Homeowners associations (HOAs) regulate issues that affect an entire housing community. Those issues include things like property maintenance, security and safety, snow removal, and other services that may not be provided by local government.
HOAs are rapidly growing in popularity, as homeowners appreciate the stability and convenience of a single, governing entity. They ensure homes, common areas, and amenities are well-maintained, and that makes communities more appealing to buyers. Some real estate professionals believe HOAs can actually increase property values.
If you and/or your neighbors are considering starting a HOA, here are the steps you should follow.
Gauge Interest Among Your Neighbors
To create a HOA, you will need the majority of your neighbors to be on board. The laws vary from location to location, but in some cases, you need every resident to sign off on the HOA plan. In other communities, you may need the consent of a certain percentage of your neighbors.
Hire an HOA Lawyer
Next, look into your local and state laws regarding HOAs in your area. Hire an attorney who focuses their practice on community and condominium associations for legal guidance and assistance. They are best equipped to represent your interests and ensure your HOA is legal and empowered to govern the community as intended.
As you move forward, the lawyer protects your interests if the HOA encounters disputes or has legal matters that need resolution. An HOA lawyer can also file the appropriate documents to establish the HOA as a nonprofit or LLC and clarify the tax obligations for each as well.
Write the CC&Rs and Bylaws
Every residential community is unique. Work with your neighbors and your lawyer to determine the needs and goals for your association; be specific. Do you need to address landscaping, pool maintenance, tennis courts, or a common clubhouse?
Once you have a list of the key areas that need to be governed, you can write your covenants, conditions, and restrictions (CC&Rs). CC&Rs are the governing documents that outline the rights and obligations for the HOA to its members.
CC&Rs are legally-binding and are officially recorded and filed with the state. They address maintenance obligations for all parties, property-use restrictions, and procedures for enforcement rules and resolving disputes.
Bylaws are equally important but have a different purpose. They describe the structure of the HOA and details about how it is governed. Bylaws clarify HOA board positions and their duties, details for the election process, and meeting frequency and quorum requirements.
Establish a Budget, Determine Fees
To ensure the HOA is solvent, you need to create a budget that will cover all necessary expenses. That amount is the starting point for establishing a fee schedule for members. Be sure to include a buffer of some financial reserves to account for price increases and emergency expenses that may arise throughout the year.
HOAs carry insurance to protect them in case something goes wrong in the community, like a dispute or lawsuit. HOAs need to have several different types of insurance, including general liability, directors and officers coverage, and social host liability coverage.
Elect the Governors
Once the HOA is formed, it is time to elect the governors. Ideally, there will be several neighbors ready and willing to volunteer their time. HOA members then nominate and vote on the governors in accordance with the election procedures detailed in the bylaws.
Communicate With Residents, Manage Issues
The HOA has been established. The board members have assumed their roles. Regulations and insurance are in place. Now the HOA is ready and able to manage the community. A positive and productive HOA communicates with members online and through meetings and newsletters.
They are responsive to residents’ needs and handle complaints fairly and promptly. With dedicated volunteers and engaged residents, your HOA can serve you and your neighbors for years to come.
Ocean City HOA Lawyers at Oliveri & Larsen Help Communities Resolve HOA Matters Quickly and Effectively
If your HOA is involved in a dispute with a resident, or you need help forming an HOA, one of our Ocean City HOA lawyers at Oliveri & Larsen can help. Call us at 410-295-3000 or contact us online to schedule an appointment today. Located in Annapolis, Maryland, we serve clients in Ocean City, Anne Arundel County, Baltimore County, Baltimore City, Calvert County, Hartford County, Howard County, Queen Anne’s County, St. Mary’s County, Worcester County, Kent County, and the upper and lower Eastern Shores of Maryland.