CAI CAP2 flashcards
CAI CAP2 · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Governing document hierarchy
- Order of authority is statute, then the declaration or CC&Rs, then bylaws, then board rules and resolutions; a lower document cannot conflict with a higher one.
- Duty of care and loyalty
- Directors must act with the care an ordinarily prudent person would use in similar circumstances and must put the association's interest ahead of personal or business interests.
- Business judgment rule
- A presumption protecting board decisions made in good faith, within authority, after reasonable inquiry, and without a conflict of interest from later second-guessing by courts.
- Selective enforcement defense
- An owner accused of a violation may argue the association enforced the same covenant differently against others; consistent, documented enforcement defeats this defense.
- Conflict of interest disclosure
- A director with a personal stake in a matter discloses the interest, abstains from the vote, and leaves the discussion; the disclosure and recusal are recorded in the minutes.
- Covenant enforcement notice
- Enforcement normally begins with written notice identifying the violation, the governing document provision, a cure period, and the consequences of continued noncompliance.
- Percent funded
- Actual reserve balance divided by the fully funded balance, times 100; a low percentage means collected reserves fall short of the inflation-adjusted cost of reserve components.
- Reserve contribution formula
- Annual contribution for a component equals its current replacement cost minus the amount already saved, divided by its remaining useful life in years.
- Special assessment
- A one-time charge above the regular assessment, usually for unexpected or unfunded costs, requiring the owner or board approval specified in the governing documents and statute.
- Compilation, review, and audit
- Three CPA reporting levels: a compilation gives no assurance, a review gives limited assurance, and an audit gives the highest assurance with an opinion on the financial statements.
- Reserve and operating funds
- Reserve money is collected for capital components and kept separate from operating money; transfers between funds require documented board action and scheduled repayment.
- Budget-to-actual statement
- A report comparing budgeted and actual income and expense for a period, showing variances in dollars and percent so the board can identify overruns.
- Deferred maintenance
- Necessary repairs or replacements postponed to a later budget cycle; deferral pushes cost upward over time and can turn a repair into a full replacement.
- Reserve study components
- A reserve study pairs a physical analysis (component inventory, quantity, useful life, remaining life, cost) with a financial analysis (fund status, percent funded, funding plan).
- HO-6 unit owner policy
- Coverage a unit owner buys for interior improvements, personal property, and loss assessment; the master policy covers the building shell and common elements.
- Directors and officers coverage
- Liability insurance protecting board members and officers against claims arising from governance decisions, typically excluding fraud, personal profit, and bodily injury.
- Fidelity bond
- Coverage for theft or dishonesty by people who handle association money, such as directors, managers, and employees, with limits tied to reserves and assessment volume.
- Executive session
- A closed portion of a board meeting limited to sensitive topics such as personnel, litigation, contract negotiations, delinquencies, or legal advice; formal votes belong in open session.
- Owner forum
- A designated agenda item at board meetings when owners may address the board; time limits and speaking rules are applied to every speaker equally.
- Mediation before litigation
- Structured negotiation with a neutral third party used before filing suit; many statutes and declarations require owners and the association to attempt it first.
- Welcome packet
- Materials given to new owners, typically including governing documents, rules, assessment schedule, architectural request process, contact information, and the meeting calendar.
- Board spokesperson
- A single director designated to speak for the board to owners, media, or vendors, so the association presents one consistent message.
- Independent contractor test
- Factors include control over how work is done, who supplies tools, set hours, and whether the worker serves other clients; misclassification creates tax and insurance liability.
- Three written bids
- A common board policy requiring at least three comparable written proposals for major work, compared on scope, qualifications, and total cost rather than price alone.
- Additional insured status
- A contract requirement making the association an additional insured on the vendor's liability policy, protecting it against claims arising from the vendor's work.
- Scope of work
- The written description of what a contractor will and will not do, including materials, schedule, standards, and deliverables; it anchors pricing, change orders, and disputes.
- Progressive discipline
- A documented sequence of corrective steps, usually verbal warning, written warning, final warning, then termination, applied consistently with a record of each step.
- Quorum
- The minimum number of directors or owners who must be present for a meeting to transact business; without it, no binding vote can be taken.
- Minutes content
- Minutes record the date, attendees, quorum, motions, vote results, and decisions, not verbatim discussion, opinions, or personal remarks about individuals.
- Proxy voting
- A written authorization letting one member vote on another's behalf; permitted only where statute and governing documents allow, and often restricted at board meetings.
- Record retention schedule
- A written policy listing record types and how long each is kept, such as permanent governing documents and minutes and statutory periods for financial and contract records.
- Written consent in lieu of meeting
- A signed document by which directors act without holding a meeting; allowed only if statute and bylaws permit it and, in many states, only if unanimous.