1099-Misc Form
Miscellaneous Income. This IRS form is used to report the year-end summary of all non-employee compensation. This form covers a variety of types of income, including royalties, rent, self-employment, and independent contractor income. It also includes crop insurance proceeds and other types of miscellaneous income. Any employer or contractee that pays a freelancer or independent contractor at least $600 during a year must issue this form by January 31 of the following year.
1120-C Form
U.S. Income Tax Return for Cooperative Associations. This form is used by corporate taxpayers to report income, gains, losses, deductions, and credits, as well as to figure the income tax liability of the corporation. Any corporation that operates on a cooperative basis under IRC section 1381 and allocating amounts to patrons on the basis of business done with or for such patrons should file this form.
1120-H Form
U.S. Income Tax Return for Homeowners Associations. This form is used by homeowners associations as its income tax return in order to take advantage of certain tax benefits. These benefits will essentially allow the homeowners association to exclude exempt function income from its gross income.
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Abstain
To abstain is to not cast a vote. Board members should abstain from voting only for clearly stated reasons such as a conflict of interest or ignorance of the matter at hand. In small groups like boards of directors meetings, abstentions should be discouraged unless there is a conflict of interest. A board has the fiduciary duty to act on matters brought before the community association.
Accounts Payable
Put simply, Accounts Payable is money owed by an association. The money could be owed to a vendor. This appears as a liability on the community’s balance sheet. Accounts Payable is a form of credit, in which a vendor allows the association to pay for goods or services after they have been delivered.
Accounts Receivable
Any money owed to an association. Usually, this money is collected in the form of homeowners assessments, commonly called dues. The amount of money owed to the association appears on the balance sheet as an asset.
Accrual Accounting
Accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged, and provides a financial record of asset depreciation. Typically not used for community associations due to IRS rules for Community Association tax returns.
Act in Good Faith
An intangible and abstract quality that encompasses an honest belief of intention to abstain from taking any unconscientious advantage of another.
Advertising Injury
Liability for injury to reputation. Due to libel, defamation, invasion of privacy, or similar injuries, in written or published form.
Agenda
Meeting agendas follow a standard format based on parliamentary procedure. An agenda is more than an announcement of the order of business for a meeting. It is a meeting management tool.
Aggregate Limit
The maximum amount that the carrier will pay out during the term of the policy. Common in liability policies.
Agreed Amount
An endorsement which waives the coinsurance clause in property insurance.
Alternative Dispute Resolution
Any form of dispute resolution other than by formal court proceedings. Can include mediation, arbitration, etc.
Americans with Disabilities Act
The ADA is a wide-ranging civil rights law that prohibits, under certain circumstances, discrimination based on disability. It affords similar protections against discrimination to Americans with disabilities as the Civil Rights Act of 1964,[4] which made discrimination based on race, religion, sex, national origin, and other characteristics illegal. Disability is defined by the ADA as “…a physical or mental impairment that substantially limits a major life activity.” The determination of whether any particular condition is considered a disability is made on a case by case basis. Certain specific conditions are excluded as disabilities, such as current substance abuse and visual impairment that is correctable by prescription lenses.
Annual Meeting
The annual meeting of the members of the HOA, which should be held not less frequently than annually at a day, time and place fixed by the CC&Rs. (See: Notices – Quorum)
Arbitration
An informal trial proceeding used to settle disputes rather than pursuing formal court proceedings. A decision by an arbitrator can be either binding (final decision) or non-binding (parties may ignore decision).
Architectural Compliance Committee
Board appointed or elected committee with the authority to review and approve changes to property. Also known as ARC or Architectural Review Committee.
Architectural Review Committee
Board appointed or elected committee with the authority to review and approve changes to property. Also referred to as ARC or ACC.
Areas of Responsibility
A document that outlines and defines the maintenance and/or insurance obligations of the association and its board of directors.
Articles of Incorporation
The “Articles of Incorporation” (sometimes also referred to as the Certificate of Incorporation or the Corporate Charter) are the primary rules governing the management of a corporation in the United States and Canada, and are filed with a state or other regulatory agency.
Assessment
An owners financial obligation to the community association during a given period of time – usually one year. It covers the owner’s share of the common expense (known as “common expense liabilities” in some states) An annual assessment may be paid on a monthly, quarterly or annual basis. Also called a maintenance fee, Regime fee or Dues.
Audit
A financial audit, or more accurately, an audit of financial statements, is the verification of the financial statements of a legal entity, with a view to express an audit opinion. The audit opinion is intended to provide reasonable assurance, but not absolute assurance, that the financial statements are presented fairly, in all material respects, and/or give a true and fair view in accordance with the financial reporting framework. The purpose of an audit is to provide an objective independent examination of the financial statements, which increases the value and credibility of the financial statements produced by management, thus increase user confidence in the financial statement, reduce investor risk and consequently reduce the cost of capital of the preparer of the financial statements. Governing Documents and state statutes may require that an independent CPA be involved in the audit.
Auditable Policies
Carrier sets a provisional premium based on the insured’s expected exposure. When the coverage year is over the carrier audits the insured’s accounts to determine the actual exposure. Less than expected, insured receives refund. More than expected, insured pays the difference.
Automated Clearing House
Automated Clearing House (ACH) is an electronic network for financial transactions in the United States. ACH processes large volumes of credit and debit transactions in batches. ACH credit transfers include direct deposit payroll and vendor payments. ACH direct debit transfers include consumer payments on insurance premiums, mortgage loans, and other kinds of bills. Debit transfers also include new applications such as the point-of-purchase (POP) check conversion pilot program sponsored by NACHA – The Electronic Payments Association. Both the government and the commercial sectors use ACH payments. Businesses increasingly use ACH online to have customers pay, rather than via credit or debit cards.
