HOA Hierarchy, Why it Matters

HOA Hierarchy, Why it Matters

To more fully understand HOA Hierarchy, Why it Matters, it’s first necessary to understand the HOA hierarchy of governance.

HOA Hierarchy, Why it Matters
HOA Hierarchy, Why it Matters

HOA Hierarchy Begins With HOA Laws

State and federal laws are at the top of the HOA hierarchy. Thus, a law will always trump the governing documents. That is, unless it specifies that the HOA’s Declaration or Bylaws apply. If an article in the governing documents conflicts with the law, the law takes precedence.
 
The Non-Profit Corporations Act of ARS Title 10 governs all non-profit corporations.
 
Most planned communities are non-profit corporations. If they were not corporations then all homeowners could have individual liability.
 
The Planned Communities Act of ARS Title 33 governs all planned communities.
 
An HOA should research the Non-Profit Corporations Act and the Planned Communities Act when seeking answers to legal questions. The Planned Communities Act is specifically for planned communities. Therefore, one should look for an answer there first. That’s because in most cases this Act will trump Title 10. Yet, one should also look to Title 10 to be certain that it doesn’t contain language that would override Title 33. If Title 33 doesn’t address a question, then one would proceed to Title 10 to search for the answer.

 

Next in the HOA Hierarchy is the HOA Governing Documents

  • These are the internal documents that govern an HOA. They are collectively referred to as the “governing documents.” They are:
    • Plats;
    • Declaration of Covenants, Conditions and Restrictions (CC&R’s);
    • Articles of Incorporation;
    • Bylaws;
    • Rules and Regulations.
  • A board of directors governs the association and acts in compliance with the state laws, local ordinances, and the governing documents. It also complies with federal laws such as the FHA, ADA, and any others.
  • The homeowners elect the board of directors to govern the association.
  • The homeowners elect the directors. Thus, only homeowners can remove a director. In planned community law, there is a specific procedure for homeowners to remove a director.

Some association Bylaws may have a section providing that a board may declare a director position vacant if a director is absent from three consecutive regularly scheduled meetings.

HOA Hierarchy, Why it Matters Explained

  • The board of directors elects the officers of the board.
  • Usually, there are four officers: president, vice president, secretary and treasurer.
  • Directors who are not officers are “directors at large.”
  • Directors at large may serve on committees or undertake special projects.
  • The officers have specific assigned duties for their office, yet they can delegate those duties to the management staff.
  • The board of directors can remove an officer from the assigned office, after which that person reverts to being a director at large.
  • The entire board has the fiduciary duty to act in the best interest of the association.
  • The owners cannot micro-manage the board.
    • Yet, the owners can and should attend meetings, ask questions, and voice their concerns and desires for the community.
  • The Bylaws will spell out the powers and duties of the board.
  • The board hires and supervises a community manager to run the daily operation.
    • The board makes the policies that the manager must follow.
    • The manager hires and supervises his or her staff.
    • The board cannot micro-manage the manager or the staff.

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Pre-order the ebook on Amazon for automatic delivery to your Kindle reader on October 11.

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