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Allocable Share:That portion of the annual assessment attributable to each interval interest or points owned by the HOA member.

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)

Articles of Incorporation:Filed with the state in order to create the HOA and to [1] Identify its purposes; [2] Establish its powers; [3] Provide for its BOD and the Indemnification of the same; [4] Identify its Statutory Agent; [5] Identify its memberships; [6] Establish the term of existence; [7] Provide for the adoption and amendment of its by-laws; and [8] List any restrictions prohibited.

Assessment:The fee or dues payable by members of an HOA for preserving, maintaining, operating and managing a timeshare plan and the affiliated HOA. Typically these assessments, including property tax and reserve allocations, and are assessed on an annual basis. (See: Maintenance Fee – Special Assessments – Individual Assessments – Property Tax – Reserves)

Association:The non-profit incorporation created for the purpose of acting as the association (HOA) for the operation, maintenance, and management of a timeshare plan, located within the state of its development and under whose laws or statutes the incorporation was formed.

Board of Directors (BOD):The governing body of an incorporated HOA. These directors are elected by the members of the HOA and are responsible for the administration of the HOAas defined and described in the by-laws. (See: Fiduciary Duties)

Board Meetings:BOD Meeting includes any gathering of a majority of the BODat the same time and place to hear, discuss, or deliberate upon any item of business scheduled to be heard by the BOD, except those matters that may be discussed in executive session.

Budget: The financial statement of income and expense for a specific period of time (fiscal year). The budget for a for-profit entity typically would express incomes first then determine the resulting expenses. A non-profit timeshare HOA budget would express the expenses first and then determine the income necessary to cover those expenses. That income results in the annual assessment (allocable share) for each HOA member. An HOA that produced net incomes from sources other than assessments would reduce the expenses by that net income prior to the establishment of the total amount to be assessed to the members. In order to determine expenses, it is recommended that a Chart of Accounts be used to identify each specific category of expenses. A copy of the approved budget should be presented to each HOA member not less than thirty (30) days and no more than ninety (90) days prior to the beginning of the HOA fiscal year or at a time as specified by state law. That budget should express the total of operating expenses (net of any other income), property tax, and reserve allocation. Each individual HOA member’s allocable share would be determined by the formula fixed by the HOA CC&Rs.

By-Laws: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.

CC&Rs (Covenants, Conditions & Restrictions): The major legal documents usually required with the development and subsequent sale of a Timeshare Plan interest period or the equivalent in points. (See: Articles of Incorporation – By-laws – Declaration of Dedication – Rules & Regulations - Developers Subsidy Agreement – Public Report)

Chart of Accounts: The Chart of Accounts is used to define categories of revenue and expense for recordation of an association’s financial statement.ARDA has developed a Chart of Accounts for timeshare resorts. (For information on the chart, please visit the ARDA Web site www.arda.org; click on “Publications,” “General Publications”, “HOA Chart of Accounts”.)

Common Area:Those parts of a timeshare plan (other than the residential units) accessible to the owners and guests and which are the responsibility of the owners to maintain and repair.Examples would be, but not be limited to, pools, clubhouse, sidewalks, streets, tennis courts, playgrounds, putting greens, etc. (See:Public Report)

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 judgment 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)

Declarant:The person, persons or entity that determines to develop the timeshare plan, execute the legal documents required to do so, and takes responsibility for the information contained in those legal documents. The declarant is responsible for constructing the accommodations and amenities on-site, selling the product and providing for initial management services. The declarant appoints the original members of the BOD.

Declaration of Dedication: Expresses the intentions of the developer to: [1] The creation of the propertyregime - description of the property, description of the improvements, nature of the common area and residence unit, fractional interest; [2] Definitions; [3] Ownership - nature of, maintenance period, acceptance by grantee, transfer, severability, partition, liens and encumbrances, encroachment, declarant’s easements, owner’s easements; [4] Exercise of Ownership Interests - rights of tenancy-in-common, residence units and common areas, furnishings, declarant’s use of facilities, care of residence unit, care of common areas, permittees, vacating residence unit & failure to vacate, restrictions on use, violations; [5] The Association-   ingeneral, membership, binding effects, voting members, control of association by declarant, contracts with adjoining associations or land, maintenance, operation, management firm, rules, penalties and enforcement, annual reports; [6] Assessments -   purpose of, annual estimate, payment, declarant’s liability for, surplus, independent obligation, liens, personal obligations, priority, enforcement, suspension of rights, personal action, non-waiver, non-exemption, abandonment; [7] Insurance - coverage, application of proceeds; [8] Repair and Restoration -responsibility for, mechanics’ liens, timing and completion; [9] Condemnation; [10] Termination-   property regime, procedure, association as agent; [11] Miscellaneous- amendment, notice, severability, construction, titles, gender, arbitration; [12] Effective Date; and [13] Other- legal description, identification of interval interest, fractional interests, plat plans, amendments.

