RealManage Insight

How to Start an HOA in Your Neighborhood

by Carolyn Thacker on Mar 15, 2022 9:40:00 AM

Living in an HOA community is a concept that is gaining traction all over the United States for several reasons. For starters, it's the appeal of living in a secure neighborhood. But more importantly, a well-regulated community plays a vital role in promoting the appreciation of home values in the area. If you're missing out on living in an HOA, starting one may be simpler than you think. You can consider starting one right where you live by following this step-by-step guide.

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A Step-By-Step Guide to Starting an HOA in Your Neighborhood

Specific requirements for HOAs may vary from one state to another. However, here are general guidelines that will make the process of starting an HOA in your neighborhood stress-free.

Evaluate the Level of Interest in an HOA

You'll be successful at launching an HOA in your community if your neighbors buy into the idea. Whereas some states require a majority of the neighbors to agree to start an HOA, others stipulate that everyone must be in for the idea to take off.

As an HOA, you must agree on the benefits and scope of the association while being open and honest about the responsibilities involved. First, you'll decide what the community members want the HOA to cover. Then, inform members exactly what is expected of them: payment for services, attendance at meetings, and volunteering for management boards.

Familiarize Yourself With Local Laws on HOAs

Pursue a thorough understanding of the legislation governing forming and managing a homeowners' association in your area. To ensure that you are fully compliant with rules, become familiar with local statutes and state laws governing HOAs. Consider contacting other HOA Board Members or an HOA attorney in your area, who are more likely to be familiar with association legal issues. Make use of their knowledge to assist you in the process.

Research What Other HOAs Are Doing

Scrutinize what HOAs in your locality is offering to develop a competitive value proposition. Then, benchmark their charges and range of amenities so that you launch a service that your neighbors will want to sign into.

Get Insurance

Like any other business, an HOA is prone to risks. Getting an appropriate insurance cover is an excellent way to cushion yourself from exposure to risk factors. Association insurance protects the board and the association from the threats faced by homeowners.

Assemble a Support Team

Starting an HOA requires multisectoral expertise and knowledge, and it's tough scaling it all solo. Assemble a formidable team from your community members to help you pull through with ease. Part of these volunteers may end up being HOA Board members at the onset.

Engage With Homeowners Constantly

Successful HOAs have engaged homeowners. Keep multiple communication channels open to ensure the minutes of board meetings are publicized effectively in the community.

Establish a robust communication channel that allows homeowners to offer suggestions for improvement, and ventilate on issues that are important to them. Set up a mechanism for handling complaints and resolving disagreements related to community associations.

Draw a Budget

Come up with a realistic budget that covers all the necessary costs. With costs determined, it's much easier to set monthly fees. Include unexpected expenses such as emergencies in your fee structure. That way, you won't need to adjust fees unnecessarily to cover these costs. By accurately determining your operational costs, you can create a superb budget.

Stipulate the CC&Rs

After you've determined what you want your HOA to do, you'll capture those aspirations in covenants, conditions, and restrictions (CC&Rs). Get homeowners to sign CC&Rs by negotiating mutually beneficial terms to both parties.

Formalize Your HOA

Set up your HOA business by formalizing it as a legal entity by registering it as a nonprofit or a limited liability corporation (LLC).

Steps to setting up your HOA as a business:

  • Name your HOA
  • Draft articles of incorporation
  • Pay outstanding legal fees
  • Confirm your by-laws are appropriately written
  • Register for a federal tax number

Elect a Board to Govern the HOA

Lastly, select Board Members from competent volunteers with a passion for serving the community. They'll be in charge of the day-to-day running of the HOA.

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