Common Interest
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Common Interest
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Red Bank Oaks Common Interest Development
Frequently Asked Questions
What
is a Common Interest Development (CID)? A Common
Interest Development (CID) is descriptive not only of a certain type of real
estate but also of a life-style that is becoming more and more common to the
American way of life. All CIDs are similar in that they allow individual
owners the use of common property and facilities and provide for a system of
self-governance through an association of the property owners within the CID. The most
common type of association of property owners is the nonprofit mutual benefit
corporation. This is a corporation in which the members of the corporation
vote for a board of directors which runs the affairs of the corporation. Do
you have to join the association?
Membership in the association is automatic. When a person buys land in a
common interest development, he/she automatically becomes a member of the
association. What
are Covenants, Conditions and Restrictions (CC&Rs)? The
Declaration of the
Covenants, Conditions and Restrictions, or CC&Rs, contains the ground
rules for the operation of the association. This governing document
identifies the association's common area and responsibilities, explains the
obligation of the association to collect assessments, as well as the obligation
of the owners to pay assessments. It also states that the association may
sue owners for violations of the rules or failure to pay assessments.
Usually, the CC&Rs will also state the duties and obligations of the association
to its members, insurance requirements, and control issues. How
are the CC&Rs enforced?
California laws allow that either the association or an owner in a common
interest development may sue in court and ask the court to enforce the CC&Rs.
The law currently requires that, unless an exception applies, prior to the
filing of a lawsuit either the owner or the association must offer to engage in
some form of alternative dispute resolution process. What
is the purpose of the Bylaws? As
stated above, the CC&Rs generally state how an association is to be operated.
In almost every instance the association, through its board of directors, has
the ultimate responsibility for managing the association. Since the
association is usually a corporation,
the Bylaws establish the rules by which the
corporation will be run. These usually include such aspects as how members
vote for the board of directors, the number and term limit of members of the
board of directors, the duties of the board, the duties of the officers, and
other incidental provisions.
Guidance CIDs are
subject to the
Davis-Stirling Common Interest Development Act
which is designed to provide property owners with a system of self-government
and dispute resolution. The
Attorney General has the authority under Corporations Code Section 8216 to
intervene on behalf of members of a non-profit mutual benefit corporation (such
as a landowners’ association) who are denied certain specified rights. The
Attorney General’s intervention would be to send a "Notice of Complaint" letter
to the board of directors. If your
association has failed to hold regular meetings of members, failed to allow
member access to books and records of the corporation, failed to provide annual
financial reports to members, failed to provide a list of names and addresses of
members, or failed to provide other specified member rights, you may submit a
complaint in writing to: Office of the Attorney General Public Inquiry Unit P. O. Box 944255
Sacramento, CA 94244-2550 Be sure
to include an address for the non-profit corporation (landowners’ association)
and your own return address. If action is warranted, you will receive a
copy of the "Notice of Complaint" letter sent within 30 days of your complaint. Who
is in charge of the association? The
members who own property in the development are in charge of the association.
During the annual meeting of the membership, all members are invited to
officially meet and vote for all or part of the board of directors which
operates the association. The board of directors' job is to preserve,
enhance and protect the value of the development, but it answers to the members.
It is not unusual for the board to contract with a professional management
company to run the day-to-day affairs of the association. What
is the board of directors and how are its members elected? The
board of directors
governs the association. Its members are elected yearly or less
frequently, depending upon the terms mandated in the Bylaws of the association.
The Bylaws also determine the number of directors. Directors are elected
by the members (owners of property) of the association who vote for vacancies as
they occur. How
can you serve on the association's board of directors? There
are two ways to become a member of the board of directors. The first is to
request that the association place your name on the election ballot so that
other members of the association will have an opportunity to vote for you at the
next annual meeting. The second way is to request that the board of
directors consider appointing you to any interim vacancy on the board. What
are the responsibilities of the board of directors? The
board has the ultimate responsibility for operating the association. That
means it makes sure that the association's money is collected, its bills are
paid, the association is operated efficiently, and violations of the rules of
the association are addressed. For example, the board is responsible for
reviewing the association's bank statements, preparing a budget, and
distributing the budget (or budget summary) to the members prior to the
beginning of the association's fiscal year. The board must also prepare a
fiscal year-end financial statement for distribution to the members. There
are numerous other things for which the board is responsible, as set forth in
the association's CC&Rs, Bylaws, the Corporations Code and the Davis-Stirling
Common Interest Development Act. Are
there other opportunities to volunteer in the association besides the board of
directors? An
association may have a number of committees that perform valuable functions.