Developer/Declarant Subsidy Agreement(if one exists): Establishes the declarant options relating to the subsidy of the HOA total expenses including property tax, obligation to fund a reserve account except for the amounts collected from owners other than the declarant or election to pay the budgeted assessment amount for all interval interest or points owned by that declarant.

Directors and Officers Insurance: Insurance coverage that protects board members in legal actions that occur as the result of the performance of their duties on behalf of the HOA for which they serve. Such insurance coverage may also protect the BOD members for any errors and omissions they may make in the performance of their duties as BOD members. (See: Corporate Veil)

Developer: See Declarant.

Executive Session:A private meeting of the BOD to discuss personnel issues, alleged misconduct, financial issues with the auditor, security issues, legal issues, or other confidential matters. Executive sessions are restricted to BOD members and should only cover the items for which the executive session was noticed and/or held. When the issues have been discussed and resolved, the BOD should return to the normal meeting. The action decided by the BOD should be reported in the minutes. Note: Review your specific state’s statutes or laws for executive session rules.

FF&E: Furniture, Fixtures and Equipment

Fiduciary Duties: [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.

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, ______.” When the HOA fiscal year has been established, it would be very difficult to change it.

Governing Documents: See CC&Rs.

Home Owners Association (HOA):See Association.

Individual Assessment: Any amount that an individual member has incurred during the use of his/her residential unit or the common areas that remained unpaid upon departure. Individual assessments could include, but are not limited to, the following: fines or fees imposed by the BOD for failure to adhere to the CC&Rs, unpaid telephone charges, costs for damages, breakage or loss of any FF&E in excess of reasonable wear, food and beverage consumed at the resort, and/or damages caused to the residence unit or common area.

Independent Contractor: People such as (but not limited to) attorneys, contractors, subcontractors and painters, who follow an independent trade, business, or profession in which they offer their services to the public and are never employees. The general rule is that the employing entity has the right to control or direct the results of the work and not the means and methods to produce such results.

Insurance Coverage (minimums): Including, but not limited to: [1] Comprehensive Hazard (with code or ordinance rider);[2]Commercial Public Liability and Property Damage (on a broad form basis); [3] Umbrella; [4] Business Interruption; [5] Directors & Officers/Errors & Omissions; [6] Workman’s Compensation; [7] Employee Practices; [8]Employee Benefits;[9] Auto Liability;[10]Computer Equipment and Data Loss; [11]Crime; and[12]Umbrella. 

Lien: A type of security interest granted over an item of property to secure the payment of a debt or performance of some other obligation. Generally, the amount of any HOA Assessment plus other charges thereon, such as interest, costs and penalties as may be provided for in the CC&Rs, shall be a personal obligation of the timeshare plan owner in default and shall become a lien upon each interest owned.

Maintenance Fee: See Assessment.

Maintenance Period:Generally, a one-week period set aside every year in each resort unit to perform unit maintenance that cannot be done during occupancy periods – i.e. painting, major repairs, FF&E replacement, etc. Units are deep cleaned during this period as well.

Management Agreement: The agreement entered into between the HOA and a management firm that includes (but is not limited to) the administration, management, housekeeping, improvement, repair, restoration, remodeling, refurnishing, and other maintenance and operation of the resort affiliated with that HOA. The CC&Rs of some HOAs require that such an agreement be entered into and some do not. Most hotel or hospitality branded developments are managed by the developer’s management entity. Many non-hotel or hospitality branded resorts are self-managed under the supervision of the HOA BOD.

