CAI CAP2 key terms

The complete set of legal instruments that establish a community association and set out how it is governed, including the declaration, bylaws, articles of incorporation, and rules. They rank in a hierarchy, and lower documents cannot conflict with higher ones.

The recorded document that creates the community association, defines which property is subject to it, and states the main use restrictions, maintenance obligations, and assessment rights. It is usually the highest-ranking governing document and is recorded in the county land records.

The governing document that describes how the association operates internally, covering board size and terms, officer duties, meeting notice, quorum, voting, and how the bylaws can be amended. Bylaws are usually adopted by the board or membership rather than recorded with the land.

The document filed with the state that legally creates the association as a nonprofit corporation. It typically states the corporate name, purpose, registered agent, and initial directors, and must be updated with the state when certain corporate facts change.

Operational rules adopted by the board, such as pool hours, parking, and pet limits, that carry out the declaration and bylaws. They must not conflict with higher governing documents and must be reasonable, consistently enforced, and adopted according to the governing documents.

The legal obligation of board members to act in the best interest of the association rather than their own interests. It includes duties of care, loyalty, and obedience, and requires informed decisions, disclosure of conflicts, and protection of association assets.

A legal principle that protects board members from liability for decisions made in good faith, with reasonable care, and without conflicts of interest, even if the decision later proves unwise. Courts generally do not second-guess such board decisions.

A situation in which a director, officer, or manager has a personal or financial interest that could improperly influence an association decision. It is typically managed by disclosure, recusal from discussion and voting, and documented board action.

A committee, often appointed by the board, that reviews owner requests to build, alter, or add to the exterior of a home or lot. It applies the architectural standards in the governing documents and should decide consistently and in writing.

The annual financial plan that estimates the association's day-to-day income and expenses, such as maintenance, utilities, insurance, management, and staffing. It supports the regular assessment and is typically adopted by the board before the fiscal year begins.

Money set aside for the future repair or replacement of major common-area components, such as roofs, paving, and pool equipment. Reserve funds are generally restricted to their intended purpose and are funded through regular assessments based on a reserve study.

A long-range planning report that inventories the major components the association must repair or replace, estimates their remaining useful lives and costs, and recommends an annual reserve funding amount. It is typically updated every few years.

A measure of how much money a reserve fund currently holds compared with its fully funded balance, which is what should be on hand given the age of the components. It is expressed as a percentage and indicates funding health.

A one-time charge to owners, separate from the regular assessment, that is approved to cover an unexpected expense or a major project not included in the operating or reserve budget. It usually requires board or membership approval as stated in the governing documents.

The recurring charge that owners pay, usually monthly or quarterly, to fund the operating budget and reserve contributions. The board sets the amount under the governing documents and is responsible for adequate collection and enforcement.

An accounting method that records income when it is earned and expenses when they are incurred, regardless of when cash changes hands. It gives a fuller picture of financial position than cash-basis accounting, especially for unpaid assessments.

An owner's account that has not paid assessments by the due date. The board should follow a written collection policy, including reminders, late fees, and possible lien or legal action, while avoiding Fair Housing or selective enforcement problems.

Scheduled maintenance performed before problems occur, such as inspections, cleaning, servicing equipment, and repainting, to prevent failures, extend the life of components, and reduce emergency repairs and liability.

Necessary maintenance or repairs that have been postponed, often for budget reasons. Deferring work can shorten component life, raise future costs, and create safety or insurance problems for the association.

The property and liability insurance policy purchased by the association that covers the common areas and, depending on the governing documents, the structures. Individual owners need their own policy for personal property and interior betterments.

Directors and officers liability insurance protects board members and officers from claims arising from their governance decisions, including alleged errors, omissions, or breaches of duty. It typically does not cover deliberate fraud or personal profit.

Insurance that protects the association's money and property against loss from dishonest acts by board members, employees, or volunteers who handle funds. It is a common control for associations that handle cash or invest reserve funds.

A document from an insurer or agent confirming that a vendor, contractor, or owner carries specified coverage limits, including the association as an additional insured. It should be obtained and reviewed before work begins and before insurance expires.

The process of identifying, evaluating, controlling, and financing risks that could harm the association, such as injuries, property damage, lawsuits, or financial loss. It includes insurance, maintenance, safety policies, contracts, and documentation.

A written set of standards that guides how board members, managers, and staff should conduct themselves, including honesty, fairness, confidentiality, and avoidance of conflicts of interest. It supports trust and consistent decision-making.

A voluntary dispute resolution process in which a neutral third party helps owners and the association reach a mutually acceptable agreement. It is often required or encouraged before litigation and can be faster and less expensive than court.

The formal process the board uses to consider alleged rule violations or disciplinary action, including notice of the charges and a reasonable opportunity to be heard. It supports due process and reduces legal risk from enforcement decisions.

The duty to protect sensitive information, such as owner collection accounts, personnel records, and legal advice, from unnecessary disclosure. Boards and managers must balance privacy with the owners' right to inspect official records.

The practice of sharing clear, timely, and accurate information with owners about board actions, finances, and policies. Transparency can be maintained through open meetings, well-kept records, and understandable financial reports.

A written description of exactly what a contractor or vendor must do, including tasks, materials, schedule, standards, and deliverables. A clear scope of work is the basis for competitive bidding and for determining whether the work is complete.

A formal invitation asking qualified vendors to submit a detailed plan and price for a project or service. An RFP usually states the scope of work, insurance and licensing requirements, evaluation criteria, and the deadline for responses.

A worker or business hired to perform a specific job and not controlled by the association in how the work is done. Misclassifying employees as contractors can create tax and liability problems for the association.

An employment arrangement in which either the employer or the employee can end the relationship at any time, for any lawful reason, with or without notice. Contracts, handbooks, or union agreements can change this default status.

A periodic review of an employee's or contractor's work against clear standards, such as quality, timeliness, and compliance with the scope of work. It should be documented in writing and used to improve performance or support disciplinary action.

The minimum number of board members or owners who must be present for a meeting to conduct official business. It is set in the bylaws or applicable law, and decisions made without a quorum are generally invalid.

A closed portion of a board meeting where the board discusses confidential matters, such as personnel, litigation, or owner disputes. It is usually limited to certain topics and must be properly noticed and recorded in open minutes.

The official written record of what happened at a board or membership meeting, including the date, attendees, decisions, and key discussion points. Minutes should be objective, promptly approved, and retained as permanent records.

The records the association must keep and make available to owners, such as governing documents, financial statements, meeting minutes, and contracts. Access is usually governed by statute and is subject to limited exceptions for confidential information.

A written schedule stating which association records must be kept, for how long, and how they should be destroyed. It helps ensure compliance with legal requirements and supports consistent, defensible records management.

A method of voting by owners without attending a meeting, used for elections or amendments when permitted by the governing documents or law. The ballot must usually meet specific form and deadline requirements to be counted.