One of the most beloved and well-known classic arcade games over the last 40 years is Pac-Man. Whether you’re an experienced gamer or a “n00b” (“newbie”), at some point you may have seen or played this game where you are a yellow ball moving around in a maze, chomping up white dots and fruits for points and avoiding the four colorful ghosts that run around the same maze. If you happen to hit one of the colorful ghosts, you lose a life. However, if you eat one of the large white flashing “energizer” pellets, not only does it earn you more points, but it turns the ghosts blue for a time and when this happens, you can chase after them and eat them for major points. Though it may sound simple, navigating the maze and alternating between chasing the ghosts and running from them can be frustrating yet addictive. While it takes minutes to learn the game, it can take years to master it.
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orking with a residential association, or serving on the board of one, can be similarly simple yet daunting. The objective doesn’t sound so difficult: collect assessments, pay the bills, take care of maintenance and repairs, address homeowner concerns, and put some money into savings for the future. The challenge arises when you realize there are legal documents that the association must understand and adhere to, and financial documents that the association is responsible for preparing and submitting to owners, the IRS and other interested parties. Lack of knowledge about these documents can make you feel like you’re stuck in a maze with a Pac-Man ghost on your tail, threatening to take you down. In this example, learning about these topics is the equivalent of Pac-Man eating a power pellet and gaining the power to destroy the ghosts. (Though providing complete and detailed information regarding all legal and financial documents in an association’s world would require more space than this entire magazine allows, this article attempts to introduce and give an overview of the more common ones. As always, please consult your association’s legal and financial team for specific guidance and advice.)
Governing Documents
Governing documents are what legally bring the association into existence, and they set up the general guidelines on how the association must operate, what information it must make available to owners and others, and rights and responsibilities of both the association and its homeowners. Governing documents consist primarily of the association’s Articles of Incorporation; Declarations of Covenants, Conditions and Restrictions; Bylaws; and Rules and Regulations.
State Law - Almost every state has statutes governing condominiums and homeowner associations. In addition most associations are subject to the state corporations’ code. Here in Illinois, we have the Illinois Condominium Property Act, which applies to condominium associations, and the Illinois Common Interest Community Association Act, which applies to homeowners associations.
Declarations and Their Covenants and Restrictions - Planned communities are created by the Declarations of Covenants, Conditions and Restrictions, and are sometimes referred to as “Decs” or “CC&Rs.” They define what the association is, where it is located, etc. These contain the restrictions that regulate residents’ behavior, they define owner’s rights and obligations, and establish the association’s responsibilities and the homeowners’ responsibilities. These documents are recorded and filed with the state, so amending them can be an involved process that includes membership votes of approval.
Articles of Incorporation - Most associations incorporate and have articles of incorporation that define their purposes and powers. They may specify such things as the number of directors and their terms of office.
Bylaws - Bylaws define how the association functions on a day-to-day level. They address association operations such as procedures for meetings and elections and specifying the general duties of the board. These documents too require a formal process with a membership vote to make modifications.
Resolutions—Rules and Regulations - Board members adopt rules and regulations, and sometimes members have
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