If you are a board member of a homeowners association, it is important that you know the terminology that is used in the industry. This will help you make informed decisions and communicate better with your fellow board members and community managers.
In this blog post, we will define ten terms that are commonly used in HOAs. We hope that this will be helpful for both new and experienced board members!
1. Request for Proposal (RFP)
In many industries, the initials RFP stand for request for pricing. However, that isn’t the case when it comes to HOAs/community associations. In this industry, an RFP/request for proposal is a package prepared by a community association manager when soliciting proposals for a service needed at a community association.
The proposal often includes specifications, a site map, insurance requirements, and specific instructions on how and when to submit a bid.
2. Robert's Rules of Order
Robert's Rules of Order are a set of rules governing how meetings and organizations are run. They were first published in 1876 by U.S. Army officer Henry Martyn Robert, and have since been revised and updated several times.
The rules are designed to promote fairness and orderliness in meetings and to ensure that all participants have a chance to be heard. Some of the key rules include:
- All members must be given notice of the meeting in advance, and the agenda should be distributed beforehand as well.
- Only one person may speak at a time, and all speakers must be recognized by the chairperson before they may begin speaking.
- All decisions must be made by a majority vote of those present unless otherwise specified in the organization's bylaws.
3. Service Level Agreement (SLA)
A service level agreement (SLA) is a contract between a service provider and a customer that specifies the nature and quality of the services to be provided. In the context of a community association, SLAs are often used to define the level of service expected from vendors.
For example, an association might contract vendors to provide 24-hour security, snow removal, and landscaping services. In return, vendors would agree to meet certain performance standards, such as response times for security incidents or turnaround times for snow removal.
4. Statement of Values (SOV)
When most people see the term “statement of values” they immediately assume that it has something to do with the community’s core values and beliefs. In reality, though, it has a much different meaning.
A statement of values is a document required when seeking insurance for a community association that lists the insured value of each asset. This statement helps ensure that the association isn’t over or under-insured.
5. Generally Accepted Accounting Principles (GAAP)
Generally Accepted Accounting Principles, or GAAP, are a set of guidelines used by accountants to prepare financial statements. GAAP includes principles like the historical cost principle, which states that assets should be recorded at their original purchase price, and the conservatism principle, which says that companies should err on the side of caution when estimating future liabilities.
While GAAP is not legally binding in the United States, many investors and lenders require companies to follow GAAP guidelines when preparing financial statements. As a result, most businesses, including RealManage, make a point of following GAAP in order to maintain credibility with investors and creditors.
6. Fair Debt Collection Practices Act (FDCP)
The FDCPA is a law that protects consumers from being abused or harassed by debt collectors. It is important to understand your rights under this law, as well as what debt collectors can and cannot do when trying to collect a debt from you.
This means that debt collectors cannot threaten you with violence, use obscene language, or lie to you about the amount of money you owe. They also cannot call you excessively, at odd hours, or try to contact you at work if they know that your employer does not allow personal calls.
If a debt collector violates the FDCPA, you may be able to sue them and recover damages.
7. Declaration of Covenants, Conditions & Restrictions
The declaration of covenants, conditions, and restrictions (CC&Rs) is a legal document that outlines the rules and regulations for a homeowners association (HOA).
The CC&Rs are intended to protect property values and quality of life within the community. They may include provisions governing the use of property, architectural standards, and other aspects of life in the community. Many HOAs also have amenities such as swimming pools, tennis courts, and clubhouses that are available for use by members of the association.
Violations of the CC&Rs can result in fines, a loss of membership privileges, or even expulsion from the association.
8. Architectural Control Committee (ACC)
An architectural control committee is made up of volunteers who are typically chosen by the board of directors.
The committee is responsible for reviewing and approving all changes to the physical appearance of homes in the community. This includes things such as adding a new deck or changing the paint color, as well as any changes to the landscape, such as planting new trees or installing a new irrigation system.
9. Automatic Clearing House (ACH)
The automatic clearing house (ACH) is a system that automates the process of sending and receiving payments. Instead of writing and mailing paper checks, ACH transactions are processed electronically. This makes payments faster and more efficient, and it helps to reduce costs for your association.
ACH transactions can be used for a variety of purposes, including direct deposit of paychecks, automatic bill payments, and tax refunds. The ACH network is operated by the nonprofit National Automated Clearing House Association (NACHA). NACHA sets the rules for the ACH network and oversees the clearing and settlement of transactions.
10. Common Area or Community Services & Facilities
When you live in a community with an HOA, you can be sure that there are common areas or community services and facilities that everyone in the neighborhood can enjoy. Associations use the collective buying power of the residents within the community to provide services more efficiently and generally at a lower cost than the individual could obtain.
Pool ownership and maintenance is an example of a common service that associations provide more efficiently and at a lower cost.
Being a member of your community association’s board can feel overwhelming at times, but educating yourself can make things much easier. Learning and understanding the terms we’ve shared in this article can help ensure that you have a successful experience on the board.