Frequently Asked Questions
Q: What is a Common interest development?
A: The term “common interest development” (CID) describes a form of real estate and home ownership that gives individual owners access to common property and facilities. A CID typically includes an operating entity in the form of a non-profit mutual benefit corporation, registered with the State of California and governed by an elected Board of Directors.
As mandated by the Department of Real Estate (DRE), a CID also provides a system of self-governance through an association of homeowners within the CID. The purpose and benefit of an association is to enhance residents’ community life by maintaining the integrity and appearance of common areas, and by ensuring the quality of provided amenities and services.
Q: What is the role of the Board of Directors?
A: As the oversight body that governs the association, the Board of Directors has a fiduciary responsibility to implement community covenants and ensure that funds are properly budgeted, collected and spent. The board is also responsible for decisions pertaining to maintenance of common areas, landscaping and similar services.
The governing documents of a CID are the declaration and any other documents that govern the operation of the development or the association. These governing documents may include by-laws, articles of incorporation, the association’s operating rules, and Covenants, Conditions and Restrictions (CC&Rs). The association’s bylaws specify the composition of the board. To ensure that the vision and integrity of the community is upheld during its formative stages, the builder and/or developer holds a majority of board positions during the construction and sales phase. New homeowners are invited to make up the balance of the board to ensure that homeowners' voices are heard. The first annual election is held in accordance with the time frames established in the CC&Rs, and homeowners are encouraged to submit their candidacy for the board. As the community continues to build out, the association board transitions from being developer controlled to being homeowner controlled.
The board sets the frequency of its meetings in accordance with provisions contained in the California Civil Code (CC) and the California Corporations Code (Corp C), taking into account the association needs. Regular session board meetings are open to all homeowners, with time provided on the agenda for homeowner input. Depending on the structure of the community, there may be opportunities for committee participation by residents in an advisory capacity.
Q: What are Association memberships and assessments?
A: Membership in the homeowners association is an automatic and integral component of purchasing a home in a CID.
The assessment amount is determined by DRE-mandated budgetary guidelines for ongoing maintenance of a community. Prior to actual property sales, the developer is required to submit a detailed association budget to the DRE which, when approved, determines the assessment paid by the residents. Once a community is fully built-out, the board determines the amount of its assessments by reviewing the association’s financial needs. These include requirements under association contracts its anticipated annual expenditures, and forecasting necessary sums for long-term maintenance of its community facilities (reserves).
Assessments are subject to fluctuation under certain circumstances, including, but not limited to, the effects of the overall economy on the cost of services or a vote by the board or association membership to add or eliminate services. Limitations on the amount an assessment can be increased each year are detailed in the CC&Rs and/or the California Civil Code.
Q: What are CC&Rs?
A: CC&Rs are based on state-mandated requirements for community management and operating procedures. CC&Rs are recorded on the development, apply to all property in the CID and, with few exceptions, can only be changed by a prescribed vote of the association members. The association bylaws contain provisions concerning operation of the development and the association.
As a general rule, provisions that relate to property rights—such as membership rights relating to property ownership—are found in the CC&Rs, and provisions concerning an association’s internal and operating matters are found in the bylaws. Examples of bylaw items include the procedures for electing the Board of Directors and for defining the duties of the association’s officers.
Q: What is the role of the management company?
A: Day-to-day responsibilities of managing a community association are extensive. A professional management company provides associations and the homeowners they serve with assistance in crucial areas, including:
- Submitting monthly financial statements to the Board of Directors detailing collections, payments and cash flow
- Collaborating with the association’s CPA on annual audit and tax filings
- Paying vendor invoices
- Collecting monthly assessments and monitoring delinquencies
- Coordinating subcontractor activities and work orders
- Guiding the proposal process between the association and qualified service providers (landscaping, street sweeping, etc.)
- Acting as the association’s liaison between the board, homeowners, vendors, builders and oversight entities
- Providing a summary overview of association-related communications received by the management company
- Forwarding written requests and communications from homeowners to the board for further direction
- Communicating board actions, decisions and requests to the appropriate entity
- Working with the board and the association’s legal counsel to resolve issues in a timely, cost-effective manner
- Monitoring relevant state code requirements and facilitating prompt action and compliance
- Facilitating insurance coverage as needed for the association
Q: What should a Homeowner do?
A: One of the benefits of association living is the reliable network of resources already in place to respond to questions or requests homeowners may have about a number of topics, including:
- Their home’s interior
- Their home’s exterior
- The community’s common area
- The association’s annual assessment
Q: What are the benefits of association living?
A: CIDs enhance residents’ community experience by providing access to well-maintained amenities, preserving community standards, and providing opportunities for social and recreational involvement.
As a resident, you can enhance the experience as well. A viable, vibrant community is one where homeowners play an active part, not only by fulfilling basic association obligations but also by running for elected offices, serving on committees and participating in group activities. Governing documents lay the logistical foundation, but involved homeowners build the vision and spirit of a community