CMCA Knowledge 3 — Questions and Answers
Question 1: When a community association enforces a rule inconsistently against one owner but not others in similar situations, it risks liability for:
- Ultra vires action
- Selective enforcement (Correct answer)
- Breach of the duty to disclose
- Tortious interference
Correct answer: Selective enforcement
Selective enforcement occurs when rules are applied unequally and can invalidate enforcement actions or expose the association to legal claims.
Question 2: Which of the following best describes the 'business judgment rule' as it applies to community association boards?
- Courts will defer to board decisions made in good faith, with reasonable inquiry, and in the association's best interest (Correct answer)
- Boards may override owner votes if they believe the decision is financially sound
- Managers are shielded from liability for any financial decision they recommend
- The rule requires all major decisions to be put to an owner vote
Correct answer: Courts will defer to board decisions made in good faith, with reasonable inquiry, and in the association's best interest
The business judgment rule protects board members from personal liability when they act in good faith, on an informed basis, and in the association's best interest.
Question 3: An association's right to place a lien on a delinquent owner's unit for unpaid assessments is typically found in which governing document?
- Rules and regulations
- Bylaws
- Declaration or CC&Rs (Correct answer)
- Meeting minutes
Correct answer: Declaration or CC&Rs
The declaration (CC&Rs) typically grants the association the authority to levy assessments and place a lien on property for non-payment.
Question 4: What financial statement shows an association's assets, liabilities, and equity at a specific point in time?
- Income statement
- Cash flow statement
- Balance sheet (Correct answer)
- Budget variance report
Correct answer: Balance sheet
A balance sheet (statement of financial position) presents assets, liabilities, and equity as of a specific date.
Question 5: A community association manager's primary client is:
- Individual unit owners who pay assessments
- The board of directors acting on behalf of the association (Correct answer)
- The developer during the transition period
- The local municipality that issued the community's permits
Correct answer: The board of directors acting on behalf of the association
The manager serves the association through its board of directors, not individual owners or other parties.
Question 6: Which of the following best describes a 'special assessment'?
- A monthly fee charged to all owners for routine expenses
- A one-time or short-term charge levied for a specific extraordinary expense (Correct answer)
- A government tax levied on the community by the municipality
- An annual adjustment to regular assessments based on inflation
Correct answer: A one-time or short-term charge levied for a specific extraordinary expense
A special assessment is an additional charge beyond regular dues, typically levied to fund an unexpected or major expense not covered by reserves.
Question 7: What is the primary function of the CAI's CMCA credential?
- To license community association managers in all 50 states
- To certify that a manager meets a baseline standard of knowledge in community association management (Correct answer)
- To designate managers as licensed real estate brokers
- To replace state-issued community manager licenses
Correct answer: To certify that a manager meets a baseline standard of knowledge in community association management
The CMCA is a national certification that validates a manager's foundational knowledge of community association management principles.
CMCA Knowledge 3
When a community association enforces a rule inconsistently against one owner but not others in similar situations, it risks liability for: