Updating Declaration and CC&Rs

Hi all. A few questions have arisen as our committee to review/revise the Declaration and CC&Rs researches the various sections. Would appreciate your feedback on the following: (a) Our developer created a "working capital" account when we bought our Lots in the amount of $250 per Lot. We are contemplating keeping that requirement in for future buyers of resales. Does your HOA have this provision? (b) We are thinking of modifying the "USE" clause for homes to allow home-based businesses (with some restrictions, of course). We all know how telecommuting and home employment using computers has rapidly increased. Does your HOA have this provision or is it contemplating it? (c) There are about 8 lots owners in our community that have not built homes on them; these lots were part of a percentage of total lots in our community the Developer had excluded from the requirement to begin construction within 6 months of purchase and completion within one year. Fearing that with no deadline for construction of homes on these lots, adjacent property owners may suffer a decline in value of their own homes, we are considering putting a time limit on these lots. How does your HOA handle vacant lots?

MANY THANKS!

Patricia I live in a condo community so a & c of your question do not apply here. Our home business restriction which was written in 1992 before telecommuting was popular still works for us. Other sections of our documents prohibit use as a boardinghouse/motel and daycare businesses:

The restriction above to the use of any unit as a single residence shall not prohibit the conduct of a “home occupation” or profession carried on by residents permitted to reside on the premises under Section 7.1 of this Declaration and in
connection with which (a) there is used no sign or display that will indicate from the exterior that the building is being utilized in whole or in part for any purpose other than that of a residential dwelling, (b) there is no commodity sold, or services dispenses upon the premises, (c) no person is employed other than residents permitted to reside in the unit under Section 7.1.A (1) above, and (d) no mechanical or electrical equipment is used except such as is permissible for and is customarily found in purely domestic or household premises for the family residing therein. A professional person may use his residence for infrequent consultation, emergency treatment, or performance of occasional or emergency religious rites, but not for the general practice of his profession. Permitted home occupations shall not include barber shops, beauty shops, shoe or hat repair shops, tailoring shops or any type of pick-up station or similar commercial activities but the recitation of these particular exclusions shall not be deemed to constitute authorization for conduct of other businesses or
enterprises which are precluded by this or other sections of this Declaration.

PatriciaB6

Ideas for your consideration.

First, I strongly recommend a statement of rights as a separate article. There are many papers on the internet on why a statement of rights is important and the content to be considered. My research, which identified 25 rights, is posted at
http://swagman.typepad.com/poa_governance/2006/10/statement_of_ri.html. This post also provides internet links to other papers on rights. Many of the posts on HOA Talk describe abuses by associations and their boards that would not occur with a strong statement of rights for the owners. Generally, developers will define the obligations of the owners, but not their rights. CAI typically opposes such provisions.

It sounds like the "working capital" account is based on a one-time fee. Does such a provision provide fairness relating benefits to those who pay the costs? A transfer fee such as you describe would be similar and would have the same fairness/unfairness issues. However, it certainly is appropriate to require a fee for any documents provided to prospective buyers.

I favor a specific fee for preservation of the assets of the association in addition to the monthly/annual assessment for operation and routine maintenance. The accountants typically refer to such funds as reserve funds for capital repair, replacement and renovation. But I believe "preservation fund" is more descriptive and meaningful. My understanding is that such fees are not taxable as long as the fees collected are place into a separate capital fund for the purposes stated in the CC&Rs.

The courts typically allow a home-based business as part of single-family home if the business is not apparent (no signs, no vehicles coming and going, etc.) The Michigan courts have so ruled. Others may have as well. Or, you could adopt the language from one of the court rulings. There are many aspects to consider. For example, is day care in a private home a permissible use of a single-family residence? Such use would not likely pass the requirement of "no vehicles coming and going".

With regard to adding a deadline on construction on lots already sold by the developer, I suspect that such a provision cannot be made retroactive. It could apply if the vacant lot is sold to another party after the new provision is recorded since the new buyer would be informed by the recorded amended CC&Rs.

The association should check with its attorney and accountant to understand the legal and accounting requirements.