Property Management

Glossary of Homeowner Association Terms

Authored by attorney, Michael Chulak

Agent refers to someone authorized by another (principal) to act for or in place of the principal; one entrusted with another's business.

Alternative Dispute Resolution means mediation or arbitration as opposed to litigation.

Appurtenant means belonging to, or connected with the use of something.

Articles of Incorporation is a document filed with the state which sets forth general information about a corporation. The filing of this document creates the corporation. Specific rules of the corporation are contained in the bylaws.

Assessment is the fee or dues payable by members of an association, usually monthly. Assessments are determined annually in advance by the board of directors as part of the budgeting process.

Association means a non-profit corporation or unincorporated association created for the purpose of managing a common interest development.

Board of Directors is the governing body of a corporation such as an association. The board is elected by the members of the association who elect the officers. The directors and officers have a duty to comply with the governing documents of the association and all applicable laws.

Board Meeting includes any congregation of a majority of the board members at the same time and place to hear, discuss or deliberate upon any item of business scheduled to be heard by the board, except those matters that may be discussed in executive session.

Bylaws are the rules adopted for governing a corporation such as an association. The bylaws address such things as elections of both directors and officers, the holding of meetings, rights to notice and the powers of directors and officers.

CC&Rs (See Declaration.)

Common Area(s) means the entire common interest development except for the separate interests. California law requires the association to maintain the common areas other than exclusive use common areas unless otherwise provided for in the CC&Rs. The common areas typically include, but are not limited to landscaped areas, driveways, pools and elevators.

Common Interest Development means any of the following:

A condominium project,
A planned development, or
A stock cooperative

The distinction between a condominium and planned development is very significant as it relates to the issue of termites and dry rot.

Condominium consists of an undivided interest in real property, which is the common area, coupled with a separate interest in space called a unit, the boundaries of which, are described in the condominium plan.

Under California law, condominium associations are responsible for the repair and maintenance of the common areas occasioned by the presence of wood destroying organisms (termites and dry rot) unless the CC&Rs indicate otherwise.

Condominium Plan means a description of a condominium project indicating all dimensions in sufficient detail to identify the common areas and each separate interest. The condominium plan is a recorded document.

Co-op See Stock Cooperative.

Coop See Stock Cooperative.

Davis-Stirling Common Interest Development Act refers to sections 1350 through 1376 of the California Civil Code. These sectors along with other sections of the California codes deal with common interest developments.

Declarant means the person or persons who signed are established the CC&Rs. This is nearly always the builder.

Declaration or CC&Rs (Covenants, Conditions and Restrictions) is a recorded document that sets forth the restrictions on the use or enjoyment of any portion of the common interest development that are intended to be enforceable equitable servitudes. Unless the Declaration states otherwise, these servitudes may be enforced by any owner of a separate interest or by the association, or by both.

Directors & Officers Liability Coverage is insurance coverage that protects board members in lawsuits due to actions taken on behalf of the homeowner association. It also covers errors and omissions by board members.

Easement means the right that someone has in the land of another, such as the right to cross Parcel A to get to Parcel B.

Employee is a worker that performs services subject to the will and control of the employer, both as to what will be done and how it will be done. The employer establishes hours of work, may provide training and the worker may not assign anyone to do the required work.

Exclusive Use Common Area(s) is a portion of the common area designated in the CC&Rs for the exclusive use of one or more, but fewer than all of the owners of separate interests.

Unless the CC&Rs provide otherwise, the following are exclusive use common areas:

1)	Awnings	7)	Patios
2)	Balconies	8)	Porches
3)	Doorsteps	9)	Screens
4)	Exterior doors	10)	Shutters
5)	Exterior door frames and hardware	11)	Windows
6)	External telephone wiring designed to serve a single separate interest	12)	Window boxes

California law requires the owner of the adjacent separate interest to maintain the exclusive use common areas.

Executive Session refers to a confidential portion of a board meeting. Refer to Open Meeting Act.

Fiduciary means the legal, moral and ethical obligations a person has to fulfill responsibilities to another. In a homeowner association, directors of the association have a fiduciary duty to act in the best interests of the association.

Governing Documents means the CC&Rs, Bylaws, Rules and Regulations and Articles of Incorporation (or Articles of Association).

Housing Cooperative See Stock Cooperative.

Independent Contractor is a worker hired to do a specific job over which the employer has no right to control the manner in which the work is done. The worker is generally licensed and offers services to the public. Independent contractors establish their own hours and receive no training. Independent contractors are free to assign work to others, if they determine to do so.