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Bad Debt
A payment that cannot be collected from an owner is called a bad debt.
Bad Debt Write-off
Consists of recording an un-collectable debt as an expense that the association must absorb. (Accrual Accounting only)
Bailee Coverage
Also known as receiving room coverage. Insurance coverage for a party who has temporary custody of the property of another. example: Staff holds deliveries in the office or at the lobby desk for residents until they pick them up.
Balance Sheet
A summary of a community’s financial position at a specific point in time. It is called a balance sheet because what the community association owns (Assets) and what it owes to others (Liabilities) must balance out. A balance sheet is typically prepared on a monthly basis to allow the board of directors and manager to carefully monitor the associations finances.
Ballot
A piece of paper on which an association member registers his or her vote on a decision voted upon by the association at a called meeting.
Bank Reconciliation
The process of determining the difference between the amount of money in an association’s financial records and the amount in the association’s bank statement. For example, if a vendor check has not been cashed, the bank statement would differ from the association’s records. A bank reconciliation would determine that the un-cashed check is the cause for the discrepancy.
Bankruptcy
A legal status of a person or other entity that cannot repay the debts it owes to creditors. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor. Types: Chapter 7 – liquidation; Chapter 11 – Reorganization for corporations; Chapter 13 – Reorganization for personal debt.
Basic Form
In commercial property insurance, the insuring agreement that covers fire, lightning, riot, explosion, vehicles, smoke, hail, aircraft, wind, vandalism, and malicious mischief. The exposures covered may vary slightly by carrier. Not as inclusive as special form.
Binding Proposal
A proposal where the carrier has given the agent authority to commit the carrier to insuring the stated risk for the stated premium-if the association accepts the proposal.
Blanket Coverage
In property insurance, one limit and one deductible apply to all the buildings or units as a whole-rather than each building or unit having its own limit and its own deductible. In fidelity insurance, all employees are covered as a category-rather than specifically named individuals or positions.
Board Meeting
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.
Board of Directors
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.
Bodily Injury
Liability for physical injury sickness, or disease.
Broad Form
In commercial property insurance, the insuring agreement that covers the exposures in basic form plus some damage from water escape from plumbing systems and certain damage from collapse. The exposures covered may vary slightly by carrier. Not as inclusive as special form.
Budget
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. Some states also require a “Budget Ratification” meeting to be held prior to the beginning of the fiscal year.
Builder
A company or person who builds homes or units within a development. Not always the developer.
Business Judgement Rule
Courts apply this rule to a boards actions to find negligence in the Board’s fiduciary duty. That is, if a board has exercised reasonable due diligence in making a decision, the court will generally not consider the board negligent. However the board must demonstrate how it reached a decision with good faith, loyalty and due care. See also Fiduciary Duty.
Bylaws
The by-laws of an HOA establish the: [1] Methods of operation of the HOA, its offices, membership, membership certificates and/or cards, transfer of membership, temporary privilege cards; [2] Meetings of members, place, type (Annual or Special), notice, voting, quorum, consent of absentees, proxies, action without meeting; [3] Directors powers, number and qualifications, election and term of office, vacancies, place of meetings, organization, regular, special and notice of meetings, waiver of notice, quorum, adjournment, consent in lieu, fees and compensation, removal, open meetings, minutes; [4] Officers, type, election, subordinate, removal and resignation, vacancies, duties of president, vice-president, secretary, treasurer; [5] Assessments, the board power to fix, determine, give notice of and collect the general assessment, provide for the tax assessment, special assessment, approval of the general assessment, special assessment, individual assessment; [6] Maintenance and Operation, agreements such as Management Agreement; and [7] Miscellaneous, such as record dates, inspection of corporate records, checks and drafts, annual reports and account, execution of contracts, and inspection of by-laws. Sometimes bylaws are developed as part of (addendum to) the declaration and recorded with the register of deeds, although usually, they are a separate document that is not recorded. While bylaws should be included in the original set of governing documents prepared by the developer’s attorney, they are sometimes overlooked and must be created and adopted by the board after control of the association is turned over to the homeowners.
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CPA
Independent Certified Public Accountant. An independent CPA should not be a community association board member, employee, or Homeowner.
Carrier’s Financial Size
An insurance carrier’s financial size is an indicator of it’s relative capacity to absorb losses. This capacity is affected by the geographic regions and types of exposure it insures. Example: A carrier’s capacity to absorb losses will be affected if it insures for hurricane damage in the Southeast.
Carrier’s Rating
An insurance carrier’s rating is an indicator of its ability to pay claims. Its rating is also an indicator of how aggressively the carrier will respond to its coverage exposures and claim exposures with your association. A rating is also a predictor of the carrier’s future rate stability and coverage ability.
Cash Accounting
An accounting method in which income is recorded when cash is received, and expenses are recorded when cash is paid. Payables or Receivables are not listed on the balance sheet. (see also Modified Cash Accounting)
Chart of Accounts
The Chart of Accounts is used to define categories of revenue and expense for recordation of an association’s financial statement.
Claims-Made Basis for Coverage
A liability policy will cover a loss that is discovered and reported during the period the policy is in effect. The event need not occur during that period. This is preferred coverage for directors’ and officers’ insurance and fidelity insurance for community associations.
Class A Membership
Means all Owners except Declarant, to which Class A member shall be entitled to one vote for each Lot owned.
Class B Membership
Means the Declarant, to which the Class B member is usually entitled to the number of votes equal to ___ times the number of Lots owned.
Coinsurance
A provision in some property policies that penalizes an insured for not maintaining a high limit of property coverage – often 80% to 100% of the total value.
