A Guide to COA Rules

Anyone who owns or has considered purchasing a condominium is likely familiar with the concept of Condominium Owner Associations (COAs). Much like Home Owner Associations (HOAs), the COA is charged with establishing and enforcing guidelines for condo owners to follow that promote value retention, keep up with maintenance and repairs and ensure harmony among the residents who live there. Although the functions of these two types of associations are similar, the application has distinct differences due to the nature of the properties being overseen. Those who wish to invest in condominiums can better protect their investments and prepare for ownership by understanding what a COA does, what is beyond its scope and how it impacts a condo owner.

Key Point Module

  • 1 COAs are responsible for establishing the CC&Rs that all unit owners must abide by. All unit owners are members of the COA and a board of directors is elected from these members to handle proposed changes and enforcement.
  • 2 It is your responsibility to understand the CC&Rs created by your COA, keep up with any changes to the established rules and exercise your right to vote on any proposed changes.
  • 3 The COA contract is between the association and the unit owner. Owners will be held responsible for any CC&Rs violations committed by themselves, tenants or guests. Recovery of any damages or losses suffered by tenants is also the owner’s responsibility.
  • 4 Hiring a property management company can help protect your investment, saving you money and time, and ensure that you and your tenants remain in compliance.

What Does a COA Typically Cover?

The COA is usually governed by a board of directors made up of unit owners within the building. For new construction, this begins with the builder until the units are sold and the members of the board can be voted in. Like HOAs, all unit owners become members of the COA, but the board of directors is responsible for proposing and enforcing the covenants, conditions and restrictions (CC&Rs) that every owner must abide by. Because condos are individual units within a single building, these CC&Rs can be very different from those created by an HOA, although their intent is the same. Here are some common items that are addressed by the COA.

  1. Parking: Parking spaces are often limited for condo owners, so the COA will often establish assigned parking spaces and establish guidelines for guest parking. This can include where guests may park and how long a vehicle may remain. There will usually be a clear procedure on what will be done with vehicles that are in violation of the rules, whether that be towing guidelines or fines assessed for those who disregard the guidelines.
  2. Exterior alterations: If an owner wishes to change the exterior appearance of their unit, the CC&Rs often have restrictions on the options available and a procedure for requesting approval before any changes are made.
  3. Pets: If the building allows pets, there are usually restrictions on the number, type and size of pets allowed. This section will also cover any areas where pets are prohibited and lay out the requirements for cleaning up after your pet.
  4. Landscaping: Although the landscaping of the property surrounding the building is often cared for by the COA, some unit owners may wish to improve their patios or balconies. There is often a limit to what the COA will allow to ensure that the units maintain the overall appearance of the property.
  5. Association fees: The COA is responsible for the maintenance and any improvements in the common areas and amenities shared by all unit owners. There is also the possibility that a COA has obtained a master insurance policy to cover the building and may have costs associated with fee collection and rule enforcement. To cover these expenses and have the funds available to handle emergencies, all unit owners are required to pay monthly or yearly fees. The COA is charged with determining the amount needed for these costs and disclosing the established methods of collection, due dates and penalties for owners who fail to meet this financial obligation.
  6. Amenities: Many condo buildings include shared amenities, such as swimming pools, gyms and recreation rooms. The COA will establish the rules that govern the use of these areas and the consequences for broken rules.
  7. Occupancy limits: Depending on the laws of the state your condo is in, the COA may establish occupancy limits on the individual units within the building. This can sometimes be stated as an overall restriction or may be stated as a limit on how many individuals can occupy each bedroom within a unit.
  8. Rule enforcement: The COA has many tools at their disposal to ensure that unit owners follow the rules established for the property. This can include fines for noncompliance, filing a lien on the unit, filing lawsuits or suspension of any onsite privileges. The COA must clearly establish the processes involved with taking any of these actions against unit owners and ensure that they are within the restrictions of state law.
  9. Rule changes: COA boards must disclose the procedure for adding or changing any rules to the CC&Rs so that every unit owner has the opportunity to exercise their rights as association members. This will usually include the notice requirements for any association meetings and the voting guidelines used to pass any proposals.

What is Excluded From COA Responsibilities?

