Note: This article has been updated since it’s original publication. 3-15-2019
Your Definitive Guide to Managing a Condominium Association
The American Dream of homeownership with a picket fence and a yard has changed.
Today, approximately 40% of homeowners live in a condominium, not a stand-alone house. According to the National and State Statistical Review conducted by the Community Associations Institute, the United States holds approximately 345,000 community associations, about 45% of which are condominium associations.
What Is a Condominium Association?
A Condominium Association is similar to an apartment complex in the sense that it features a multi-family residential building or collection of condominium buildings. Unlike an apartment complex, condominiums are owned, not rented. Condo owners carry a mortgage and have the rights to make changes to their property, within certain limitations.
When a condo owner purchases their unit, they are buying not only the unit itself, but also a communal share into the community itself, which includes common areas like the parking garage, and amenities, like the swimming pool or gym. Buying a condo also gives the owner access to services the association maintains, like a concierge desk or garbage pickup.
Who Owns a Condo Association?
Every Condo Owner who buys into the Condo Association owns their own unit, plus an undivided interest (a percentage) of the common elements of the community – which consists of everything except the living unit, and any limited common elements (such as private balconies). So, the short answer is that the condo owners themselves own the community.
How Condo Associations Are Formed
If you’ve watched any real estate TV shows, you know that looks are a big part of getting a good price when selling a home. A well-maintained home with access to good amenities that looks beautiful will draw a bigger price in nearly every situation. That’s why, at the heart of any community association is one simple purpose – to preserve and increase the property values of the homes in the community.
If the developer of the property cannot ensure that the value of the units will stay steady or increase, then they cannot guarantee the investment that they made in building the community. This applies more strongly for a Condo complex, in which there are many units in each building. For that reason, most developers choose to incorporate the condo complexes they build into a legal entity known as a Condominium Association.
The function of the Condo Association is to maintain the common areas of the community, to ensure that the community is fiscally healthy, and to maintain the visual integrity and safety of the community in order to increase the property values.
What Is Turnover in a Condo Association?
When a developer builds a Condo Complex, they are ready to begin selling units. Often, the Condo Association has already been formed by the time the first unit has been sold.
While the developer holds the majority of the units in the building, they are the majority voting block for the association, and they appoint the members of the board of directors for the association. However, in the governing documents of the association, there is a percentage of ownership (or a tipping point) that defines when the developer no longer claims the majority share. When that point is reached, the management of the community becomes the responsibility of the unit owners, and the board of directors is turned over to the owners.
Condo Association Governance
Who Is Responsible for Running a Condo Association?
Like any corporation, a condo community is governed by a Board of Directors or Board of Trustees. In most cases, the Board of Directors is elected by the other owners (aka members or shareholders) in the association, but they can also be appointed by the developer when the association is initially formed.
The board also has a legal obligation to uphold called Fiduciary Duty. This means that the board is expected to run the association responsibly to the best of their ability. If the board is believed to be acting in a way that does not serve the association’s best interests, the board could be taken to court for neglecting their Fiduciary Duty.
What Laws Govern a Condo Association?
At the time of this writing, there are no federal laws that specifically govern condo associations, outside of standard housing laws like the Fair Housing Act and the Americans with Disabilities Act, and laws that apply universally, such as the Fair Debt Collections Act and the Fair Labor & Standards Act. Depending on the state you live in, you may have very restrictive and detailed condo laws (such as Florida and California) or your state may have no laws for condos at all. Some counties also have laws that apply to condo associations, such as restricted zoning.
Regardless of where it’s located, every condo association is governed by a set of rules, called the Governing Documents. The Governing Documents are the rules that define the running of the association. They dictate everything from whether you can put plants on your balcony to the makeup of the board, and anything in between.
A whole collection of official documents makes up the Governing Documents of a condo association:
- The Declaration of Condominium, which declares the community to be governed as a condo association and defines the elements of the community (units, common elements, limited common elements). It breaks down assessment rates, defines voting regulations, and defines the percentage of ownership each homeowner has in various common elements.