Collection Policy
Provides a systematic approach to delinquencies. It can be done without owner approval. Also known as a Collection Resolution.
Commercial General Liability
A part of the commercial package policy that provides insurance coverage for legal claims arising from bodily injury, property damage, personal injury, and advertising injury.
Commercial Umbrella Insurance
This Insurance extends the amount of coverage beyond the limits of underlying liability policies, such as general liability, hired and non-owned auto, employers liability, and perhaps directors and officers insurance.
Commercial Package Policy
A policy that contains property and liability coverages and possibly other coverages-hence the name “package policy”. Modifications to the “package” are made by means of endorsements or options.
Common Elements
Typically consists of land, foundations, columns girders, beams, supports, exterior walls, exterior surfaces of the buildings, unfinished floors and ceilings, corridors and stairways, roof, etc. See your Declaration of Condominium for a specific definition for your Association.
Common Expenses
Expenditures made by, or financial liabilities of, the association, together with any allocations to reserves.
Common Interest Development
Common Interest Development means any of the following: 1) A condominium project, 2) A planned development, or 3) 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.
Common Open Space
Improved, usable area set aside and designated on a site development plan for recreation or open space purposes and reserved for the use of the residents of a development. Also referred to as Common Area.
Common Policy Conditions
The basic provisions that apply to all insurance coverages in the policy. Examples: conditions for premium payment, renewal, cancellation. May appear in a longer form or a separate endorsement.
Compilation
A presentation of financial statements by a CPA without the assurance that the information conforms to GAAP. Not to be confused with an Audit or Review.
Condo Conversion
A conversion condominium is one in which the building or buildings originally existed with units that were rented (such as an apartment). Essentially, the apartments are “converted” into condominiums by filing a declaration of covenants, conditions and restrictions and selling units. A conversion condominium declarant may or may not do any work to improve the apartments prior to converting them.
Condominium
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 Declaration of Condominium.
Condominium Act
State law that governs Condominiums. For Single Family and townhome communities, see Planned Community Act.
Condominium Endorsement
Special policy conditions that have become standard for condominium insurance. Meet the needs of other types of community associations with similar property insurance requirements. Special policy conditions include: waiver of rights of recovery, recognition of an insurance trustee, “no control” provision, “other insurance” provision, standard mortgage clause, and “cross liability” clause.
Corporate Veil
The metaphor of a “veil” represents the veneer of formalities and dignities that protect individual and collective members of an HOA BOD from suits in contract or tort brought against the HOA. This “veil” may be pierced if an individual director or the collective directors are deemed to have acted outside of the business judgement rule.That rule is a safe harbor for the BOD if the following criteria are met: [1] Their individual and collective decisions were made in good faith; [2] on an informed basis; [3] in the best interest of the HOA; and [4] in the absence of a conflict of interest. BOD must also show that they individually and/or collectively performed their fiduciary duties. (See: Fiduciary Duties)
Cost of Loss Adjustment
A coverage which reimburses for costs associated with presenting a claim. If included in coverage at all, often limited to a nominal amount.
Coverage Trigger
In liability insurance, the trigger is either the occurrence of an event or the making of a claim.
Cross Liability Clause
Permits one party insured under the policy to bring a claim against another party insured under the policy.
Cumulative Voting
If Authorized by the Association’s Bylaws – Voting in which a member may cast as many votes for a director as he/she has votes multiplied by the number of open director seats to be elected.
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Declarant
Declarant means the person or persons who signed are established the CC&Rs. This is nearly always the land developer.
Declarant Control
The period of declarant control is defined as the period of time in which the declarant has the right to appoint board members of the association. In a some states, this period generally terminates upon the sale of 75% of the units in the condominium, or a specified date within the CCR’s.
Declaration of Condominium
A Condominium Declaration, also sometimes known as Master Deed, is a fundamental document that establishes the existence of and further governs the use and maintenance of a condominium property. It is regulated by the Condominium Act and it includes legal descriptions of the condominium and of each individual unit, the nature and scope of the development project (when applicable), and several provisions regarding the use of the condominium units and common areas. Also referred to as “CCR’s”.
Declaration of Covenants, Conditions and Restrictions
The declaration of covenants, conditions, and restrictions (CC&Rs) are recorded with the register of deeds in the initial phase of development of a townhome or planned community and govern what an owner may, may not, or must do with respect to the real estate. Also known as Governing Documents, Declaration of Covenants, Conditions and Restrictions (DCCR’s), and Restrictions.
Declarations Page
This page describes the insurance contract. It usually lists the issuing company, name insured and address, policy number, policy period, policy premium, type of policy, amounts and limits, optional coverages, and forms and endorsements. The declarations page can be more than one page long. On the declarations page for any property package policy; the limit under Section 1 applies to the coverage for sudden accidental loss of the insured party’s own property; the limit under Section 2 applies to liability coverage.
Deductible
The amount that the insured must pay on each loss before the carrier will make payment.
Defense Outside Limits
Provision that the limit of liability coverage will not be reduced by the attorney’s fees related to defense of a claim.
Developer
Land development refers to altering the landscape in any number of ways such as: changing landforms from a natural or semi-natural state for a purpose such as agriculture or housing subdividing real estate into lots, typically for the purpose of building homes developing property or changing its purpose, for example by converting an unused factory complex into a condominium.
Directors
The members of the Association for a specified term elect Board Members at an annual meeting. As an alternative, the Board may appoint them if there is a vacancy in a Board position. The Board is the decision-making entity of the Association and has the ultimate responsibility for the activities within the association. The Board Members are the individuals who will vote on issues that come before the association at regular, specific, or executive meetings.
