Building your Dream HOA — a Checklist

By Deborah Goonan, Independent American Communities

debgoonan@icloud.com

Does your HOA have what it takes to work well for residents?

The industry that builds, sells, and serves homeowners’ associations (HOAs) promotes a wildly unrealistic premise — that unit owners and shareholders will forever engage in fair and friendly cooperation with their association leaders and their neighbors.

Unfortunately, in the real world, HOAs aren’t always fair or friendly. In the U.S., reports of HOAs from Hell are common, as featured by Judy L. Thomas of the Kansas City Star.

An HOA-governed community is based on several faulty assumptions, including the myth that HOAs protect property values.

HOA restrictions and rules can be oppressive, as documented and explained at length on this website. But don’t just take my word for it. Consumer protection groups across the country agree.

The success or failure of any community, including the HOA-governed community, is dependent upon its resilience in the face of uncontrollable events.

Most HOAs don’t foster resilient communities, because they’re primarily designed to protect the short-term interests of industry stakeholders.

Who benefits from HOAs?

The truth is, most modern HOAs are designed for the financial benefit of real estate developers, major real estate stakeholders, and local governments.

Contrary to once-popular belief, HOAs don’t necessarily provide true economic or community values to members at large.

The reason: HOA-governance power structure is blatantly unbalanced in favor of association corporations.

HOAs have broad authority to covenants, restrictions, and rules, and residents are too easily penalized and held accountable by their HOAs. For example, the power of the HOA to impose fines or otherwise punish members is often abused.

By contrast, to hold their association leaders accountable for poor financial decisions, negligence of maintenance, or general misconduct, member options are limited.

All to often, a homeowner is forced to either put up with abuse and dysfunction, or spend a great deal of money and time challenging the HOA in court.

With most state laws skewed in favor of real estate developers, boards and managers of HOA corporations, suing one’s HOA rarely results in meaningful accountability.

That’s why critics of the HOA-governed common interest community agree that its governance, economic, and social structure is fundamentally flawed.

 

Can the HOA work for its members?

It’s not that homeowners, condominium, and cooperative associations can never work as envisioned by its proponents.

But meeting the many conditions required to ensure an effective, benign, and desirable HOA is certainly challenging.

For starters, community leadership must set the right tone, and that rarely happens when the primary focus is on property values vs. social values.

Nevertheless, here are some basic guidelines for that elusive Dream HOA.

Building your Dream HOA — a Checklist

 

• Money. Each community needs a sufficient and consistent revenue stream to operate efficiently over the long term. That includes a secure savings plan, so there’s enough money in reserve when needed for repair and renovation of common property.

 

• Commitment. Each owner must be willing to contribute both time and money necessary to ensure long-term success of the community. A community with a high turnover of owners often lacks a high level of commitment to the future.

 

• Strong internal controls. An HOA must have administrative policies that include internal checks and balances to prevent theft, corruption, conflicts of interest, fraud, and general misconduct of the board and its agents.

 

• Confident, reasonable board members. Effective HOA leaders do not fear transparency. On the contrary, they encourage open communication, and resident involvement.

 

• Careful choice of reliable, ethical knowledge base. Some HOAs are fortunate to have knowledgeable board members with prior career experience in management, construction, or law. But most HOA board members must be willing to actively seek out ethical and reliable experts when needed.  Effective HOA boards don’t allow the manager or attorney take the lead and steer the direction fo the community.

 

• Government assistance. Sometimes HOAs benefit from local or state government support and guidance. This is especially true in times of disaster recovery, and for economically disadvantaged communities.

 

• Quality insurance coverage. HOAs must have adequate insurance coverage from financially sound, reliable companies. The goal is to protect the association from a full range of liabilities, to ward off financial ruin, and to reduce financial risk for members.

 

• Common values. Ideally, members of the association will share a common vision for the community. However, owners and residents of larger HOA-governed communities usually divide over competing interests. (Owner-occupants vs. investor-owners.)

 

• High-quality construction and design. A community that starts out with good planning and solid construction ages more gracefully, because it’s easier and less costly to maintain. Unfortunately, many common interest communities fail to meet high quality construction standards.

 

• Suitable and desirable land use. A well-planned community should have no inherent adverse issues, such as safety or environmental hazards or an inconvenient location. Local government should be invested in the community’s success. If it’s not, the HOA rarely thrives.

 

• A no-tolerance policy for abuse. All HOA members — whether on the board or not — must have the moral courage to stand up to community bullies, especially abusive leaders in positions of power and control over their neighbors.

 

• An effective emergency response plan. All HOA-governed communities are vulnerable to unforeseen disasters, from fire to hurricanes to tornadoes and earthquakes. Wise HOA boards work with experts in law and insurance, as well as government agencies, to create a written, comprehensive plan of response before a disaster strikes.

 

• Neighborly, not oppressive community security. HOAs benefit when all residents are actively involved in neighborhood safety and security, as the eyes and ears of the community. HOAs that rely too heavily on surveillance cameras or private guards expose the association to liability for negligence or violation of privacy. Responsible HOA boards emphasize common sense measures for prevention of crime, such as board member and employee background checks, good nighttime lighting, security locks on doors and windows, etc.

 

• A “people first” attitude. Like any social organizations, HOAs work best when leaders engage in mutual cooperation, service to others, driven by kindness, consideration, and compassion toward one’s neighbors.

 

How many of these conditions are met in your HOA-governed community? ♦