- The Covenants, Conditions and Restrictions (CC&Rs) is a subset of the Declaration. This section of the document spells out all the rules governing the architecture and care of the community, such as what paint colors are allowed, how parking spaces are assigned, etc.
The Declaration is the most important document for homeowners because these are the rules to which each resident will be held accountable. Failure to follow the rules set out in the CC&Rs can result in fines and other punitive measures.
- The Articles of Incorporation makes the condo association a legal entity with associated rights. Primarily, condo associations are not-for-profit corporations (not to be confused with non-profit charities, so yes you still have to pay taxes), meaning that any monies received that exceed the day-to-day maintenance of the community are to be re-invested into the community’s reserve (rainy day) fund. Not all Condo Associations are incorporated, particularly older communities. However, if your community is not incorporated, your board should consider it carefully. By doing so, your board members and homeowners will gain the same protections afforded to business corporations and will provide rights and privileges to the association as an entity, which may help the community obtain financing, deal with legal issues and obtain insurance in the future. Consult an attorney specializing in Community Association Law for more information.
- The Bylaws is a document that explains the strategy for the governance of the condo association. It defines the makeup of the board, roles (such as president, secretary, etc.) lays out the guidelines for voting procedures, defines the amounts required for quorum, and sets an expectation for procedures to be followed when running meetings.While every board member should be intimately familiar with all of the governing documents, the Bylaws is one of the most important documents for the members of the board as it defines all of the procedural information necessary to prevent conflicts and maintain smooth governance of the community.
- Depending on the state and the developer that formed the community, another document, the ‘Plat Map’, ‘Plans’ or ‘Condo Map’ may be either included in the Bylaws or Articles of Incorporation or provided as a separate document. The Condo Map is an architectural drawing of the entire community, plus floor plans of the various units. The plans give a visual representation of the parts of the community that are common elements (such as the elevator) or limited common elements (such as a rooftop patio only accessible by penthouse units).
What Does the Board of Directors in a Condo Association Do?
As the governing body of the condo association, the board of directors is responsible for all decision making involving the condo association. This includes financial transactions, hiring and firing, investments, rule violations, legal issues, and anything else that the community may encounter.
That does not mean that the members of the board have to do all of the work themselves, there is a vast available support structure of organizations that can assist the board in accomplishing their goals, but at the end of the day, all decisions that affect the community must go through or be reviewed by the board.
A Board Member’s primary responsibility is to make decisions for the community, so it should come as no surprise that meetings figure heavily into the board member’s duty. We will talk more about meetings later, but know that if you take a position on the Board, you should expect to spend at least 2 hours a month in meetings, more if your condo association requires additional guidance.
Board Member Training
Some states require that all board members complete a board member training or certification course within a certain amount of time of being elected.
Even if your state does not require training, it is a good idea to seek it out. Not only will board training cover the topics here in greater detail, it will also get you up to speed on the specific laws in your state and/or county that you need to know. Many times, law firms that specialize in Community Association Law offer board member training courses for free.
Committees in Condo Associations
To assist in larger or more detailed tasks, the Board of Directors has the authority to create committees for any purpose they deem necessary. Some permanent committees are dictated in the Bylaws. A common example of this would be the Architectural Committee. Other semi-permanent committees (or social committees) are formed by the board to provide the community with an ongoing resource, such as a clubhouse committee or a garden committee. A temporary or Ad-Hoc committee can be formed to perform a specific function, such as the budget committee, or a solar energy exploratory committee.
Committees are staffed by community volunteers, and may also include board members.
Types of Condo Association Meetings
Board members spend much of their tenure in meetings. There are multiple types of meetings that are conducted. Check your Condo’s Bylaws to find the required meeting types and any special rules that apply. Most Condo Association meetings fall into one of these categories:
- Annual General Meeting – the AGM is the biggest meeting for the community, so luckily it only happens once a year. The AGM is where board member elections are conducted, the annual budget is passed, and any major amendments or declarations are put to the vote.Decisions made at the AGM are not considered legally binding unless a quorum of the membership is present, The Quorum amount is specified in the Bylaws, but is usually a specific percentage of the total number of condo owners in the association. If the quorum is not achieved, the meeting must be canceled and rescheduled until the quorum can be achieved. It is for this reason that boards often tie the AGM to a community social event, in an attempt to encourage a bigger turnout from the membership.