Directors’ and Officers’ Policy
Directors and Officers Insurance Policy designed to protect the Officers of a company or organization. This insurance is designed to pay for damages arising from wrongful acts that do not lead to property damage, bodily injury, advertising injury, or personal injury. Examples of wrongful acts include: failure to file taxes, collect assessments, maintain replacement reserves, failure to uniformly enforce the governing documents or deliver core services to its residents. D&O insurance will pay to defend the board and may pay for any settlements or judgements arising from wrongful acts.
Discrimination
Applying special treatment, (generally unfavorable) to an individual solely on the basis of a personal characteristic-such as ethnicity; age, religion, or gender.
Duty to Defend
Under this provision, the carrier has a duty to defend against a legal claim, even if it is groundless, false, or fraudulent. In turn, the carrier retains the right to settle the claim.
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Easement
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.
Electronic Funds Transfer
Is the electronic exchange, transfer of money from one account to another, either within a single financial institution or across multiple institutions, through computer-based systems.
Employment Practices Liability
Liability and insurance coverage for employee claims against an employer for such things as wrongful discharge and discrimination. Relatively new form of coverage that is available. Different from employer’s liability for employee injuries-included with workers’ compensation.
Endorsement
Short insurance forms that can be included in a policy in order to add to the coverage-or subtract from it.
Environmental Coverage
Insurance coverage for damage caused by pollutants. Typically obtained only from carriers specializing in the coverage.
Equal Employment Opportunity Commission
The federal law that prohibits discrimination against otherwise qualified people in hiring, promotion, dismissal, compensation and working conditions based on specific personal characteristics. Also known as EEOC.
Executive Board
The body, regardless of name, designated in the declaration or bylaws to act on behalf of the association. *Commonly known as the “Board of Directors” of an association.
Executive Session
Means a board meeting session that is closed to the membership with discussion items that are regulated by state statues.
Expenses
Expenses consist of the cost of goods and services used to operate and maintain the association’s common elements. Typically there are three types of expenses: Operating expenses, Major improvement expenses, Reserve contributions.
Experienced-Modified Policies
Applies to large associations. Used frequently with workers’ compensation. When a premium is of a certain size, the carrier applies a modifier which increases (surcharge) or decreases (discount) the premium. The modifier is based on the history of the association’s claims under that particular policy. The same basic concept is known as Individual Risk Premium Modification (IRPM) when it is used in other types of policies.
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Fair Debt Collection Practices Act
The purpose of the FDCPA is to protect debtors from unscrupulous debt collectors and to impose a consistent and fair method to collect debts. Also known as FDCPA.
Fair Housing Act
Title VIII of the Civil Rights Act prohibits discrimination in the sale, rental, financing, insuring and other housing related services of dwellings based on race, gender, color, religion disability or national origin. Some states and local governments have adopted their own versions that expands the protected classes to sexual orientation, age and sources of income.
Federal Communications Commission
FCC adopted Over-the-Air reception Devices (OTARD) rule concerning restrictions on viewers ability to view programming from direct broadcast satellites, wireless cable and television broadcast stations. It overrides a community associations deed restriction that bans satellite dishes and antennae from property that is exclusively used, controlled or owned by the resident, including tenants.
Fee Simple
Absolute title to land, free of any other claims against the title, which one can sell or pass to another by will or inheritance. This is a redundant form of “fee,” but is used to show the fee (absolute title) is not a “conditional fee,” or “determinable fee,” or “fee tail.” Like “fee” it is often used in deeds transferring title as in “Harry Hadit grants to Robert Gotit title in fee simple…” or similar words.
Fidelity Insurance
This insurance protects against employee (or volunteer) dishonesty which may lead to the theft of money, securities or property. Best practice for coverage limits are 3 months of assessments plus the reserve fund balance.
Fiduciary Duty
Requires directors to act in the best interest of the community as a whole and for the corporation. [1]Duty of Care – The level of competence that is expected of a board member and is commonly expressed as the duty of “care that an ordinarily prudent person would exercise in a like position and under similar circumstances;” [2]Duty of Loyalty-A standard of faithfulness, a board member must give undivided allegiance when making decisions affecting the organization; [3]Duty of Obedience – Ensuring that: (a) BOD members are aware of state and federal statutes and laws related to the HOA and are in compliance; (b) the HOA complies with deadlines for tax and financial reporting, including filings with the Secretary of State, Attorney General, and Department of Revenue/IRS; (c) BOD members are familiar with the HOA CC&Rs and follow the provisions on those documents; (d) When appropriate, BOD members obtain the opinions of independent third parties such as, but not limited to, legal counsel, CPAs, engineers, and/or investment brokers. See also Business Judgement Rule.
Firm Proposal
A proposal whose numbers won’t be changed by the agent-unless the specifications change.
Fiscal Year
A twelve-month period over which an HOA accounts for its financial matters. A fiscal year does not always begin in January and end in December; it may run over any period of twelve months. The fiscal year is referred to by the date in which it ends. For example: an HOA budget that operates on a calendar fiscal year would be expressed as “for the year ending December 31, ______.”
Flood Coverage
Insurance coverage for flood damage to buildings and contents when a body of water rises. Water that escapes plumbing system or enters a building from above the surface or the ground is not considered a flood. Typically obtained through the National Flood Insurance Program (NFIP), a Federal insurance program.
Foreclosure
A legal proceeding filed in court whereby a party with a claim of lien can claim ownership of the unit involved, in order to recover the money it is owed. The unit is usually auctioned by the court’s representative and sold to the highest bidder.
Forms
Insurance forms define-who or what is covered, covered causes of loss, and qualifications to coverage. There will always be some forms in a policy that are unique to the state involved because the insurance industry is state-regulated.