Although the COA is responsible for maintaining the overall appearance and integrity of the building as a whole, there are a few areas that are beyond the scope of the association. Insurance can be considered one of the most impactful. Although many COAs will obtain a master insurance policy for the property, this generally will not cover much, if anything, inside your unit. Master policies, at most, could include the fixtures, additions and installations within your unit, but many only offer “bare walls coverage” which makes you liable for any damage within the unit. This means, at a minimum, you will need insurance for any personal belongings and may need coverage for everything within your unit walls. A separate HO6 insurance policy will ensure you are covered for damages caused by theft, weather, fire, smoke, vandalism or frozen pipes.

It’s also important to note that investors who choose to rent their units out will still be held personally responsible for any rule violations by their tenants. The COA agreement is only held with unit owners so there are no established procedures for renters who violate the rules. It’s a good idea to include the CC&Rs within any lease agreements for your protection and clearly outline your recovery methods for any damages you suffer due to the negligence of your tenants.

Aside from these common exclusions, anything that isn’t covered by the CC&Rs established by the COA is considered the responsibility of individual unit owners. To ensure your personal liability does not go beyond the scope of what you feel is appropriate, it’s a good idea to keep up with COA proposals and exercise your right to vote on any changes being considered.

What Does This Mean for You as the Investor or Owner?

As the primary or partial investor in a condo unit, it’s important to recognize your responsibility to follow the CC&R guidelines and require that any tenants do the same. You will be held responsible for the actions of anyone within your unit, including guests and tenants, making it necessary to ensure everyone clearly understands the rules. Including the relevant CC&Rs within lease agreements is a good way to establish these guidelines to tenants, but your liability still stands, and you will be responsible for recovering any damages from renters after fulfilling your obligation to the COA. This can be expensive, depending on the rental laws established by the state, and often involves a significant investment of your time.

The CC&R rules are subject to change, usually with a vote by all association members, so getting involved with your COA is a good way to protect your investment and prevent personal liability. The COA is usually required to give notice when a meeting is being held or when changes are being proposed, but it is up to you to keep up with these communications and be present. All unit owners are usually granted a vote and there are often established rules that determine the minimum number of members required to hold the election and the minimum number of votes needed for proposals to pass. Not showing up means you forfeit your right to have a say on any changes being made and could result in being subject to rules you don’t agree with.

Obtaining your own condo insurance is also recommended to protect your unit from any damages that aren’t covered by the master policy. Any gaps in coverage will be your responsibility should disaster strike, so owners are encouraged to fully understand what is excluded and must be purchased separately.

All unit owners are also responsible for their own dues, so don’t forget to factor in that expense when determining the price for your rental. The COA dues for units are often higher than those created by HOAs because they cover the additional expense of maintaining the main building and any interior and exterior common areas and amenities. These can be due quarterly, semi-annually or annually, so make sure to anticipate these costs if they are not collected monthly. Failing to submit your COA dues on time can result in hefty fines or a lawsuit resulting in a lien on your unit.

How a Property Management Company Can Help Protect Your Investment

Property managers specialize in working with COAs to ensure the tenants they cover stay within the CC&Rs for the unit. This can be especially helpful for investors that own multiple properties or have a condo in another state. The professionals who work with property management companies will often take on the burden of understanding the CC&Rs and staying abreast of any changes that are proposed and passed. This makes your contact within the property management company an excellent resource if you are considering an investment in additions or alterations to your unit.

A property management company will also take on the burden of renting out your unit. If you live out of the area, they will be up to date on any state renting laws and can create a rental agreement that falls within legal guidelines and covers the CC&Rs that are relevant to tenants. This protects you from any penalties that may be imposed for violating state rental guidelines and ensures your tenants will fully understand their obligations when they move in.

Should your tenants violate any of the COA rules or fail to meet their financial obligation to you, property management companies have established procedures for collection and eviction proceedings. Again, this ensures your compliance with state and local laws while also removing the stress and hassle of dealing with noncompliant renters. Some property management companies will even stand as your representative in court, should that be necessary for your situation.

Finally, property management will handle all the little inconveniences, such as setting up appointments to fix or replace unit appliances, filing insurance claims for damages, ensuring COA dues are paid on time and handling tenant complaints. Although there are costs associated with hiring a property management company, the services they offer will often pay for themselves in the form of rent collection, compliance guarantees and preventing you from being fined by the COA or state and local governments. The time you save by outsourcing all these responsibilities also has value, allowing you to focus on other projects that need your attention, spend time with family or pursue recreational adventures. Although there is nothing a property management company does that you couldn’t do yourself, many investors find they get more benefit from their investment by allowing paid professionals to handle the daily responsibilities of investment condo ownership.