Annual Community Association Duties – The Basics   Leave a comment

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There is no time like the present to think about making sure your community association is organized and taking care of its basic obligations.  It can be easy to lose sight of the basic obligations that the association has to perform each year, especially when dealing with bigger issues such as the effects of foreclosures on your community or other difficult and emotionally-charged issues. This article is intended to provide you with a guide to the basic obligations so that you will not end up sweating the small stuff.

Some of these obligations arise from the association’s organization as a nonprofit corporation.  Others arise because the association is expressly given routine tasks to perform under its declaration of covenants, conditions, and restrictions (or in the case of condominiums, in the declaration of condominium or in the Georgia Condominium Act).

To begin, the board of directors of the association should be meeting regularly, preferably at least once each quarter, or as provided specifically in the association’s by-laws.  Check your by-laws to see what the requirements for how often you must meet, when notices for these meetings must go out, how many directors must attend the meeting before anything can be accomplished.  These nuances assure that the actions taken in the meeting are valid actions of the association.  These meetings are open to the membership and members should be informed of the meetings and able to attend.  Only certain topics may be discussed in executive sessions.  If these requirements are not in the by-laws, or if there are currently no known by-laws for the association, I would highly recommend that the association set aside money for a legal review of its documents to determine what else might be missing – and to fix it.

The association officers, at the direction of the board of directors, should maintain permanent, current records of all board, committee, and member meetings and any waivers of notice for such meetings as provided in the Georgia Non-Profit Corporation Code §14-3-1601.  The treasurer, or other officer, should maintain current and accurate accounting records for all money flowing through the association, as also required by the Georgia Non-Profit Corporation Code §14-3-1601.

Finally, the officers should make sure there is a current, up-to-date list of the association’s members available at each membership meeting, as provided in the Georgia Non-Profit Corporation Code §14-3-1601 and 14-3-720.

Each year, the association, as a nonprofit corporation, is required to file a registration and pay a fee to the Georgia Secretary of State.  This registration updates all of the contact information for the association.  You can find the registration form and pay the fee easily online at www.sos.georgia.gov/corporations/.  If this step has been overlooked in the past, the association may have been dissolved by the Secretary of State and you will need to reinstate the association.  This is very important as the authority to act under any declaration is given to the association.  Even more important to the directors and officers is that the legal protections for their actions (any insurance coverage, indemnities in the documents, etc.) disappear if the association is dissolved.

Another annual responsibility that is often overlooked is the need to file a tax return.  Even if your association is nonmandatory and has little or no money flowing through it, you will need to file a return.  Make sure that a Federal tax identification number has been obtained for your association.  If not, or if you are unsure, a tax professional or community association attorney can assist you with finding out if your association needs a number and help you get one.  The association would file a form 1120 or a form 1120H with the Internal Revenue Service and a tax professional can help you with filling out these forms.

One thing to look out for, though, is advice that tells you that your association can be a 501(c)(3) tax exempt entity.  The standards for becoming this kind of entity (and being tax exempt) are very specific and are very unlikely to include your association.  Again, consult a tax professional before attempting to file for this status.

Other annual responsibilities include preparing an annual budget, computing annual assessments (dues), and compiling annual financial statements. These tasks are often required to be performed at the end of the association’s fiscal year, depending upon how the declaration and by-laws for the association are worded.  If these tasks have not been performed, they should be taken care of without any additional delay.

Typically, owner/members have the right to see the budget and get notice of the annual assessments well in advance of due dates for payment, and the budget may be subject to approval by the association’s members.  The financial statements will likely also be required to be prepared annually, by an independent public accountant, and there are a variety of standards that may be required.  Check your documents (or with your attorney) to determine what your requirements are.

Finally, and most importantly, there must be at least one meeting of the members each year and the declaration and by-laws should give you guidance on how to call this meeting (what notices to send out and to whom).  Unfortunately, these provisions are often a bit legalistic and spread out between various provisions in the documents.  You may want to verify the process with a community association attorney before calling a meeting to make sure you have the process and documentation right.

By Amy H. Bray, partner in the Commercial Real Estate Department, Andersen, Tate & Carr, P.C.

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You may, as long as you include this complete bio with it:

 Amy H. Bray is a Georgia attorney, focusing her practice in community association and real estate law matters. 

 Her firm, Andersen, Tate & Carr, P.C., works with all manner of clients in business and personal matters, providing “big firm” sophistication with suburban law firm attention and service.

Website: www.atclawfirm.com

Blog: www.andersentatecarr.wordpress.com

 Copyright © 2009 & 2010, Amy H. Bray & Andersen, Tate & Carr, P.C.

 

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