- Regular Board Meetings – a standard board meeting is conducted every period at a regularly scheduled time. This is the meat and potatoes of being a board member, where the bulk of the community’s business is conducted. Regular board meetings follow parliamentary procedure, beginning with a reading of the minutes from the previous board meeting, followed by treasurer, management and committee reports, then new business. While condo owners and residents are usually allowed to attend regular meetings, they are limited in the amount of time (and when) they are allowed to address the board.
- Executive Sessions – when the board needs to discuss a matter of a sensitive matter that should not be discussed in front of residents or even other condo owners, the President can call an Executive (or private) Session (this can even be done in the midst of another meeting). Executive Sessions are usually reserved for discussion of litigation, collections and delinquency or personnel.
- Special Meetings – if an issue comes up or an emergency occurs, the President has the ability to call a special meeting on limited notice. Special meetings are not open to the public and should only be used in a time sensitive matter where the board cannot wait for a regular meeting. This is commonly used as a result of natural disasters, notice of litigation, notice of fraud or other issues that require more immediate attention.
- Committee Meetings – board appointed committees may meet at any time unless otherwise dictated in the Condo’s Bylaws. Committees often prepare a report for presentation at the regular meeting if a decision or update is required from the Board.
How Much Advanced Notice Must We Give for a Condo Board Meeting?
As regular board meetings are on a recurring schedule, a notice in the community newsletter or on the website that board meetings are held on the first Tuesday of every month at 7pm in the clubhouse is usually more than sufficient, unless your state laws or governing documents specify differently.
Any meeting that involves the general membership (particularly the AGM) is required by most state laws to give the shareholders public notice a certain amount of time in advance (usually 30 days). Even if your state does not require notice, be sure to check your governing documents, as there may be a stipulation there.
How to Prepare for a Board Meeting
The biggest challenge with any meeting is time. When you get a lot of people together in a room, it’s easy to lose track of it, and condo board meetings can run hours and hours if you let them. The secret to a well-run, timely meeting is preparation and time management.
Once you have given notice, you need to prepare the elements that will be required for the meeting. You will need a written meeting agenda, with time slots specified for each item on the agenda. If you will be opening up for shareholder comments, set specific time limits for the entire process, as well as the amount of time each speaker is granted.
Be sure that your board or committee members who will be giving reports to the board are also prepared with any supporting materials such as budgets, financial reports, proposals, slide presentations, or whatever else that may be needed in the course of the meeting.
How to Keep Condo Board Meetings on Task and on Time
Parliamentary procedure is a set of rules agreed upon in advance, by which everyone in the meeting adheres to. The idea is to help provide a set of guidelines for decision making and healthy debate so that board meetings don’t go off the rails with tempers flaring, and time running out.
The most commonly used parliamentary procedure is Robert’s Rules of Order, often just referred to as Robert’s Rules. Robert’s Rules are used for countless meeting types, not just residential management, so they are well organized and very complete. They can also get complicated, which is why there is value in having a trained parliamentarian on your board to help navigate the procedures when there are questions on what is ok and not ok to do.
Many communities adopt a simplified version of Roberts Rules, or even an alternative to Roberts Rules as a way to make the meeting process more streamlined. However, be sure to check before you explore that option. Some communities have a required parliamentary procedure written right into the governing documents.
What Goes Into the Meeting Minutes?
The Minutes are the official record of every board meeting. Minutes may be used in a court of law as evidence, and are the official record of decisions the board makes. The secretary is the official record keeper, and is responsible for taking the minutes – this is a vital role on the board, as the Secretary will often be the first called upon to testify in court. As such, there is a right and a wrong way to do the Minutes.
