, obtaining the necessary legal knowledge is the most intimidating part of Board membership.
At Community Property Management (CPM), we help Board members gain the knowledge they need to protect their HOA and ensure compliance with state and local laws. Below are the essential legal basics your HOA Board members should understand to foster a well-managed community.
Why Legal Knowledge is Important for HOA Boards
HOA Boards operate as governing bodies, which means that all of your decisions must align with your community’s governing documents and all applicable state and federal laws. When Board members understand the legal foundations that govern their communities, they can make better decisions and mitigate risks of all types.
The good news is that you do not need to be a legal expert to be an effective Board member. A basic legal understanding can aid your Board in the following.
- Avoid costly mistakes.
- Enforce rules consistently.
- Protect homeowners’ rights while upholding HOA standards.
- Navigate complex issues, such as collections, architectural requests, insurance claims, and vendor contracts.
- Maintain compliance with evolving state laws and municipal regulations.
HOA Legal Basics
Now that you know why legal knowledge is so crucial for Board members, it is time to talk about the legal basics every HAO Board should understand.
1) Governing documents.
A set of documents governs all HOAs. These include the following.
- CC&Rs (Covenants, Conditions, & Restrictions)
- Bylaws
- Articles of Incorporation
- Rules and Regulations
- Architectural guidelines
It is every Board member’s duty to read and understand these governing documents in full. Whenever a question arises about community management, the governing documents should be the first place to look.
2) State and local laws.
HOAs must comply with their own rules and regulations, as well as state and municipal laws. These laws typically cover the following.
- Meeting requirements
- Budget and financial reporting standards
- Election procedures
- Assessment collection practices
- Maintenance obligations
- Handling of records and transparency rules.
State and municipal laws are constantly evolving, so it is best to partner with an expert HOA management company, such as CPM, to ensure your community remains aligned with all requirements.
3) Fiduciary duties.
Board members are legally obligated to act in the best interests of their association and to fulfill these three core fiduciary duties.
- Duty of care: Board members must make informed decisions based on research, expert guidance, and a clear understanding of the issue.
- Duty of loyalty: Board members put the association’s interests above personal gain, including conflicts of interest or self-dealing.
- Duty of obedience: Follow all governing documents and applicable laws, and do not adopt policies that conflict with legal requirements.
Understanding the legal basics of HOA governance will empower your Board and increase resident satisfaction. At CPM, we can guide your Board members on the ins and outs of HOA legal responsibilities. Contact us today to learn more.