Homeowner group's bylaws can help solve voting disputes


September 23, 2001

I've received two questions recently about homeowners' associations, otherwise known as HOAs.

An HOA is a private organization comprised of homeowners in a designated community. An HOA collects periodic assessments from its members (the homeowners) and uses the money to maintain common areas within the community. Often, the common areas are merely open spaces that need mowing and landscaping. Sometimes, the common areas are more elaborate, including tot lots, swimming pools and other recreational amenities.

The scope of the HOA's responsibilities usually is established by a declaration of covenants and restrictions, created by the developer of the community. The declaration is an important legal document that is recorded in the land records of the county where the community is located.

The provisions of the declaration usually are binding on all building lots within the community, and the owners of the lots must adhere to the restrictions of the declaration. The declaration commonly includes a lengthy set of protective covenants, intended to maintain the character and appearance of the community.

For instance, the covenants may include architectural standards or may regulate or prohibit owners from using their property in ways that may disturb or offend the residents. The declaration also sets up the procedure for collecting assessments from homeowners.

The affairs of an HOA are run by a board of directors, elected by the homeowners.

The HOA has a set of bylaws that establish the tenure of directors, prescribes the manner of giving notice of meetings, provides the number or proportion of members needed for a meeting and provides for the number or proportion of votes necessary for the members or directors to act.

The board usually is charged with the responsibility to approve an annual budget and to establish the annual assessments paid by homeowners.

Charles Laster of Pasadena lives in a community of more than 400 homes. The community has an HOA. Recently, the members voted on important rule changes. Fewer than 200 homeowners bothered to vote. The rule change was approved by a majority of those voting. Mr. Laster wants to know if this procedure is legal, since it allows a minority of members to approve important changes affecting the entire community.

The HOA's bylaws control the number of members' votes needed to approve an action. In the case of Mr. Laster's HOA, the bylaws may say that only a majority of the members actually voting is required for approval. Mr. Laster should review the HOA bylaws to see if the voting requirements were met.

Meanwhile, William Sites of Baltimore states that when the revenues of his HOA are insufficient to pay expenses, the directors assess the members to make up the shortfall.

But, he complains, when the assessments collected by the HOA exceed expenses, "they do not return the excess to the members." Mr. Sites wants to know if the expenses have to be refunded.

The decision about whether to refund excess assessments should be made in accordance with the HOA bylaws. The bylaws may give the directors the power to establish reserves to pay future expenses, or they may give the directors the discretion to distribute excess funds.

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