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Generally Accepted Accounting Principles
Refers to the standard framework of guidelines for financial accounting used in any given jurisdiction; generally known as accounting standards or standard accounting practice. These include the standards, conventions, and rules that accountants follow in recording and summarizing and in the preparation of financial statements. Also known as GAAP.
Glossaries
Section of a form that defines key terms and concepts used. Glossaries are important because the policy may define a word narrowly than its common usage. A narrow definition is a way for the carrier to restrict coverage.
Governing Documents
Term used to describe the Association’s Articles of Incorporation, Bylaws and CCR’s.
Guaranteed Replacement Cost
A relatively new provision whereby the carrier agrees to replace damaged buildings after a covered loss even if the cost of doing so exceeds the limit of building coverage in the policy.
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HO-3
Insurance Term referring to a policy specifically for owner-occupied single-family homes.
HO-4
Insurance term that refers to a tenant’s insurance policy. Not appropriate for Condominium Unit Owners, since it typically only covers the owners contents and not the interior of the unit.
HO-5
Insurance Term referring to a policy specifically for owner-occupied single-family homes.
HO-6
Insurance Term referring to a policy specifically for a condominium or cooperative unit owner.
HOA
Homeowners’ association that governs a planned unit development or other series of single family homes. While both condos and single family homes can have homeowners’ associations, HOA is often used in contrast to a condominium owner’s association or COA to mean a non-condo homeowners association.
HOA Management
Homeowners’ Association Management (HOA Management) is an umbrella term that covers a broad range of services. Generically speaking, HOA management refers to the professional management of a homeowners’ association, but, it’s not nearly as simple as it initially sounds; there is a lot that goes into a well managed HOA.
Hired and Non-owned Automobile Liability Insurance
This insurance covers legal claims arising out of the use of automobiles that are not owned by the community association, but that are used while acting on behalf of the association. Thus, injury to a third party and property damage caused by the use of automobiles belonging to board members, volunteers, employees may be covered under certain circumstances.
Homeowners Association
Homeowners’ association that governs a planned unit development or other series of single family homes. While both condos and single family homes can have homeowners’ associations, HOA is often used in contrast to a condominium owners’ association or COA to mean a non-condo homeowners association.
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Income Statement
Records the community association’s financial transactions during a given period of time – generally for a given month plus the fiscal year to date. It is a way to keep track of the community’s financial activity.
Increased Cost of Construction
A form of ordinance or building law coverage that pays for bringing a building up to current codes after a covered loss-if the law requires.
Increased Cost of Demolition
A form of ordinance or building law coverage that pays for demolishing an undamaged portion of a building when the rest was damaged by a covered loss. The action must be required by law for coverage to apply. Often purchased with loss of value.
Independent Contractor
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.
Infrastructure
The fundamental facilities and systems serving an area. Examples: sidewalks, streets, storm water systems, underground lawn sprinklers.
Inland Marine Coverage
Insurance coverage for means of transportation, merchandise in transit, property in the custody of bailees, and a variety of movable property. Examples of movable properties: walkie-talkies, tractors.
Insurable Value Appraisal
An independent service estimates the insurable replacement costs of property.
Insurance Policy
A contract between the insured party and an insurance carrier that consists of the following items: declarations page, forms, endorsements, optional coverages, common policy conditions, and glossaries.
Insurance Services Office
An independent organization supported by insurance carriers. Services include developing and disseminating standard insurance forms.
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Liability Exposure
Possibility of losses due to a person or entity bringing or threatening to bring a legal claim against the association because of a legal wrong it is alleged to have committed or for which it is supposedly responsible. Liability claims include: Advertising Injury, Bodily Injury, Directors & Officers Wrongful Acts, Employment Practices, Personal Injury, and Property Damage.
Lien
A legal claim that someone or something has on the property of another person until a debt has been paid back.
Limited Common Element
Typically the locations of the common elements to which each unit has direct (or exclusive) access. Such as a balcony, porch, patio, terrace or fence. See Declaration of Condominium for an exact definition for your association.
Lis Pendens
A written notice that a lawsuit has been filed concerning real estate, involving either the title to the property or a claimed ownership interest in it. The notice is usually filed in the county land records office. Recording a lis pendens against a piece of property alerts a potential purchaser or lender that the property’s title is in question, which makes the property less attractive to a buyer or lender. (similar to a lien)
Loss Control Recommendations
Deficiencies that insurance carriers identify when they inspect an association’s property and operations prior to issuing coverage. Mandatory recommendation-failure to comply may mean loss of coverage. Voluntary recommendation-non-compliance will not imperil coverage at the current time.
Loss of Value
A form of ordinance or building law coverage that pays for the value of any undamaged portion of a building when codes require a building damaged by a covered loss to be demolished. Often purchased with increased cost of demolition.
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Majority Vote
Vote by more than half of the voters for a candidate or other matter on the ballot.
Management Company
Homeowner’s Association Management (HOA Management) is an umbrella term that covers a broad range of services. Generically speaking, HOA management refers to the professional management of a homeowners association, but, it’s not nearly as simple as it initially sounds; there is a lot that goes into a well managed HOA.
Managing Agent
A person or entity hired to assist the board of directors in enforcing the documents and managing the assets, including funds, of the association.
Master Association
Commonly seen as a large association consisting of residential or mixed, residential and commercial or public buildings or parks, that all owners are a member of. Typically include a number of smaller communities that pay a separate assessment to and is commonly known as a sub-association.
Master Policy
A name given to the association’s primary policy which provides coverage for property and liability. Now also used to refer to a single policy insuring several associations.
Mechanical Breakdown Coverage
Also known as boiler and machinery coverage. Insurance coverage for physical damage caused by certain sudden, accidental events that originate inside machinery or electrical equipment. Also pays for building damage caused by steam boiler explosions.