Meeting Minutes: Minutes of an incorporated HOA and its Board are required to be kept by the secretary of the HOA in accordance with Roberts Rules or some other form as directed by BOD policy. Generally speaking, it is advised that the secretary not attempt to keep and report those minutes verbatim.Minutes are intended to report actions taken by the Board or the association in an annual meeting environment.Said minutes are required to be distributed to the HOA membership in accordance with state law and the resort’s CC&Rs. Copies of those minutes and any associated documents are required to be kept in a minutes book of the corporation and available for inspection by the state at any time.

Notices: The by-laws of the HOA will establish the specific notice requirement for the annual meeting, special meetings and/or any meetings of the BOD. Those same by-laws will provide specific directions for the delivery of such notices and the proof that they were delivered.

Officers: The CC&Rs of most HOAs will dictate the election of officers by the BOD at an organizational meeting which usually follows the annual meeting. Those officers are typically a president/chairman of the board, one or more vice presidents, a treasurer, and a secretary. The duties of these officers will be discussed in detail in another section of this site. The BOD may appoint such other officers as the business of the HOA may require. Such subordinate officers may include (but not be limited to) the following: real estate broker, assistant treasurer, recording secretary, and liquor agent.

Property Tax: The taxes that are assessed by the local governing body who is responsibility for property tax collections as determined by the county or local real estate appraiser. The assessing body will calculate these taxes based on the assessed value of the property, applying that value to the tax basis and then annually billing the owner of that property the calculated amount. Generally speaking, the tax appraiser will place a value on the whole villa or condominium rather than the individual ownership interests. The HOA generally acts as the collector of the property tax from the individual members and then pays the tax when it is billed. It is advised that any timeshare or vacation ownership resort and its affiliated HOA retain a property tax specialist who will file an appeal of property taxes each year they are assessed. It should be noted that in some cases a state (California, for example) may require that property tax be collected from the individual owner of the real estate.

Proxy: A proxy takes at least two forms: (1) the broad basis proxy is a person appointed to represent another; and (2) the proxy form that is critical to HOAs is the written form, which may [a] be used to establish the necessary quorum for a meetings of members, [b] used to appoint someone else to cast the votes entitled to the individual member without specific instructions, and [c] used to appoint someone else to cast the votes entitled to the individual member with specific instructions. A proxy is usually good until notice is given that the proxy has been withdrawn. Said notice is usually given in the form of a more recently dated proxy, the presence of the actual owner at a meeting for the purpose of voting themselves, or until it expires in accordance with government laws or statutes. Typically, each member receives two types of proxies from the HOA with respect to a duly called meeting where an agenda has been provided with respect to issues or items to be voted upon. The first type is a simple attendance proxy used to establish the required quorum and the second is a proxy which gives the owner at least the following options: [a] to appoint the HOA secretary (or any other individual) to cast the vote(s) in a specific manner of listed issues; [b] to appoint the HOA secretary to cast the vote(s) as approved by a majority vote of the members of the BOD, or [c] to appoint another person to cast the vote(s) without specific instructions. HOAs are advised to make sure that the proxy forms used are not really ballots casting votes without a proxy.

Public Report:The document required by a state’s timeshare regulatory agency in order for the developer/declarant to offer the timeshare plan for sale within the state. The state will have required that each purchaser of a timeshare plan received a copy of the report and signed a receipt that they did so. This report usually contains, but is not limited to, the following: [1]General – the number of whole units divided into the number of timeshare plan intervals or equivalent in points, project map recordation book number, map page, county, state, project name, number of buildings, number of living units and their square feet; [2]Timeshare use – perpetuity or term of years, annual or bi-annual, offering (fixed unit, fixed time / floating unit, floating time), lockout, maintenance period; [3]Project Location – address, city, county, state; [4] Narrative of the Offering; [5] Utilities – electricity, phone, natural gas, water, sewage disposal; [6] Access – to the development, within the development, [7] Common Area Facilities – within the development and maintenance of development facilities; [8]Assurance for Completion of Facilities; [9]Local Service and Facilities – shopping, public transportation, medical facilities, fire protection, ambulance service, police service; [10]Sales – evidence by seller delivering the appropriate legal document to purchaser, earnest money deposited into the required financial institute account; [11] Management and Exchange Network – managed by, exchange firm(s) affiliated; [12]Assessments – owner required to pay (monthly, quarterly, yearly or bi-annual), amount (year of purchase), developer assurance of budget adequacy based on estimated cost of operation for the year of purchase, assurance that financial arrangements have been made sufficient to guarantee payment of assessments on unsold interests and/or a developer’s subsidy agreement: [13] Taxes – property taxes, other (if any);   and (14) Owner’s Association – name, control of, title to common areas, membership.

