Industry Terminology
Common Terms
Association Manager manages the common property and services of condominiums, and planned communities through their homeowners’ or community associations.
The Board of Directors are elected volunteer officials that are responsible for all operations of the association and ensuring the community governing documents are followed and enforced.
The respective officers of the Association shall have such powers and duties as are from time to time prescribed by the Board and as are usually vested in such officers, including but not limited to, the following:
- President shall be the Chief Executive Officer of the Association and shall preside at all meetings of the Members and at all meetings of the Board and shall execute amendments to the Declaration and this Operating Agreement as provided in the Declaration and this Operating Agreement.
- Vice President shall, in the absence or the disability of the President, perform the duties and exercise the powers of such office.
- Secretary shall keep minutes of all meetings of the Members and of the Board and shall have charge of such other books, papers and documents as the Board may prescribe.
- Treasurer shall be responsible for Association funds and securities and for keeping full and accurate accounts of all receipts and disbursements in the Association books of accounts kept for such purpose.
Governing Documents include various sets of documents such as the declarations, bylaws, and rules and regulations that control the operations of the association and the common interest development it was formed to manage.
Governing documents do have a hierarchy which are listed in order below. Documents may vary depending on type of Association (condo, townhome, etc.):
- State Law
- Municipal Ordinances
- Declaration of Covenants Conditions and Restrictions (CC&Rs), Master Deed
- Bylaws
- Rules and Regulations
- Plats of Survey and Easement Agreements (may be separate, often included in the declaration)
Illinois Condominium Property Act provides the framework for the creation and governance of condominium associations.
Common Interest Community Association Act (CICAA) provides the framework for the creation and governance of homeowners associations.
State Statute permits the creation of condominium/townhome form of ownership and prescribes the basis of determining ownership interest, rights and obligations of the owners, duties and powers of the association, and the proces of dissolution of the condominium.
Community Association Plat of Survey describes the location and nature of the common elements and the units.
Condominium Declaration or Master Deed defines the units, common and limited common elements, and is the collection of covenants imposed on the property to provide for:
- The basis for allocation of percentage ownership interest
- The obligation of each owner to share in funding the cost of association operations
- The power, authority, and responsibility of the association in its operations and in making and enforcing rules
Individual Unit Deeds is a legal document regarding the ownership of an individual unit.
Articles of Incorporation creates the association as a corporation under state corporate statute and defines its membership and sets forth the process for creating the board of directors, voting procedures, etc.
Bylaws implements, in specific detail, the provisions of the Declaration and the Articles of Incorporation regarding the association operations, including delineation of the meeting process, election procedures, powers and duties, board meetings, committees, insurance requirements, rule-making and enforcement process.
Rules and Regulations sets forth the operational powers or provisions and the use restrictions adopted by the association.
Cash Method of Account income and expenses are only recorded when cash changes hands. Financial reports only reflect cash transactions. This is a relatively simple system for simple situations. Because all obligations are not recorded until cash changes hands, this method does not provide an accurate portrayal of the financial condition of the association at any given time.
Accrual Method of Accounting keeps track of all financial activities, including revenue as it is earned (as opposed to when it is received) and expenses as the obligation is incurred (as opposed to when it is paid). This makes possible a more accurate determination of the financial condition of the association at any point in time. Also, this is a better method for multi-year tracking of capital reserves credits and deficiencies. The primary disadvantage is the greater complexity and technical knowledge that is needed to maintain the records, understand the reports, etc.
Capital Reserves the Board has the obligation to repair and replace major capital facilities, buildings, and equipment of the association. The ideal method of providing for these future expenses is the establishment of a capital reserves system and budget to assure that such funds are available when needed. With knowledge that the future holds predictable major expenditures for repair and replacement of facilities and equipment, the association could begin the gradual accumulation of funds through a reserve account to meet all or a portion of that expense when it comes due.
Common Area are those portions of the premises which are designated as “Common Area” in the associations governing documents. The Association is responsible for the maintenance of these areas and is generally consists of all portions of the premises located outside of the homes.
Common Assessment are the expenses of operating and administering (including management and professional services) of the Association.
Declarant is the developer of the Association.
Municipality is the village or any political entity which may from time to time be empowered to perform the functions or exercise the powers vested in the municipality.
Owner is a record owner, whether one or more persons, of fee simple title to a Lot.
Resident is an individual who resides in a home within the community.
Voting Member is the individual who shall be entitled to vote in person or by proxy at meeting of the owners.
Limited Common Element is a portion of the common elements as being reserved for the use of a certain unit or units to the exclusion of other units. (The responsibility of maintenance for these areas differ in each Association and is more clearly defined in the associations governing documents.)
Percentage of Ownership are assigned to each unit and the total of the percentages must equal 100. Common expenses are divided among the owners according to their percentages. (This is decided by the developer and not the Board of Directors.)
PSI Specializes in the management of homeowner associations. From professional business, governance, and community management services, to leading online services – we offer a complete and unparalleled solution for our clients.
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