Homeowners' Associations, Articles, Covenants, and Bylaws
An Overview
We hear or read the terms Homeowners' Association or HOA, Articles of Incorporation, Covenants, and Bylaws, but it may not be clear to all what they precisely mean, or what the distinctions among them are. In the following, definitions of these terms are often paraphrased or copied from Nolo.com. (If you are not familiar with Nolo.com, it is a respected website for researching legal issues, as well as finding resources for doing law on your own).
Homeowners' Associations and Articles of Incorporation
A Homeowners' Association is a legal entity, typically set up as a nonprofit corporation. As such there is a legal document, called Articles of Incorporation, that provides the necessary legal description of the corporation for identification, taxation (yes, we pay an accountant to handle our income tax returns each year), and other purposes as prescribed by law. A discussion of Articles of of Incorporation for nonprofit entities is found here.
Homeowners' associations are common. If you buy a home (such as a single-family home, condo, or townhome) in any planned, covenanted community, such as Wheatland Hills, you will most likely be required to be part of a homeowners’ association (HOA), just as you are in Wheatland Hills. The HOA will have its own governing documents in addition to the Articles of Incorporation in the form of
- A Declaration of Covenants, Conditions, and Restrictions (CC&Rs), usually just shortened to "Covenants"
- Bylaws
These must also be recorded with the proper governing body, which in our case is Gallatin County (in the Clerk and Recorder's office).
Covenants
As noted above, the Covenants are a legal document that lays out the guidelines for a planned community. Basically, the Covenants are the rules of your neighborhood. They govern what you can, cannot, or must do with respect to your building structures, your property, common areas, and so forth. For example, the Covenants may require you to keep your garage door closed or prohibit certain types of landscaping. It is also typical for the Covenants to regulate things such as:
- basketball hoops
- clotheslines
- fences
- TV antennas/satellite dishes, and
- garbage cans
- parking
- quiet times
- business use of property
If you don’t abide by the Covenants, the HOA may impose penalties for any violations. In summary, it is always a good idea to become acquainted with and follow the rules of the Covenants of one's community. In fact, most real estate transactions done through a Realtor include providing the buyer with a copy of the Covenants. Buyers are expected to be familiar with the Covenants and make their home purchase accordingly. For example, if a buyer plans to purchase and run a business in a home in a community with Covenants he or she must carefully consult the Covenants to determine the conditions, if any, under which this activity is allowed.
Bylaws
Since an HOA is a legal organization established to manage a private, planned community, such as Wheatland Hills, like any such organization it must have a governing body with a set of rules to follow in governing and managing the HOA. Thus, an HOA is governed by a Board of Directors (who are elected by the members) and a set of rules called Bylaws. The Bylaws establish how the HOA operates and contain the information needed to run the HOA as a business. For example, the Bylaws cover matters such as:- how often the HOA holds meetings
- how the meetings are conducted
- how many people are on the Board of Directors
- the duties of the various offices of the Board of Directors
- how voting is conducted
Understanding Differences Between Covenants and Bylaws
If the distinctions between Covenants and Bylaws could still use clarification, here is a source from Nolo.com:
When Legal Documents Collide
In spite of various descriptions of the differences among Articles of Incorporation, Covenants, and Bylaws, it still happens: These three documents may have contradictions among them. How can this be handled? One way is to carefully craft all three so that contradictions just don't appear. That's a bit lofty of a goal it turns out, as many people become involved over time in writing and amending these documents. Our Wheatland Hills Bylaws cover these bases. The 1986 amendments to the 1975 Bylaws currently in effect state (Article XIII. AMENDMENTS, Section 2):
Conflicts. In the event of any inconsistency between these Bylaws and the Articles, the Articles shall control and in the even of an inconsistency between these Bylaws or the Articles and the Covenants, the Covenants shall control.
Summary
If one is thinking of purchasing a home in an HOA community (or already live in one), such as Wheatland Hills, one should take the time to become familiar with the Articles of Incorporation, Covenants, and Bylaws, with the Covenants clearly being the most important. These documents can all be found in this section of the website (use the rightmost dropdown menu above, or navigate to the next pages below).
The most important thing to be aware of about Covenants is that while they are restrictive, they are not meant to be punitive. Instead they are intended to provide for a peaceable, enjoyable, beautiful, friendly and safe neighborhood while simultaneously protecting the value of each member's property by ensuring that the entire environment is kept up and maintained in good condition. The efforts of all members in keeping not only the letter of the Covenants but the spirit of cooperation and neighborliness implied by the Covenants are greatly appreciated by all!