- Minutes should fully state the Who, What, Where and When of the meeting – who was in attendance, meeting date, type of meeting, where it was held. If a member is not present or leaves early, this should also be recorded in the Minutes.
- The call to order (when the meeting officially began) and the time of adjournment must be recorded in the Minutes.
- The inclusion of and approval of the previous meeting’s minutes ensures that all members present are in agreement that the official record of the previous meeting is accurate. It also serves as a way to quickly bring all members up to speed on the board’s business.
- Reports that are given, by the treasurer, manager, committee members or invited experts are presented and recorded as received and accepted. (The report contents are kept for records, but do not need to be a part of the minutes).
- Minutes are not a log of commentary or debate. Stick to the facts – motions made and passed, votes and their results, resolutions made, actions taken, etc.
Technology Tools for Condo Associations
In addition to the many people and companies that can help with the management of your condominium association, there are also some great technology tools available to make life easier.
First, let’s look at the broader categories of technology you need to consider:
Member CRM – Your CRM (customer relationship management) software is the main location where information on the shareholders should be stored. It is your System of Record, meaning the main source for correct information on your community members. Ideally, your CRM should be connected to your accounting and management software, as well as your portal or website, to act as a source of updating contact info.
Look for a Member Management Software package that provides the following features:
- Member Database
- Property History
- Board / Committee Tracking
- Community Portfolio
- Resale Package Generation
- Communication Tools (Letters, Labels, Etc)
Accounting Software – The most important piece of technology for your community is your accounting software. The accounting software is the primary source for all financial data you maintain for the community, which covers a lot of bases. Many communities try to use off-the-shelf software to manage their condo, and we watch them struggle and fail due to a lack of proper tools and a system that is not designed to work the way condo accounting works.To ensure that your community financials flow smoothly and accurately, look for accounting software that is specifically designed for managing condos and other community associations.
Look for a CAM Accounting Software package that provides the following features:
- GAAP Standard Accounting
- Customizable Chart of Accounts
- Delinquency & Collections
- Reserve Fund Tracking
- Vendor Management
- Budgeting Tools
- HOA Banking
- Customizable Reports
- Board Report Packages
- Check Templates
- Statements / Coupon Books
Management Software – Preventive maintenance and proper rules enforcement are vital to maintaining your community’s property values. But trying to maintain all of that is a spreadsheet or other simple system can be an exercise in frustration.
Look for a Management Software package that provides the following features:
- Maintenance Tracking
- CC&R Violations Enforcement
- Architectural Enforcement
- Document Storage
- Letter Templates
- Batch Letter Processing
Owner Portal / Community Website – All of the software types above are designed to make it easier to run a Condo Association efficiently. However, none of that matters if you cannot give your shareholders access to their own account information. That is where an Owner Portal comes into play. An online portal should give your homeowners the ability to log on to a website and view their current account information, make requests, pay their assessments online, and communicate with the board or their manager. It’s vital that whatever portal you choose, it should connect to your CRM and your Accounting system at the very least, and ideally your management system as well, to ensure that the information your shareholders can access is always up to date.
Look for an Online Portal or Community Website that provides the following features:
- Member Access
- Board Access
- Payment Gateway
- Document Repository
- Direct Communications
- Mass Communications
Consider an All-In-ONE Community Association Platform
While it is possible to find all of the above technologies in individual packages, trying to get them all to connect and play nicely together can be messy, and expensive. We recommend you consider an all-in-one platform that incorporates CRM, Accounting, Management, and an Owner Portal, with all of the associated features above.
TOPS [ONE] is your all-in-ONE platform that serves all the people in your condo’s ecosystem – The board, the shareholders, the management team, even your community vendors. With TOPS [ONE], managing a condo has never been easier, and it’s all online, so the members of your board can access the community while relaxing on the couch. It even seamlessly integrates with many industry banks and technology providers to allow you to stay with your preferred vendors.
Download a FREE eBook “How To Run A Condo Association”!
In this download, you will get valuable insights and know-how from industry experts.
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- How to form a condo association.
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- And much more.
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