Rental property owners operating in communities run by a homeowners association might come across unfamiliar terms such as covenants and CCRs. But, what is a CCR anyway? And how does it affect landlords and tenants?
What Is a CCR? Understanding Homeowners Associations
A homeowners association is an organization that is in charge of managing a community, subdivision, condominium building, or other planned development. Membership is typically mandatory, as homeowners immediately become members of an HOA upon buying a home located in the community.
The primary purpose of an HOA is to maintain curb appeal and property values. One way associations accomplish this is by enforcing strict rules that keep the community in order. Having agreed to follow these rules prior to the purchase of the home, members face a variety of possible consequences when they break them.
Although not all HOAs prohibit rentals in the community, a fair number of them do. Many more impose stringent rental restrictions that can affect how owners manage their rental properties. You might think of these restrictions as excessive, but they generally exist for the betterment of the community.
A term you might encounter during your time as a landlord in an HOA community is “CCR.” CCR, otherwise known as CC&Rs, is short for Covenants, Conditions, and Restrictions. It is one of the handfuls of HOA documents that govern how the community operates. Usually, when homeowners first buy into the community, they are provided a copy of these documents. Some associations even ask owners to sign them as proof that they agree to follow the stipulations within them.
What does the CCR cover? While no two associations have the same covenants and restrictions, they typically cover the following:
- Rights of homeowners
- Maintenance responsibilities of the HOA and the homeowners
- Property appearance restrictions and use
- Dues and assessment obligations
- Insurance requirements of the HOA and the homeowners
- Guidelines for rule enforcement and conflict resolution
Other HOA Governing Documents to Know
A homeowners association’s CCR covers a broad range of topics. As such, this document is typically the most comprehensive. It is also widely considered to be the most important in an HOA’s operations. But, apart from the CCR, there are other homeowners association governing documents you should know about.
HOA Articles of Incorporation
When you bring up articles of incorporation, most people immediately correlate it with corporations. So, why would a homeowners association even have this set of documents?
In many states, HOAs are recognized as nonprofit corporations and even have to register as such under the Secretary of State. As such, these associations usually need to file their own articles of incorporation. Keep in mind, though, that this does not unequivocally apply to all homeowners associations. Some states do allow associations to remain unincorporated.
Within the context of HOAs, the articles of incorporation contain the basic details of the association. This includes the name, address, and purpose of the HOA. Due to this, most associations’ articles don’t consist of a lot of information. But, again, no two associations are completely the same. And some HOAs also opt to discuss voting rights and amendment procedures within their articles.
At the helm of every homeowners association, there sits a set of directors running the whole show. Known as the HOA board, this group of leaders is responsible for making decisions within the community’s best interest. And what governs the HOA board? The HOA bylaws.
Homeowners association bylaws dictate the community’s structure and procedures. It covers things like how long board members can serve when the board and annual meetings must take place, the roles and responsibilities of individual board members, and election procedures. It can also discuss how the budget must be created and how dues are determined. Because of the similar nature of the bylaws, there may be some overlap between this set of documents and the CCR.
Unlike other governing documents, though, HOAs don’t normally need to record their bylaws with the county recorder’s office. As such, it is generally easier to amend the bylaws compared to other documents.
HOA Rules and Regulations
A homeowners association’s CCR ordinarily consists of more general rules and guidelines. More often than not, HOAs need to further clarify them by adding supporting rules. This is where the operating rules and regulations come in.
Rules and regulations tend to be longer and more comprehensive. They also usually contain more specific language. Though, unlike the CCR, an association’s rules are much more flexible. This means boards have the authority to enact or amend the rules even without a majority vote from the membership. Still, many associations require the board to give owners a 30-day window to review the rule change, at which point owners can voice their feedback.
Should a rule come into conflict with a covenant in the CCR, the latter takes precedence. This is because the CCR assumes a higher ranking on the hierarchy of governing documents.
How Homeowners Associations Affect Rental Properties
If you own and operate a rental property in an HOA community, chances are you’ll come across some rental restrictions. While not all HOAs have them, most have these restrictions in place to maintain the association’s general appeal and exclusivity. Some of the most common ones include:
- A limit on how many tenants can occupy a single rental property
- Imposing a minimum lease duration (to prevent short-term rentals)
- Thorough tenant screening requirements
- Not allowing tenants to vote on association matters
- Not allowing tenants access to facilities and amenities
It is also worth noting that all of the HOA’s rules also automatically extend to tenants. As such, if an HOA has a no-pets policy, tenants are not allowed to bring pets into their leased home either. Additionally, if a tenant breaks a rule, the HOA will normally go after the landlord or property owner. Due to this, it is important that you choose the right tenants that won’t get you in trouble with the association.
What Is a CCR? Answered!
A CCR is integral to the day-to-day and overall functions of a homeowners association. It defines the rights and responsibilities of the association, its members, and its board. For landlords, the CCR can have a direct impact on your property and tenant. Therefore, it is important to review an HOA’s governing documents prior to buying a home or renting out your property.
Dealing with tenants is hard enough; adding homeowners associations into the mix just complicates things even further. If you need help, start looking for a property management company using Rental Choice’s online directory.
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