Mediation
An informal proceeding during which a neutral third person works with both parties in a legal dispute trying to reach a resolution.
Meeting Minutes
Adopted minutes are the official record of actions taken at a meeting. For this reason, well-written minutes can be invaluable. In the event of a dispute, minutes are the best proof of the precise wording of a motion or whether a proposal was adopted by the board. A word-by-word re-enactment of a meeting really isn’t minutes. Minutes are supposed to be a short, to-the-point account of business transacted (actions taken) so that readers can quickly determine what was done. This provides a permanent public record of actions taken by a board. The secretary of the board is responsible for maintaining all official records, including the minute book of all board meetings.
Mitigate
An attempt to alleviate trouble or cause damage to be less severe.
Modified Cash Accounting
An accounting method in which income is recorded when cash is received, and expenses are recorded when cash is paid, but pre-paid amounts received are recorded on the balance sheet as a liability.
Motion
In parliamentary procedure, a motion is a formal proposal by a member of a deliberative assembly that the assembly take certain action. These can bring new business before the assembly or consist of numerous other proposals to take procedural steps or carry out other actions relating either to a pending motion or the body itself.
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Net Income (Loss)
Excess revenue left after deducting expenses from income. A loss occurs when expenses are greater than income. A loss is indicated on an income statement by putting the figure in parentheses.
Net Income Exposure
Possibility of losses that involve a decrease in association revenues or an increase an expenses.
No Control Provision
Preserves coverage for loss caused by an insured party (such as an owner) acting outside the control of the association.
Non-Profit Corporation
An organization that uses surplus revenues to achieve its goals rather than distributing them as profit or dividends. Community Associations typically are organized as non-profit corporations under state statutes. Non-profit status is not the same as being tax exempt. Community Associations are not tax exempt under IRS guidelines.
Nuisance
Arises from a person’s use of their property in violation of rules, laws, or standards which obstructs or injures the rights of another and creates annoyance, an inconvenience, or discomfort. Examples of nuisance can be loud noises, or odors on a property.
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Occupational Safety and Health Act
OSHA’s mission is to “prevent injuries and protect the health of Americas workers by ensuring safe and healthful workplaces.” If your association has employees, it must comply with all OSHA requirements. When the association contracts with a company whose employees will be working on the property, the contract should contain a provision requiring the contractor to comply with all provisions of OSHA.
Occurrence Basis for Coverage
A liability policy will cover an event that occurs during the period the policy is in effect-even if the event is reported after the policy has expired.
Occurrence Limit
The limit to the amount that the carrier will pay out under a policy for one incident or occurrence.
Officers
The Board appoints officers for a specific purpose. They are appointed during an organizational meeting that is conducted after your annual election. They typically serve for a one-year term but they may be removed from their officer role (not board member role) by a vote of the Board. In many associations, the Board members appoint the officers from amongst the members of the Board. However, in some bylaws the Board is permitted to appoint another member of the homeowners association to fulfill an officer role without them being on the Board. These individuals do not have voting power but do have a role to serve and duties to perform. The standard officers of an association include: President – This individual serves as the Chairperson and normally has the general supervision, direction, and control of the business and officers of the Association. Vice President – In the absence of the President, the Vice President shall perform all duties of the President. This position may also have other authority and duties as provided within the bylaws or directed by the Board. Secretary – the Secretary has the responsibility for keeping the records of the Corporation including maintaining a set of minutes in a minute book, copies of any resolutions or other corporate documents. Treasurer (or Chief Financial Officers) is responsible to ensure that records of account are being kept (financial statements, etc.) They will report to the Board at least on a quarterly basis that all financials, statements, bank statements, reconciliation reports, etc. have been reviewed. The Treasurer will provide input and guidance to the Board before capital expenditures are approved as well as provide suggestions during the budgeting process. The Board of Directors may elect other Officers, as they deem proper as long as it is consistent with the By-laws. Servicing as an officer is an excellent method in which to focus your participation on the Board and to contribute in a more specific manner.
Optional Coverages
Provisions within a form or endorsement that only apply if noted on the declarations page. Multiple options usually appear in the longer forms.
Other Insurance Provision
The associations master policy is treated as the primary coverage in the event that a unit owner and the association carry insurance for the same property.
Over-the-Air Reception Devices (O.T.A.R.D.)
FCC adopted Over-the-Air reception Devices (OTARD) rule concerning restrictions on viewers ability to view programming from direct broadcast satellites, wireless cable and television broadcast stations. It overrides a community associations deed restriction that bans satellite dishes and antennae from property that is exclusively used, controlled or owned by the resident, including tenants.
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Parliamentary Procedure
Parliamentary procedure is the body of rules, ethics, and customs governing meetings and other operations of clubs, organizations, legislative bodies, and other deliberative assemblies. It is part of the common law originating primarily in the practices of the House of Commons of the Parliament of the United Kingdom, from which it derives its name. In the United States, parliamentary procedure is also referred to as parliamentary law, parliamentary practice, legislative procedure, or rules of order. See Roberts Rules of Order.
Pay on Behalf of Insured Parties
The carrier will pay when the claim is adjudicated . In this situation, the carrier is likely to take the lead in settlement negotiations.
Personal Injury
Liability for injury to reputation because of something said or done. It does not involve written or published statements. Injury may be due to slander, defamation of character, false arrest, wrongful entry or eviction, invasion of the right of private occupancy, malicious prosecution, or willful detention.
Personal Property
Things that are movable-as distinguished from real property. Examples: inventory; furniture, equipment, supplies, electronic data processing, and valuable papers and records.
