Free CMCA Beginner's Questions and Answers — Questions and Answers

Question 1: What obligations does "Co-Insurance" place upon the Association?

Maintain certain limits of insurance (Correct answer)
Pay the deductible
Provide insurance for homeowners
Cover the depreciated value of all association buildings

Correct answer: Maintain certain limits of insurance

Co-insurance clauses in property insurance policies stipulate that the insured (the association) must carry insurance coverage up to a specified percentage (e.g., 80% or 90%) of the property's full replacement value. If the association fails to meet this requirement at the time of a loss, the insurer will only pay a prorated amount of the loss, even if the loss is less than the policy's face value. This encourages adequate coverage to protect the association's assets.

Question 2: If a member does not get notice of a meeting, the association is not liable if the member:

Already signed the petition to call the meeting.
Shares title with multiple owners.
Does not usually attend the meetings.
Did not notify association of their current address. (Correct answer)

Correct answer: Did not notify association of their current address.

Community associations typically have a responsibility to send meeting notices to the last known address provided by the member. If a member fails to update their contact information with the association, they are generally considered to have forfeited their right to claim non-receipt of notice. The association's liability is contingent on fulfilling its duty to send notice to the address on record.

Question 3: Which of the following is included in the initial letter you write to an owner who broke one of the regulations the organization has established?

What the outcome of similar cases has been.
The offer to meet to hear the owner's viewpoint. (Correct answer)
Steps to amend the rules.
The amount of fine assessed.

Correct answer: The offer to meet to hear the owner's viewpoint.

When addressing a rule violation, the initial communication should include an offer for the owner to meet with the board or a designated committee to discuss the alleged violation. This provides the owner with due process and an opportunity to present their side of the story or explain mitigating circumstances before any penalties are formally imposed. This approach promotes fairness and can help resolve issues amicably.

Question 4: Which project would a board be most likely to hire a consultant for assistance in creating bid specifications?

General state statues
Federal statues
Articles of Incorporation
Specific state statues (Correct answer)

Correct answer: Specific state statues

While the question's phrasing is somewhat ambiguous, a consultant hired to assist in creating bid specifications for a community association project would need to ensure those specifications comply with all applicable laws. Specific state statutes often contain crucial requirements related to building codes, environmental regulations, accessibility standards, and contractor licensing that must be incorporated into project bids. The consultant's expertise helps ensure the project is legally compliant and meets necessary standards.

Question 5: Which is an example of an association control system?

Posting police department information on building bulletin boards
Frequent neighborhood inspections (Correct answer)
Owner garage door locks
None of the above

Correct answer: Frequent neighborhood inspections

Frequent neighborhood inspections are a proactive association control system designed to monitor the physical condition of common areas and individual properties for compliance with community rules and maintenance standards. By regularly checking for issues like unkempt landscaping, architectural violations, or needed repairs, the association can identify problems early, enforce standards, and maintain the community's aesthetic and property values.

Question 6: Where could a manager find rules about how the association should take care of the physical assets?

Board resolutions (Correct answer)
Governing documents
Real estate sales contract
Equipment warranties

Correct answer: Board resolutions

While governing documents provide the foundational rules for an association, specific, detailed policies regarding the maintenance of physical assets are often established through board resolutions. These resolutions are formal decisions made by the board of directors that outline precise procedures, standards, and schedules for maintaining common elements and amenities. They offer actionable guidance for the manager and staff on how to fulfill the association's maintenance responsibilities.

Question 7: Board members and the manager have what "duty" to members?

Conduct
Accountability
Loyalty (Correct answer)
Service

Correct answer: Loyalty

Board members and managers of community associations have a fundamental fiduciary duty of loyalty to the members. This duty requires them to act in the best interests of the association and its members, placing the community's welfare above any personal gain or conflicting interests. It ensures that all decisions are made impartially and for the collective good of the community.

Question 8: Contracts of employment are NOT required to include:

Interests (Correct answer)
Legal sources
Notice
Termination

Correct answer: Interests

Employment contracts are legally binding documents that typically specify essential terms such as legal sources governing employment, notice periods for termination, and the conditions under which employment can be terminated. While an employee's 'interests' are important, they are not a mandatory contractual clause in the same way that legal obligations and operational procedures are. The contract focuses on defining the terms of the working relationship.

Question 9: As part of HR management, discipline might include:

Selecting using a progressive system
Gathering performance information from other employees
Counseling the employee (Correct answer)
Terminating an under-performing employee

Correct answer: Counseling the employee

In HR management, discipline is often a progressive process aimed at correcting employee behavior and improving performance. Counseling the employee is a common and crucial initial step in this process. It involves providing feedback, clarifying expectations, and offering support to help the employee meet job standards before more formal or severe disciplinary actions are considered.

Question 10: The purpose of directors' and officers' liability insurance is to cover claims that come from:

Bodily injury of directors and officers.
Wrongful acts of employees of the association. (Correct answer)
Damage to board owned property.
Theft of funds by an association board member.

Correct answer: Wrongful acts of employees of the association.

Directors' and officers' (D&O) liability insurance is specifically designed to protect the association and its leadership from claims arising from alleged 'wrongful acts' committed in their official capacity. These wrongful acts typically include errors, omissions, breaches of duty, or misstatements made by directors, officers, and sometimes employees acting on behalf of the association. It covers the financial costs of defending against such claims and any resulting settlements or judgments.

Question 11: The board performs its fiduciary duties by:

Establishing internal controls. (Correct answer)
Authorizing the manager to enforce rules.
Voting to eliminate parking rules.
Authorizing of a committee to adopt due process procedures.

Correct answer: Establishing internal controls.

The board fulfills its fiduciary duties by acting in the best financial and operational interests of the association and its members. Establishing robust internal controls, such as financial policies, approval processes, and oversight mechanisms, is a critical way to meet this duty. These controls safeguard the association's assets, ensure accurate financial reporting, and prevent fraud or mismanagement, demonstrating responsible governance.

Free CMCA Beginner's Questions and Answers

What obligations does "Co-Insurance" place upon the Association?