Free CMCA Exam Flashcards

From highest to lowest authority: federal/state law, then the declaration (CC&Rs), then articles of incorporation, then bylaws, then rules and regulations. When two documents conflict, the higher-ranking document always controls.

The recorded document that creates the covenants, conditions, and restrictions establishing the property regime and the association itself. It ranks just below federal/state law and is typically the hardest governing document to amend, often requiring a supermajority owner vote.

The document that forms the association as a legal corporate entity (usually nonprofit). It exists mainly to create corporate status and grant the association legal standing to hold property, contract, and sue or be sued.

Bylaws govern corporate operations such as board elections, meetings, and officer duties, and rank above rules. Rules and regulations implement the authority granted by the bylaws and declaration, cover day-to-day conduct, and are the easiest document to amend - but they can never conflict with a higher-ranking document.

Before an association can impose a fine or suspend privileges, the alleged violator is generally entitled to written notice of the violation, an opportunity to be heard (a fining hearing), and often a right to cure the violation within a set period. Skipping these steps can void the penalty even if the violation was real.

Protects board members from personal liability for decisions made in good faith, with reasonable care, and within the scope of the board's authority - even if the decision later turns out badly. It does not protect decisions made with fraud, self-dealing, or gross negligence.

Board members owe the association a duty of care (act as a reasonably prudent person would), a duty of loyalty (avoid conflicts of interest and self-dealing), and a duty to act within the association's stated purposes and governing documents.

Race, color, religion, national origin, sex, familial status, and disability. Association rules, architectural decisions, and enforcement actions that disproportionately burden any of these classes can trigger fair housing liability, regardless of intent.

In a condominium, owners hold title to their individual unit plus an undivided interest in common elements. In an HOA/planned community, owners hold title to a separate lot plus membership in the association. In a cooperative, residents own shares in a corporation that holds title to the whole property and occupy their unit under a proprietary lease.

Committees established by the board (e.g., architectural review, finance, social) are generally advisory and make recommendations, not final decisions, unless the governing documents specifically delegate binding authority to them. The board retains ultimate responsibility.

The formal process of transferring control of the association from the developer to an owner-elected board once statutory or declaration-defined triggers are met (e.g., a percentage of units sold). Transition typically includes a turnover study/audit of finances, reserves, and construction to protect the incoming board.

A board-adopted collection policy defines the escalation steps (late notice, late fee, lien, referral to counsel) for delinquent assessments. Debt becomes 'unrecoverable' when collection costs would exceed the amount owed or the owner is judgment-proof (e.g., bankruptcy, foreclosure by a superior lienholder) - the board must still follow a documented write-off process.

FFB = (effective age / useful life) x current replacement cost, calculated for each reserve component. It represents the theoretical reserve balance if the association had funded the component perfectly since installation.

Percent funded = actual reserve balance / fully funded balance (FFB). Reserve studies generally flag associations below roughly 70% funded as at meaningful risk of special assessments; 100%+ is considered fully funded.

Straight-line (component) funding sets aside money for each reserve component separately, which is simple to track but can produce uneven assessments. Cash-flow (pooled) funding combines all components into one fund and smooths contributions over time, which is more common in professionally managed associations.

The operating fund pays recurring day-to-day expenses (utilities, payroll, landscaping) and is refilled annually through regular assessments. The reserve fund pays for major repair and replacement of common-element components. The two funds must never be commingled - using reserve money for operating shortfalls is a common audit finding and can create fiduciary liability.

An audit provides the highest level of assurance because the CPA independently verifies transactions and balances. A review provides limited assurance based on analytical procedures and inquiry, without verification. A compilation provides no assurance - the CPA simply organizes management's data into financial statement form.

When an owner falls delinquent, the association can record an assessment lien against the unit to secure the unpaid debt; if the debt remains unpaid, the association may ultimately foreclose on the lien. Foreclosure is a last-resort remedy pursued only after less severe collection steps (notices, late fees, payment plans) have failed.

Cash basis accounting records revenue and expenses only when cash actually changes hands. Accrual basis accounting records revenue when earned and expenses when incurred, regardless of when cash moves - GAAP-compliant association financial statements use the accrual basis.

IRS Form 1120-H offers a simplified filing with a flat tax rate but only taxes non-exempt (non-membership) income, and requires at least 60% of income to be from members and 90% of expenses to be exempt-function costs. Filing the standard Form 1120 instead can sometimes produce a lower tax bill but requires full corporate-style reporting and is more complex.

The tested investment hierarchy for association reserve funds is safety first, liquidity second, and yield (return) third - reserve funds should never be placed at meaningful risk of loss chasing higher returns, since they exist to fund guaranteed future repairs.

A board-approved annual budget must estimate operating costs and reserve contributions using historical data, contracts, and reserve study funding plans. Common threats to accurate budgeting include inflation on service contracts, deferred maintenance becoming an emergency expense, and underfunded reserves forcing special assessments.

Quorum is the minimum number of members (in person or represented) who must be present for a meeting's business to be valid, set by the bylaws or statute. A proxy is a written delegation of one member's vote to another person and counts toward meeting quorum, but it only authorizes a vote - it does not by itself satisfy every meeting requirement.

