How To Create A Homeowners Association

A homeowners association, or HOA, is a developer-created organization that serves the purpose of maintaining the appearance and common areas of pre-planned, pre-built residences and communities. Most often, membership in the subdivision's HOA is mandatory with the purchase of a home, and residents are required to pay dues as well as abide by the covenants, conditions and restrictions, or CC&R's.

It is possible, however, to form a legal homeowners association after the fact—if the neighborhood has existing or long-term residents who believe creating such an organization is in order. It is done in the same way as for any corporate body, such as a limited-liability corporation. Laws vary by state, and some states have additional regulations for forming HOAs, so be aware of possible exceptions in your area.

Notify residents throughout the community about the intention to start a homeowners association. Optimally, you have already gauged interest in doing so and know that the majority of residents are in favor of its creation.

It is still important to inform all residents because, unlike the compulsory membership that comes with buying a home in a neighborhood already bound by an HOA, existing residents cannot be forced into a newly formed association.

Notification can be done by mail or e-mail, or by publicizing and holding a community meeting.

Hire a real estate attorney. Although it is not 100 percent necessary to have an expert in real estate law on board, it will help to ensure that you do not overlook any state laws or statutes when forming the association. If questions arise, it is best to have a professional who understands the ins and outs of forming HOAs to turn to for answers and guidance.

Name your homeowners association. This is imperative because you cannot submit articles or applications to your filing office without an official name. Taking a vote on the name or collecting recommendations from the community is something to consider so that everyone will feel involved with the planning process.

Put in place a board of directors. Typically, you want the director and the board composed of active, upstanding members of the community and residents within the area that the HOA will affect.

Form committees. This is not required, but some homeowners associations have standing bodies that are governed by a member of the board of directors. For example, the finance committee may be overseen by the treasurer and the planning committee headed by the vice president.

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Make it legal by submitting your application and articles to your filing office. Your real estate attorney can be of great help in doing this properly. Check with the corporate filing office as to what paperwork is required of you and whether there are any exceptions to the articles of incorporation if it is an HOA you are creating.

Create bylaws and outline the CC&R's for your homeowners association. You will want to meet with the community regarding this phase in the process.

If the neighborhood affected by the HOA is long-standing, certain rules and regulations may not be suitable. For example, in developer-designated, obligatory HOAs, CC&R's can be as specific as to designate proper grass height and front-door color.

Set bylaws and covenants, conditions and restrictions that are appropriate for all, or at least the majority, of the newly-formed HOA's members.

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Hold a meeting. There is much to address at a newly formed homeowners association's first meeting. Review the bylaws and adopt them. Vote on and swear in the directors. Decide on membership fees and make plans for allocating them. Outline membership requirements. Set up a meeting schedule. Gather community feedback and be sure to address residents' concerns about the HOA.

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Build a website. For an HOA to run smoothly, attention to detail and communication are paramount. Stay on top of meetings and community happenings, and speak with residents regularly so everyone is on the same page.

Send out a monthly newsletter to announce the meeting times and provide residents with the minutes from meetings past. Newsletters and websites are also effective in distributing news about neighborhood events.

Tips

Include an editor on your board of directors to ensure that all information sent out to the public is professional.

Hold community fun events throughout the year and make it known that they are HOA-sponsored. This will help build neighborhood morale and make residents aware that the association has their best interests at heart.

Warnings

Disagreements will arise as the HOA sets rules and enforces them throughout the community. Have a process in place for taking and addressing complaints.