Insurance Coverage Forms

1)	Guaranteed Replacement Cost Coverage with Full Building Code Upgrade is insurance that pays replacement costs without regard to policy limits and includes costs resulting from code changes. The amount of recovery will be reduced by any deductible.
2)	Guaranteed Replacement Cost Coverage with Limited or No Building Code Upgrade is insurance that pays replacement costs without regard to policy limits, but limits or excludes costs resulting from code changes. The amount of recovery will be reduced by any deductible.
3)	Replacement Cost Coverage is insurance that pays replacement costs up to policy limits based upon like or equivalent construction. The amount of recovery will be reduced by any deductible.

Lien is a recorded claim against a property, including Assessment Liens, Deeds of Trust and unpaid taxes.

Management Agreement is the contract between an association and management company setting forth the rights and obligations of the parties. These agreements may be “full service” or “financial service” contracts. Some management companies provide more services than others.

Mechanics' Lien is a right provided by law to individuals and businesses that make improvements to real property and who are not paid. Mechanics include any worker or business that supplies building materials or labor for the construction or improvement of real property.

Meeting of Board. See Board Meeting.

Open Meeting Act refers to the Civil Code Section that permits any member of an association to attend board meetings, except when the board adjourns to executive session to consider litigation, matters relating to the formation of contracts with third parties, member discipline, personnel matters, or to meet with a member, upon the member’s request, regarding the member’s payment of assessments.

Operating Rule means a regulation adopted by a board of directors that applies generally to the management and operation of the common interest development or the conduct of the business of the association.

Planned Development means a common interest development other than a condominium, or stock cooperative. The common area is often owned by the association, however, it may also be owned in common by the owners of the separate interests. The separate interest is a lot, parcel, area or space, not a unit.

Under California law, in a planned development, each owner of a separate interest is responsible for the repair and maintenance of that separate interest as may be occasioned by the presence of wood destroying organisms (termites and dry rot) unless the CC&Rs indicate otherwise.

Proforma Budget is an annual budget for the association setting forth the estimated revenue and expenses along with a summary of the association’s reserves based upon the most recent reserve study. A copy must be distributed to all association members not less than 30 days nor more than 90 days prior to the beginning of the association’s fiscal year.

Proxy is the power granted by one person to a representative to vote for the person. A proxy form is often completed by an owner who is unable to attend a homeowner meeting so that a quorum can be achieved at the meeting.

Reserve Study is a written report which identifies all of the major components which the association is obligated to repair, replace, restore or maintain having a remaining useful life of more than two years and less than 30 years as of the date of the study. The report estimates the remaining useful life of each component and the amount of funds the association must set aside each month (Reserves) in order to have the cash available to make all necessary repairs and replacements. It is a cash flow report. California law requires most all associations to obtain a reserve study at least every three years.

Reserves are the funds set aside for repairs and replacements to be made by an association as determined by a reserve study.

Separate Interest has the following meanings:

1)	In a condominium project, “separate interest” means an individual unit or separate interest in space. See “Condominium.”
2)	In a planned development, “separate interest” means a separately owned lot, parcel, area or space.”
3)	In a stock cooperative, “separate interest” means the exclusive right to occupy a portion of the real property.”

With both condominiums and planned developments, the transfer by sale or foreclosure of a separate interest, includes the automatic transfer of the owner’s undivided interest in the common area or membership interest in the association. Under California law, the owner of each separate interest is responsible for maintaining it.

Special Assessment is an assessment made usually for a special project or in response to a large unbudgeted expense.

Stock Cooperative is a project in which a corporation is formed for the purpose of holding title to the property and where the shareholders of the corporation receive a right of exclusive occupancy in a portion of the property (either an apartment, space or home site). The shareholder’s interest in the corporation is evidenced by a share of stock or a membership certificate.

Structural refers to the load-bearing components of a building as opposed to the screening or ornamental elements. Structural lumber is generally, at least a 2 x 4.

Townhouse is not a legal form of ownership. It is an architectural style. Townhouses may be condominiums or planned developments. Townhouses are multi-level homes, usually built in rows with individual garages. The homes are not stacked one on top of another so that no owner lives above or below another owner.

Undivided Interest refers to the type of ownership interest that the owner of a separate interest has in the common area. In a condominium or planned development, this undivided interest consists of a tenancy in common which means that each owner having an undivided interest may use all or any portion of the common area, subject to any restrictions set forth in the Declaration or CC&Rs.