A voting method that lets an owner concentrate all of their available votes onto one or a few board candidates rather than casting one vote per open seat, which can help minority-interest owners elect a preferred candidate. It must be authorized by statute or the governing documents to be used.

Open session covers routine board business (budget votes, rule adoption) that owners may attend. Executive session excludes ordinary owners and is reserved for sensitive topics like pending or threatened litigation, personnel matters, contract negotiation strategy, and communications protected by attorney-client privilege.

Governing documents and state statutes set minimum notice periods and required contents (date, time, location, agenda) for board and membership meetings. A defective notice can void actions taken at that meeting, even if the underlying decision was otherwise proper - courts tend to enforce notice requirements strictly.

Minutes are the official written record of a meeting - what was decided and who moved/seconded/voted, not a verbatim transcript of discussion. Minutes from executive session are typically kept separately and may be redacted or withheld from general owner records requests to protect privileged content.

Most governing documents and state statutes allow owners to remove a sitting board member before their term ends through a formal recall process, typically requiring a petition and a majority or supermajority vote at a special meeting - distinct from simply not re-electing them at the next annual election.

Many state statutes and governing documents require board elections to be conducted by secret ballot to protect voters from pressure or retaliation, meaning the completed ballot cannot be traceable back to the individual owner who cast it.

If a meeting fails to reach quorum, many governing documents allow the meeting to be adjourned and reconvened at a later date under a reduced quorum requirement, so routine association business is not permanently blocked by low turnout.

Some governing documents and statutes allow the board or membership to take official action by unanimous (or otherwise specified) written consent instead of holding a live meeting, provided the consent is properly documented and distributed.

Covers physical damage to the building structure and common-area property from covered perils like fire, wind, and vandalism. It is the foundational policy in an association's insurance program and is usually required by the declaration and any mortgage lender.

Covers the association's legal liability for third-party bodily injury or property damage occurring on common property - for example, a visitor's slip-and-fall in a clubhouse or pool area.

Covers board members and officers against claims arising from their decisions and actions taken on the association's behalf (wrongful acts), such as an owner suing over a denied architectural request. It complements, but is distinct from, the business judgment rule's liability protection.

Covers losses from theft, embezzlement, or dishonest acts committed by association board members, employees, or the management company handling association funds - it protects the association's money, not its liability to others.

Provides an additional layer of liability coverage above the limits of the underlying general liability and D&O policies, triggered once a claim exceeds those base limits - inexpensive protection against unusually large judgments.

Flood damage is excluded from a standard property policy and requires a separate flood policy, often through the National Flood Insurance Program. Workers' compensation is a separate, typically state-mandated policy covering injuries to the association's own on-site employees, distinct from the GL policy that covers third parties.

A document a vendor or contractor provides as proof of active insurance coverage (usually GL and workers' comp) before starting work for the association. Managers should track COI expiration dates, since work performed after a COI lapses leaves the association exposed.

The National Fire Protection Association standard governing inspection, testing, and maintenance of water-based fire protection systems (sprinklers, standpipes). Associations with fire sprinkler systems must schedule NFPA 25-compliant inspections on a recurring basis.

The National Fire Protection Association standard governing fire alarm and signaling systems - installation, inspection, and testing. It is distinct from NFPA 25, which covers water-based suppression systems rather than alarm/detection equipment.

Major common-element assets with a limited useful life and a significant replacement cost - such as roofs, paving, pools, and elevators - that a reserve study identifies individually to calculate funding needs. Routine, low-cost items are typically excluded and funded from the operating budget instead.

Preventive maintenance is scheduled, routine upkeep performed to avoid failures (e.g., regular HVAC servicing), which is cheaper and protects property values. Emergency maintenance addresses an unplanned failure after it occurs and is typically far more costly - deferred preventive maintenance is a leading cause of emergency repairs.

An engineering and financial review conducted when governance transitions from the developer to the owner-elected board, documenting the physical condition of common elements and reserve adequacy to identify any construction defects or underfunding the developer should address before turnover is complete.

A pest-control approach that combines monitoring, prevention, and targeted treatment to minimize pesticide use while controlling pests effectively - favored over routine blanket chemical spraying for cost and environmental reasons.

An absolute deadline (set by state law, often 6-10 years after substantial completion) after which a construction-defect claim can no longer be brought, regardless of when the defect was discovered. It differs from a statute of limitations, which runs from discovery of the defect rather than from completion of construction.

A formal solicitation document the association sends to multiple vendors describing the scope of work needed, so the board can compare competing bids on a consistent basis rather than accepting the first or cheapest quote without context.

Conditional partial waiver (waives rights for a progress payment only if paid), unconditional partial waiver (progress payment already confirmed received), conditional final waiver (waives all remaining rights pending final payment), and unconditional final waiver (final payment confirmed received, project fully closed out).

Before awarding a contract, the manager verifies a vendor's licensing, insurance (COI), and references, and continues tracking COI renewal dates throughout the contract term so coverage never lapses while work is ongoing.

The section of a contract that specifically defines the deliverables, tasks, materials, timeline, and standards the vendor must meet - the primary reference point when a dispute arises over whether the vendor performed as agreed.

The contract provision defining how and when either party may end the agreement early - for cause (e.g., breach, poor performance) or for convenience - along with required notice periods and any early-termination fees. Reviewing this clause before signing protects the association from being locked into an underperforming vendor.