HOA Frequently Asked Questions 

QUESTION: "Why is it necessary to have an Owners’ Association?" 

RESPONSE: The overwhelming number of timeshare plan resorts requires that a not-for profit entity be incorporated in the state of its existence for the purpose of operating and managing the resort for the benefit of the owners.  

 

QUESTION: "Are all owners required to be members of the Owners’ Association?" 

RESPONSE: Typically, both and declaration of dedication and the by-laws of the association will state that all owners are members of the association and that membership cannot be separated or otherwise conveyed separate from the timeshare interval. 

 

QUESTION: "What does the term C.C. & R’s actually mean?"  

RESPONSE: The term stands for Covenants, Conditions, and Restrictions/Reservations. These are often referred to as the association legal documents. 

 

QUESTION: "Is it very important that all owners know what all is contained in the Association Legal Documents?"  

RESPONSE: It is advisable that each owner know what is contained in these documents that could/would have an impact on them. Some of these items would include owners rights; the powers of the association, its directors, and the resort management entity; how annual assessments are determined and what, if any, limits have been placed on increases of those assessments. It is important to determine that all elected officers of the association have a full understanding of all the actual CC&Rs. 

 

QUESTION: "How can I be assured that the Associations financial resources are being properly maintained?"  

RESPONSE: You should receive a copy of the fiscal year budget when you receive your annual assessment billing, and an annual report of the association’s books and records within 120 days of the end of the fiscal year. This report must be provided to the agency responsible for monitoring all incorporated entities in the state. It is advisable that this annual report be performed by an independent Certified Public Accountant (CPA). You should gain assurance that all funds are deposited in their appropriate accounts and not co-mingled. Example: Reserve funds and property tax funds should be in their own impressed accounts and not be part of the operating funds. These are just a few of the most important items. 

 

QUESTION: "Why is it necessary to have Association Officers if we have a Board of Directors?"  

RESPONSE: The association by-laws require the election of officers because state law usually dictates that all corporations within their jurisdiction do so. The by-laws will indicate that the Board elects these officers, which typically include a president, one or more vice presidents, a secretary, and a treasurer. The by-laws will also define the duties of each officer. 

 

QUESTION: "Do members of the Board of Directors have to be owners at the Resort?"  

RESPONSE: Usually during the initial phases of a development, the developer has the right to appoint the first Board of Directors. The Articles of Incorporation of the association will address this issue and may be amended (once the association takes control) to include an ownership requirement if it is the will of a majority of owners (other than the developer). The by-laws will usually contain language that will require at least one member of the Board to be elected by members other than the developer commencing with the first annual meeting of the association members. These requirements will also be affected by the laws in which the resort is located and will largely be affected by the legal structure of the resort (e.g., condominiums laws in Floridarequire the majority of the Board of Directors be elected by owners at a certain point in time and based on certain events). 

 

QUESTION: "Should the Board of Director positions have term limits?"  

RESPONSE: The association’s by-laws will clearly state the requirement for term limits if there are any, which is often controlled by state law. Each set of by-laws will differ on this question. If there are no term limits and it is the will of the members to establish the same they must amend those by-laws. Amending any of the association’s legal documents usually takes at least 5% of the voting power to bring the issue before the association for vote and an affirmative vote by two-thirds of the members voting in person or by proxy (once the required quorum has been established). In some instances, amending the by-laws requires only a simple majority of those voting affirmatively to effect a change.

 

QUESTION: "How can I be assured that the Associations Reserve Funds are invested safely?"  

RESPONSE: This question is difficult to answer. We can only give an example of how one association attempted to ensure that safety. The Board of Directors establishes investment policy, acting within the powers granted by the association’s legal documents and using full due-diligence. That policy includes the Board appointing an Investment Committee and empowering it to make the necessary decisions without calling a meeting of the full Board. (Refer also to the HOA Toolbox section and the Example of an Investment Policy.)