If you’ve just moved into a new home, there might be a homeowners association to join. Homeowners associations are known for beautifying neighborhoods and raising property value. However, not all communities come equipped with one from the outset.
If your neighborhood doesn’t have a homeowners association, you can take a few steps to start one. Some of the essentials involve asking around your neighborhood, doing extensive planning, and getting a lawyer involved.
Table of Contents
- Starting a Homeowners Association in Your Neighborhood
- Step 1: Test the Waters
- Step 2: Determine If Your HOA Should Be Mandatory
- Step 3: Know the Law and Get an Attorney
- Step 4: Put the Expectations in Writing
- Step 5: Plan the Operations and Structure
- Step 6: Write the Rules and Be Transparent
- Step 7: Make a Budget and Determine Fees
- Step 8: Choose a Name
- Step 9: Create a Non-Profit or LLC
- Step 10: Create Governing Documents and Elect Board Members
- Additional Tips To Make Your Homeowners Association Successful
- Benefits of a Homeowners Association
- Related Questions
Starting a Homeowners Association in Your Neighborhood
Starting a homeowners association is no easy venture. But, if you’re dedicated to creating one, follow these 10 steps:
Step 1: Test the Waters
Ask around to see who’d be interested in being a part of a homeowners association. You’re going to need quite a few neighbors to be on board. Also, now is an excellent time to ask what everyone would expect from the association.
The law varies from state to state. While some may require a majority buy-in to form an HOA, others might necessitate that everyone in your neighborhood sign off.
Homeowners associations can sometimes get a reputation for being overbearing. Therefore, check-in with residents to determine their expectations. This step can prevent your association from getting a bad rep and help to form your path moving forward.
Step 2: Determine If Your HOA Should Be Mandatory
Determining if you want your HOA to be mandatory or if you’d rather everyone have the choice to join is one of the first decisions you’ll have to make. If most people in your neighborhood are excited about a homeowners association, mandatory just might work! However, if interest is wildly varied, voluntary participation is probably the best route for you.
You can also determine this decision based on what your homeowners association is planning to do. For example, a mandatory association would be helpful when splitting the costs of beautification and neighborhood maintenance.
If residents could opt out, things would get tricky, since they’d still benefit from the collective upkeep. However, if you want to form a homeowners association to streamline trash collection, those who opt out can simply schedule the service on their own.
Step 3: Know the Law and Get an Attorney
Once you’ve got most, or all, of your neighborhood on board, it’s time to research homeowners association laws. First, you should research both state and local laws. This research helps you determine what can and cannot be done legally by your homeowners association.
Next, hire an attorney. An attorney can help you sift through deeds and set up legal agreements when the time comes.
Step 4: Put the Expectations in Writing
Determine the wants and needs of the homeowners association. Basically, you’ve already surveyed the neighborhood; now is the time to put all that in writing. Expectations could be anything from the maintenance of shared spaces to snow plowing to handling sewage and trash fees.
Or, if you’re forming a HOA in a condo complex the expectations may include maintaining common areas such as the lobby, landscaping, swimming pool, tennis courts, elevators, spas, and the like.
Step 5: Plan the Operations and Structure
Plan out the operations of your homeowners association. More specifically, how is your operation going to run and function? There are lots of associations out there that have vastly different rules. You need to establish a process for when changes need to be made and all the organizations or committees that need to be formed. Determine what is best for you and your community.
Develop things like necessary committees, how to determine rules, and an organization structure. This stage in the process will go much smoother with the help of a lawyer.
Step 6: Write the Rules and Be Transparent
Write the covenants, conditions, rules, and restrictions of your homeowners association. Most importantly, communicate! Make sure to keep all those who want to join the homeowners association in the loop throughout the entire process. Even though you’ve already received approval from your neighbors, you need to maintain buy-in.
It is also essential to uphold transparency as you determine rules and regulations. It is advisable to include other members of the community in the decision-making process. Good communication is the best way to keep your neighbors happy and enthusiastic about the new homeowners association.