The committees consist of volunteer property owners. The specific number
and types of committees are usually determined by the association's Bylaws, CC&Rs,
and/or the board of directors. How
does the association pay its bills? Each
association has a budget that is prepared, based on the common area obligations
of the development, and distributed to all of its members. The budget
determines how much money the association is going to need to operate for the
following year. The association has the right to bill the members for
their fair share of the budgeted amount. This billing is known as an
assessment, which may be paid via monthly invoices, coupons supplied by the
association, or some alternative method. Ideally, the association collects
sufficient money through these assessments and pays the bills for the services
and goods contemplated in the budget. If the assessments collected are
insufficient to pay the bills, the board of directors is allowed to levy what is
known as a special assessment. Without member approval, the total of
special assessments in any fiscal year cannot exceed 5 percent of the gross
budgeted expenses for that year. By
paying your fair share of the obligations of the association, through the budget
and assessment process, you are paying for the current and long term maintenance
obligations of the association. Of course, all of the other owners are
doing so as well. How
is the amount of the monthly assessment determined? When the
budget is prepared, the amounts necessary for the daily operation and long term
reserves for maintenance and replacement are determined based on the level of
service for which the association is both required and willing to pay. For
example, sometimes there are specific items defined in the CC&Rs that require a
certain level of maintenance by the association. Once the annual amount is
determined, then it must be collected from the members in order for the
association to operate. The CC&Rs will normally indicate the frequency of
assessment collections. Are
there different types of assessments or fees? There
are several types of assessments that may apply to your association. The
California Civil Code defines assessments as either being regular or special.
Regular assessments are needed for the operating (day-to-day) and reserve
(long-term maintenance) activities of the association. Special
assessments are those levied by the association for major repairs, replacement,
or new construction of the common area or for a one-time, unanticipated expense
which cannot be covered by the regular assessment (e.g., insurance premiums that
unexpectedly "sky rocket"). Note:
a special assessment should not be confused with a monetary penalty levied by
the association against an individual owner to reimburse the association for an
expense such as damage to the common area, or imposed as a disciplinary measure
for a violation of the rules and regulations. Also,
some CIDs establish user fees or special charges for uncustomary services and
activities. Typically, they are imposed on an owner specifically
benefiting from the service, such as a common garbage dumpster or use of
association owned assets. The fees are usually on a pay as you go basis
and generally cannot become a lien on the owner's unit or interest. Some
associations have other types of assessments designated as well. For
example, an association may have what is known as a reimbursement assessment,
which is actually a special assessment levied against an individual owner
charging them for damage to common property that occurs by virtue of an act by
the owner or an owner's guest. Who
can raise the amount of the assessment? The
board of directors can raise the amount of the assessment. However, the
board must follow certain procedures mandated by California Civil Code Section
1366. Even if the governing documents are more restrictive, the board of
directors may not raise the regular assessment more than 20 percent per year,
without the approval of the owners. The board must circulate a budget to
the membership no less than 45 days but no more than 60 days prior to the
beginning of the fiscal year. If the budget indicates that an assessment
increase greater than 20 percent is necessary, a majority of the members of the
association must approve the assessment. There are also provisions for a
board to increase an assessment more than 20 percent without member approval in
cases of emergency such as an extraordinary expense required by order of a
court, or for repairs to the common area. What
happens if you do not pay your assessments? Usually,
the first thing the association will do is send you a reminder letter. The
law is specific in California regarding the due date of assessments and the
overall process that an association must follow regarding delinquent
assessments. The law states that if an assessment is not paid within 15
days of the due date, a delinquency occurs. At this point, the association
can add a charge to your assessment in the form of a late fee in the amount of
$10.00 or ten percent of the monthly assessment amount, whichever is greater,
unless the CC&Rs specify a lesser amount. Again, the law covering this
area is quite clear and the board must follow these procedures. Once a
year, the association will send each owner a copy of the assessment collection
policy, which will tell you the amount of the late fee. In addition, if
your assessment becomes over 30 days delinquent the association has the right to
assess interest up to 12 percent per year on the balance which is owed and
unpaid. Furthermore, if you fail to pay your assessments, the matter may
be referred to an attorney or foreclosure service. The association has the
right to lien your property for the amounts owed as well as other costs such as
attorney's fees. The association can foreclose and take your property for
your failure to pay assessments. Additionally, a personal judgment may be
entered against you for failure to pay your assessment. As you can see, it
is imperative that all owners pay their assessments in a timely manner.
Failure by several owners to pay their assessment obligation could place the
association in financial difficulty. Are
there other rules in an association? An
association's board of directors may establish rules and regulations governing
issues ranging from where you can park to what you can place on a balcony or
deck. Associations frequently have guidelines and rules which specify the
type of landscaping that may be installed or in some instances, not installed.
Rules and regulations can be just as enforceable in an association as the CC&Rs,
Bylaws and applicable statutes. The most frequent type of miscommunication
between an owner and the association usually arises from an owner being unaware
of the rules and regulations when the association attempts to enforce them.
You can easily prevent such misunderstandings by making certain you have a
current copy of the rules and regulations, which may be obtained from the
association or the management company. Can
you make improvements to your property? The
answer is generally yes. However, in addition to the conditions in the CC&Rs,
most associations have established rules and regulations which must be followed
in order to make any alterations or improvements. Furthermore, all
improvements should be in conformance with applicable federal, state, county,
and city ordinances and governances. Who
do you contact if you are having problems with or questions regarding the
association common area? Neighbors? Paying assessments? The
first place to look for answers to your questions is the CC&Rs. Then you
should speak to a board member or, if your association has contracted with a
management company, they may be able to provide assistance. The
association's common area is managed by the association, so the appropriate
contact is either one of the association's board members or, if applicable, the
management company. When there is a dispute between neighbors, sometimes
it is best resolved between those owners. Where a dispute involves payment
of assessments or an infraction of the association rules or CC&Rs, it would be
appropriate to contact the board of directors and/or the management company. What
is a management company and what does it do? A
management company is a separate business enterprise usually hired to act as the
agent of the association. As an agent for the association, they take their
direction specifically from the association's board of directors. Typical
contractual responsibilities of the managing agent include a variety of services
to the association, such as: collecting assessments, paying the association's
bills, taking direction from the board of directors for enforcement of rules
infractions, and obtaining various vendors to perform services. The
managing agent also helps with the budget process and prepares meeting agendas
and minutes for the board of directors. Further, the management company
provides assistance to all parties in helping solve problems that can occur in
CIDs. They advise the board of directors on how to comply with relevant
California Civil Code requirements and assist with appropriate and timely
compliance. When contracting with a management firm, it is important that
the association be willing to pay for the level of services needed. What
happens if you rent your land or home in a common interest development? Nothing,
as long as your tenant does not create a problem in the development. There
is usually no restriction on rentals in a CID. Some CC&Rs require that a
rental agreement acknowledge that the tenancy is subject to all of the rules and
regulations of the association. Some associations' rules and regulations
also require that you provide the association with a copy of the rental
agreement. In most associations, the CC&Rs state that the owner of the
property being rented is responsible for the conduct of the tenant.
Naturally, it is in the best interest of all parties to prevent problem
situations between tenants and owners of other units. If your tenant
damages common areas or creates a nuisance (e.g., loud music or pet problems),
the disturbance could become your problem. What
are your individual responsibilities as an owner living in a CID?
Primarily, pay your assessments on time and abide by the CC&Rs and all other
rules and regulations which exist for community harmony. What
are your individual rights as an owner of property in a CID? Who
do I contact when I decide to sell my land or home? You may
wish to contact a real estate professional, the board of directors, the
professional management company and/or an escrow company for assistance with the
many details. There are a number of documents that an individual owner is
legally required to provide to a prospective purchaser of a unit in a CID.
You will want to make sure that the buyer is aware of the rules and regulations
of the association as well as the assessment obligation so there is not a
problem or misunderstanding which could jeopardize the sale of your property.
Conclusion A
successful and viable CID is generally one in which property owners assume an
active role in the association’s function, not only by attending meetings,
voting, and paying dues, but also by taking an active role in the actual
functioning of the association by running for the elected offices, serving on
committees, and generally participating in group activities. While the
framework of the association is the governing documents, it can certainly be
said that the "backbone" of the association is the
active and involved membership. * All information contained herein is sourced from Public Information Brochure, “Living in a California Common Interest Development,” published by the California Department of Real Estate, September 2001.
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Copyright © 2008
Red Bank Oaks Property Owners' Association
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