HOA BASICS
What is an HOA?
You’ve moved into a new house. You’re prepared to pay your mortgage, insurance, and whatever necessary bills come with your home. But then, you’re surprised to receive another bill requesting you to pay assessments or association fees. Sound familiar? If so, you are probably a new member of an HOA. An HOA, Homeowner Association, is a non-profit corporation encompassing the homes and owners within their respective neighborhood. Although the size of an association and number of members within it can vary, each one has a board of directors that makes decisions on behalf of all homeowners. Every homeowner living in the HOA is a member of the association, but the board of directors is made up of a select few members who have been elected to oversee its operation. Every association begins as a development, in which an individual or company will acquire a large amount of land, spilt it into individual lots, and build upon them to create an entire neighborhood. The developer will construct homes on these lots, with the goal of selling the units the majority of them are occupied, at which point the development begins to take shape as a full-fledged association.
Associations can include houses, condominiums, or townhomes. Each association charges fees, known as assessments, that pay for the expenses and maintenance costs of running the association and maintaining amenities. Rules and operational procedure will differ depending on what type of home you live in; townhomes and condos will have many more shared amenities than a single-family home, such as a shared wall, stairwell, or adjacent hallways. Regardless, each association has its own set of governing documents, known as Covenants, Conditions, and Restrictions (CCR’s), that outlines the limitations of homeowners within the association. If you’ve received a violation notice, it could be because you have not paid your assessments, but often it is because there is a standard that is not being adhered to. This could be trash that has been left outside, a car parked in the street that shouldn’t be, inappropriate décor on the outside of your home, or any other number of things that are not in coordination with the CCRs that accompany your association. Keep in mind that these governing documents were more than likely created at the same time as your association, and they may change or be amended over time. For older communities, some or all the original board members may no longer be there, and the new members may be as unaccustomed as non-board members. This is why it is important for everyone to have a clear understanding of what the HOA standards are and what is required of its residents when moving into a new association.
How are Homeowner Associations created?
Homeowner Associations, like other corporations, have a founder and their own origins. Traditionally, an individual or corporate entity owning a large amount of land, known as a “developer,” will decide to establish individual lots. From there, they will oversee the construction of homes on those lots, building out an entire neighborhood. It is during this stage that the association begins to take shape. From the very first notion of building properties on these lots, the developer is considering the future of the association. However, at what point does this development go from a construction site to an organized owner’s association? Well, first here must be owners. As construction of a unit is completed and the property is sold, an influx of residents gradually fills the community.
Up until this point, the developer has maintained complete control over the direction of the association. They have determined what amenities will be installed and budgeted for, what landscaping will be implemented, and what management company will oversee the community. Once a high enough percentage of the homes in the community are occupied, the process of transitioning power from the developer to the owners begins. This entails the developer signing a declaration document that identifies themselves as the “declarant,” and initiates the process of electing board members to represent the owners.
Before control is fully transferred, the developer may retain nearly any rights they feel necessary, with respect to state statutes. To ensure that their interests and voice are present in meetings regarding the direction of the development, they may also appoint members of their own team to serve on the board as representatives. There may be time constraints that dictate when a declarant must relinquish control to the owners, although this is not always the case. However, once all homes within a community are sold, the owners within the association could begin a hands-on vie for control and will push for that transition. This process can take months or sometimes years and may end with the homeowners assuming authority or can have no real outcome, and the community may remain in the hands of the developer. Luckily, these records are public, and you can easily discover whether you live in a developer-controlled association or not. For more information regarding developments, refer to our developer information page.
What does an HOA management company do?
Homeowner Association Management Companies handle a wide variety of tasks integral to the operation of an association. Essentially, management companies serve to serve to maintain and improve the overall value and quality of the associations. We help to take a heavy weight off the back of the board of directors: being an officer of a homeowner association is an unpaid position, decided by election, and the members are no different than other homeowners who may have families and full-time occupations.
Management organizations, such as William Douglas, assist boards to establish yearly budgets, ensure the rules and regulation of the association are adhered to by all members, and facilitate operations and projects on behalf of the community- these can include landscaping, maintenance, or any other undertakings that require 3rd party involvement. For example, in the case of townhomes and condos, the management company would be the one to contact if there is any damage to the building or other amenities. William Douglas employs an on-call Emergency Specialist that can be contacted outside of our regular business hours- including holidays- if an urgent situation arises, such as fire, water, or sewage emergencies. Some associations may be smaller, and may not require an extensive level of care, in which case a management company may only assist in setting up budgets and ensuring bills are paid. Often, expenses and reserves may be overlooked. We make it our job to consider all financial needs that are apparent, and many that may not be as recognizable such as future maintenance expenses or any unforeseen costs that may arise.
It is a common misconception that association management companies are in charge of the association. Quite the opposite; it is the association that dictates the actions of the management company. Specifically, community managers have an obligation to the governing documents- known as the Covenants, Conditions, and Restrictions (CCR’s)- of the association and a duty to see that they are followed to the tee. In fact, these governing documents often predate board members and and may not be ignored by the elected directors of the association, although the board can make amendments to these CCRs, given that the proper bureaucratic and legal procedures are taken. For more information regarding this process, see our articles regarding HOA authority.