Step 7: Make a Budget and Determine Fees
It’s critical to make sure your homeowners association budget covers everything it plans to manage. These items include all those wants and needs from step four.
Ensure the homeowners association budget covers requested wants and needs but keeps costs low by not being too extravagant. Creating a realistic budget will limit homeowners association fees from drastically increasing each year.
Decide on the amount for the dues of your HOA and when you will collect them. Most commonly, fees are collected monthly. However, it is not unheard of to have an annual fee. Ask around in your community to determine the residents’ preferences.
Step 8: Choose a Name
The HOA’s title should be a community decision, so come up with a few names and have a neighborhood vote. Be careful not to choose anything trademarked or too similar to another organization.
Step 9: Create a Non-Profit or LLC
This process makes your homeowners association a legal entity.
Note: Whether your homeowners association becomes an LLC or non-profit, it needs to pay taxes. Factor these into your budget.
Step 10: Create Governing Documents and Elect Board Members
Base governing documents on your operational needs from step five. The governing documents needed include bylaws and articles of incorporation. Bylaws help establish your association’s rules and regulations, including how frequently meetings occur and how to elect board members. If you have a few volunteers, this makes electing the board easier.
Even if you have volunteers, have members vote on positions. It’s a bonus if elected members have experience in their elected positions
Additional Tips To Make Your Homeowners Association Successful
In order for your HOA to succeed and be accepted by the community, it’s important to cover your bases. Follow these tips to help your homeowners association be as successful as possible:
Insurance protects the organization in case a homeowner decides to sue. Ideally, the homeowners association should have the following forms of coverage:
- Property Insurance — This insurance covers damage to common areas.
- General Liability Insurance — This covers legal expenses for the entire homeowners association. It also protects it from personal injury and property damage claims.
- Social host Liability Insurance — This covers the HOA’s responsibility when serving liquor to anyone during a gathering.
- Directors and Officers Insurance —This covers legal expenses that pertain to a board member’s actions.
- Workers Compensation Insurance — This is to cover any homeowner’s association employees if they are injured at work.
Make a Website
A website for your HOA keeps members up to date on events and information. Also, it can inform potential buyers of what they can look forward to upon moving in and the neighborhood vibe.
Stay on Top of the Budget
Regularly assess your budget. Ideally, your homeowners association should have a treasurer to keep track of the money flow. Be open about your budget with members of the homeowners association. For example, send out an annual expense report that showcases how the association handles and spends fees.
Keep Members Engaged and Involved
Regularly ask for input and requests. Use the website and occasional in-person meetings to keep residents in the loop. Take complaints seriously and handle them thoughtfully. Remember, your homeowners association covenants, conditions, and restrictions are in place for a reason.
Benefits of a Homeowners Association
If you’re considering establishing a homeowners association, there are many benefits to doing so. Before setting one up, consider the following:
- Homeowners associations usually take care of community upkeep. Upkeep can be everything from maintaining community spaces to hiring landscapers to dealing with neighborhood lawns. Some homeowners associations even take care of pest control and snow plowing.
- Houses in areas with homeowner associations tend to sell better in the future. The sameness and general upkeep created by a homeowners association are appealing to buyers.
- Many homeowners associations have community spaces for recreational activity. These amenities can be anything from a golf course to a pool to a gym. Some homeowners associations even host social gatherings for residents like block parties.
- Homeowners association fees generally cover utilities. This helps cut down on the number of bills you have to handle and track.
- Homeowners associations help with conflict resolution. If your neighbor is giving you trouble, a homeowners association can help you deal with it in a helpful manner.
Can I opt-out of a homeowners association?
If a homeowners association is forming in your neighborhood, they probably cannot force you to join. However, if the association existed before you moved in, you might have to join.
If you move into an area with an established homeowners association, joining could be part of your lease or contract.
What is the average homeowners association fee?
Homeowners association fees are dependent on the services the association offers. Usually, the average cost is around $200 per month, though it can vary from $100 to $700 monthly.