Personnel Exposure
Possibility of losses that result from the death, disability, retirement, resignation, or unemployment of association employees. Under certain circumstances, may apply to association board members, owners, or volunteers.
Planned Community
A planned urban community designed for self-sufficiency and providing housing, educational, commercial, and recreational facilities for its residents. (Usually a Single Family detached or townhome community)
Planned Community Act
A state law that governs planned communities (single family or townhomes) For Condominiums see Condominium Act.
Planned Development
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. See also “Planned Community”
Plat Map
A map or plat or plan is recorded in the County or Parish (or similar jurisdiction) recorders office before any lots or units shown on it are sold. The purpose is to show the precise location of each lot or unit as well as the common areas.
Policy Limits
The amount of dollar coverage provided for each identified are of coverage.
Premium
The rate charged for an insurance coverage.
Priority of Liens
Liens are usually ranked in the order in which they are “perfected” or recorded. As a result, “first in time, first in line” is how liens are normally prioritized. (1st mortgage, 2nd Mortgage, etc.)
Property Damage
Liability for damage to someone else’s property-or for the loss of use of that property.
Property Exposure
Possibility of losses that involve damage to the insured party’s property-or the loss of use of that property.
Property Management
Property management is the operation, control, and oversight of real estate as used in its most broad terms.
Protective Safeguards Endorsement
An endorsement that provides a premium credit for having a protective system. Example: a building sprinkler system. CAUTION: If a system is deactivated without meeting certain reporting conditions, coverage may be voided. Example: building sprinkler system deactivated and fire occurs. Damage would not be covered.
Public Offering Statement
A disclosure statement that provides information on the community association to the first prospective buyers in a new development. A Public Offering Statement is not part of the Association’s Governing Documents.
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Quorum
A quorum is the smallest number of board members necessary to legally conduct the business of your HOA. Most, but not all, groups define a quorum as a simple majority of the members. It should be defined in your HOA’s bylaws. Without a quorum, a vote cannot be taken, and the status-quo can’t be changed. Unless a quorum is present, minutes should note be taken since official business of the HOA cannot be conducted. Opponents to a proposal that would change the status-quo can block the proposal by walking out of a meeting or not attending in the first place. Usually, the rule that defines a quorum ignores any vacant seats. In this case, if a simple majority is required to have a quorum, and there are seven board seats, but there are only four members, all four would have to be present to conduct business.
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Ratable Limit
The limit used to determine the premium for a guaranteed replacement cost for buildings.
Real Property
Land and whatever is erected or growing on it, or affixed to it. Examples: trees and buildings.
Reasonable Accommodations/Modifications
In 1988 the Fair Housing Act created a new class of protected individuals, those with disabilities. The Act’s intent was to allow those with disabilities to have an equal opportunity to use and enjoy their home. In many situations, that may mean that the community association must allow variances to rules, policies and services so that the person with the disability can use and enjoy his home and common facilities.
Recuse
To temporarily remove an association member or board member or disallow his or her participation in a particular vote or proceeding.
Regular or Open Session
A specific portion of a meeting in which the board of directors or “executive board” meet to discuss matters of the association, approve minutes, accept financials and review policies. Owners are permitted to attend this portion of a meeting and have a dedicated period of time at the beginning of the meeting to discuss agenda items and at the end of the meeting to discuss any other concerns that they may have in an open forum setting. A quorum of the board must be present either in person or by telephone in order for this meeting to be called to order.
Remedy/Relief
Compensation sought by a plaintiff which can include money damages, injunctions, etc.
Replacement Cost
The amount of money it would cost to replace the property at today’s prices.
Reserve Study
A budget planning tool, prepared by a Licensed Reserve Specialist, which identifies the current status of the reserve fund and a stable and equitable funding plan to offset ongoing deterioration, resulting in sufficient funds when those anticipated major common area expenditures actually occur.
Reserves
Consists of funds put aside for the future replacement of major components of a community’s common property.
Residential Use
Use as a dwelling or for personal, family or household purposes by ordinary customers, whether rented to particular persons or not but do not include spaces or units primarily used to derive commercial income from or provide services to the public.
Resolution
A resolution is a motion that follows a set format and is formally adopted by the board of directors. Resolutions may enact rules and regulations or formalize other types of board decisions.
Retained Earnings
A Balance Sheet figure shown under the heading retained earnings is the sum of all profits retained since the Association’s inception. Retained earnings are reduced by losses, and are also called accumulated earnings, accumulated profit, accumulated income, accumulated surplus, earned surplus, undistributed earnings, or undivided profits.
Retroactive Date
A date set in the past by a claims-made policy to limit the policy’s coverage of past events.
Revenue
Consists of the collective items or amounts of income which, in the case of a community association, are appropriated for common expenses.
Review
A less thorough (compared to an audit), and therefore less costly, review of a community association’s financial activities.
Roberts Rules of Order
A published book containing rules of order intended to be adopted as a parliamentary authority for use by a deliberative assembly. The latest Robert’s Rules of Order is Robert’s Rules of Order Newly Revised (11th Edition). Each new edition brings changes to procedure (the 11th Edition lists 120).
Rules and Regulations
Rules the association’s board may be authorized to adopt to implement and interpret the CC&Rs. (see your CCR’s for the specific authority to create rules and regulations)
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SS-4
This is the form that a corporation, LLC or other type of business entity must complete, sign and file with the Internal Revenue Service to apply for, and obtain, a federal tax ID number (FEIN).
Self-Retained Limit
In an umbrella liability policy, the self-retained limit operates like a deductible if no underlying insurance applies.
Soldiers and Sailors Civil Relief Act
SSCRA impacts American forces on active duty by requiring the delay of all civil court actions, such as bankruptcy and foreclosure, until the service member returns from active duty.
Special Assessment
A one-time assessment, usually requiring majority owner approval, to cover a major expense, such as a major repair, replacement or improvement that was not included in the annual operating budget.
Special Form
In commercial property insurance, the insuring agreement that covers every accidental cause of loss except those explicitly excluded. Special form is more inclusive than basic form and broad form.
Special Meeting
Any meeting of the association (unit owners) or board that is not a regularly scheduled meeting is a special meeting. Generally, the only regular meeting for unit owners is the annual meeting, so all other meetings are special meetings. Special meetings often have special notice requirements.
Standard Mortgage Clause
A standard clause which applies if a mortgage is attached to a unit. Enables the carrier to make payments to the mortgage holder and to send notices to the lender (such as termination of coverage notice).
Statement of Assessment
Statement outlining current charges or pending charges to an owner’s account for a closing attorney.
Statute of Limitations
A time period during which a complaint must be filed or it is not recognized.
Statute of Repose
A statute of repose (sometimes called a non-claim statute), like a statute of limitation, is a statute that cuts off certain legal rights if they are not acted on by a certain deadline.
Sub-Association
A smaller community typically found within a master association. A sub-association typically pay two separate assessment amounts, one to the master association and the other to their sub association and are bound by two separate sets of governing documents.
Sublimit
Usually a fixed lower limit for a certain type of property no matter how high the limit of property coverage is. Example: coverage for exterior signs is no more than $500.
Super Majority Vote
Vote by 2/3rd’s or more of the members other matter on the ballot. See your Association’s By-laws for the exact requirements.
Superseded Suretyship
A provision that a newly-issued policy covering employee dishonesty will respond to a loss committed during a previous policy term-even though the current policy may not be a renewal. Often applies to theft that occurs over a period of time.
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Taxpayer Identification Number
A number assigned to a business, corporation, LLC, etc. for income tax purposes. Also referred to as Federal Tax ID (FTI), or Tax ID number.
Title Insurance
Insurance provided by a title insurance company that reviews all recorded documents that impact the title of a particular piece of real estate. This title “search” discloses mortgages, liens, or other encumbrances on the property that would negatively impact the purchaser’s ownership rights.
Townhome
Townhome or 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. See the Governing documents to see which laws apply. (Condo or planned community)
Transfer Fee
An obligation arising under a declaration or covenant recorded against the title to real property that requires or purports to require the payment of a private transfer fee upon a subsequent transfer of an interest in the real property to a third party (i.e. Developer).
Transition
Describes the general process by which the control and responsibilities of the governing board of an association are transferred from the developer to the homeowners.
Turnover
Used to describe the date upon which homeowners gain control of their association after development.
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Umbrella Liability Coverage
Insurance that provides both additional and broader coverages beyond the limits of the association’s commercial general liability and other liability coverages.
Unanimous Consent
Unanimous consent means adoption of something with every Board Member’s approval. Consent is approval, or permission as to some act or purpose given voluntarily by a competent person. Unanimous consent is different from general consent even though some parliamentary manuals treat them as synonymous. General consent means adoption without objection regardless of whether every voter affirmatively approves. Whereas unanimous consent implies that everyone was in agreement.
Underlying Limits or Requirements
The minimum amounts which so-called primary or underlying liability policies must provide as specified by the umbrella policy in order for it to pick up where the underlying policies end.
Undivided Interest
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.
Unit
The term “unit” can be used generically to refer to each person’s house in an HOA, but it has a specific meaning with regard to condos. While declarations may differ as to the physical definition of a unit (a unit can be defined as “everything from the sheetrock in” to an “airspace” unit that includes the entire home and yard and areas above and below the physical home), a unit owner owns is generally responsible for maintenance and repair of his or her own unit.
Unit Owner Certificate
Statement provided by a unit owner indicating that the unit is covered by a master policy. Proof of insurance coverage for unit mortgage lenders.
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Valuation
The estimated worth or price of something.
Vehicle Coverage
Insurance coverage for association-owned vehicles that must be licensed for highway use is called commercial automobile coverage. Insurance coverage for legal claims arising out of the use of vehicles that are not owned by the CA, but are used while acting on its behalf, is called hired and non owned automobile liability insurance.
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W-9 Form
Request for Taxpayer Identification Number and Certification. A tax form which certifies an individual’s tax identification number. This form must be present in a brokerage account’s files to avoid backup withholding by the IRS. This form is also used by a company or a contractee in order to request a copy of an individual’s Social Security or taxpayer ID number for purposes of tax reporting.
Waiver of Rights of Recovery
Formerly known as waiver of subrogation. Carrier waives its contractual right to recover a claim payment from certain parties that may be responsible for a loss. The special condominium endorsement routinely extends this waiver to unit owners.
Workers Compensation, including Employer’s Liability
Insurance Coverage which pays for the medical bills, lost wages, and certain other benefits due injured employees. State laws usually mandate this type of coverage. Employer’s liability coverage protects employers from suits brought on behalf of injured employees to recover damages separate and distinct from claims for workers’ compensation benefits.
Working Capital Contribution
Many condos and townhomes — both new construction and existing properties — impose a capital contribution on new owners. This is a one-time, non-refundable fee paid by the buyer at closing. Once collected, the capital contribution is deposited into the HOA’s reserve fund, which serves as a savings account for the property. The capital contribution rate is set by the HOA in its declaration, but it is typically equal to two months of HOA dues. So if the monthly HOA fee is $250, the buyer would need to bring an additional $500 to the closing to cover the capital contribution fee.
Wrongful Acts
Includes negligent acts, omissions or breaches of duty or errors relating to the operation of the community association.
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Zoning
A comprehensive system of land use controls normally reserved for city or county governments.