Quorum:The minimum number of members of a deliberative body necessary to conduct the business of that body. A HOA and/or its BOD are considered to be such deliberative bodies. The CC&Rs of an HOA will specify the number of its members to be present in person or by proxy in order to hold its annual meeting and to conduct its business such as the election of Board members. That meeting must be adjourned and rescheduled for when the required quorum can be met. The same rule will apply toward meetings of its BOD with this exception: A board member cannot be present by proxy. Boards can meet and establish the necessary quorum via teleconferencing.

Reserves: The funds collected and set aside for anticipated long-term maintenance, remodeling, refurnishing, or replacement of residential unit or common area FF&E as well as infrastructure items such as (but not limited to) roads, telecommunications, elevators, fences/walls, and grounds. Funds assessed as reserves must be placed in impressed accounts and used only for reserve items. The individual HOA CC&Rs will disclose the actual reserve standards for that specific resort in that specific state. (See: Reserve Study)

Reserve Study: A reserve study is a long-term planning and budgeting guide that provides an assessment plan, which allows the HOA to collect annual contributions to be deposited into their reserve account. These accumulated funds are then available to cover expenditures directed toward items for which the HOA was allowed to reserve funds. The reserve study provides a useful life for most resort assets, projects their replacement cost at the end of that life, presents a schedule for the accumulation of the funds to be required, and projects those out for 30 years. The most effective reserve studies are performed by third party firms specializing in such studies. (ARDA has several members that fall into that category and can be identified at www.arda.org.)

Reserve Allocation: The amount of any annual assessment budgeted and collected in any HOA fiscal year for the purpose of increasing the accumulated reserve fund account(s).

Roberts Rules: A set of rules designed for use in ordinary societies that are the most commonly adopted parliamentary authority among societies in the USA. Typically, some version of Roberts Rules is used by HOAs for all meetings of its BOD and/or members. While these rules are widely accepted and are based on long-standing traditions of parliamentary procedures, they are not legally binding upon any HOA unless they (or some version thereof) have been formally adopted as its parliamentary authority.

Rules & Regulations: Those rules that have been established for the benefit of owners and their guests, which have been created by the BOD and are subordinate to the Declaration and as subsequently amended by the BOD. These rules may include but are not limited to: [1] Effective Date; [2] Definitions; [3] Assessment, Billing and Collection Policy (ABC policy); [4] Foreclosure of Liens; [5] Returned Checks; [6] Member Address; [7] Regular Use; [8] Bonus Time Use; [9] Exercise of Ownership – check-in/check-out times, failure to vacate, care of furnishings and equipment, fireplaces, building modifications, housekeeping services, inventory of furnishings, houseware’s and equipment, pass key, safety and health, pets, control of children, maximum occupancy, guest, employee relations, personal charges, use of recreational facilities, valuables; [10] Day Use; [11] Commercial Use; [12] Parking and Traffic; [13] Common Area Room Use and Fees (if any); and [14] Respect and Common Sense. 

Special Assessment: An amount determined by the HOA BOD and assessed against an owner on a non-recurring basis at the allocable share for such owner of expenditures for [1] capital improvements; [2] amounts in excess of available reserves expenses for construction or acquisition of new facilities or equipment; [3] deficits arising from damage not fully covered by insurance proceeds; and [4] similar expenses. Special assessments should not include any expense attributable to the initial construction or furnishings of buildings, and structures or improvements shown on the plot maps required to have been filed by the developer/declarant and expressed in the public report.

Timeshare Plan: Because of the many varieties of vacation ownership that now exist this term has been used in many state statutes to blanket the industry developments. For example, in Arizonathe following definition can be found at A.R.S. 33 §2202 - “Timeshare plan” means any arrangement, plan or similar device, other than an exchange program, whether by membership agreement, or sales, lease, deed, license or right-to-use agreement or by any other means, in which an owner, in exchange for consideration, receives ownership rights in or the right to use accommodations for a period of time that is less than a full year during any given year, but not necessarily for consecutive years, if the use rights extend for at least three years.”