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Subject: HOA 101
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Author Messages
MelissaP1
(Alabama)

Posts:10576


03/26/2015 7:16 AM  
This topic is for breaking down what a HOA is and what it means. Each one of course is different just like every state law. This is just in GENERAL BASIC TERMS of what a HOA is. It is NOT to represent the whole of each and every HOA. It is not going to perfect for everyone views or opinions. However, it is just the CONCEPT of what a HOA is.

The birth of a HOA typically begins this way (EXAMPLE)... A developer buys 100 acres of land. They then break that up into 100 LOTS. They sell each lot to 100 buyers. The Developer forms the HOA as a corporation for themselves due to possible county/city regulations, for corporate protections, and sales incentives. The buyers are part of the HOA as members. However, the developer still owns and manages the HOA under their corporation.

This means the funds of the HOA are contributed by the members. The beginning the buyers/members are there to basically be investors. The developer will manage their contributions to continue to develop the property, maintain, and add amenities. Those amenities could be a clubhouse, pool, tennis court, utilities, sewer, ponds, or anything considered a common shared element.

The cost to a developer is simplistic. They may buy the 100 acres for 100K. They sell each lot for $20K. A builder then comes in and builds homes in the 100K range. The developer may then spend 20K on amenities like a pool. Which a pool attracts potential buyers. More potential buyers, the better investment of the property.

Eventually, the developer is in this for a PROFIT. They pretty much made that once they sold off the lots. The amenities they may add are just sales tools to them. Once they get the 90 to 100% occupancy to turn over to the owners to control/own the HOA they are out of there. They know the real expense is NOT in the ownership of the land but the long term maintenance of it.

This is when the OWNERS form the HOA. This means that ALL YOU and YOUR NEIGHBORS are now owners/investors. You don't necessarily own the land now but the responsibility of MANAGING and long term maintenance of the amenities. The money you now contribute as dues is now going directly into keeping the HOA up to par to your own imposed standards. Which are dictated by your rules, CC&R's, ACC, and Articles of Incorporation.

You as a HOA member now have the choice. You can elect your fellow members/neighbors to represent you on a board. You can choose be elected on that board. The HOA board is made up of other owners voted on by other owners. Only qualification is that you be an owner. There are no "They or Them". It is truly "YOU and your neighbors" funding, running, and operating the HOA.

Now your HOA can choose to hire an Management company to handle it's business. There are various degrees and agreements each HOA may have with their MC. Some may want their MC to enforce rules and run the place carte blanche. Some may want their MC to handle just the bills. The bottom line is that a MC is still a PAID CONTRACTOR to the HOA, and the HOA is ultimately responsible for the end decisions. Even telling what the MC to do.

No I did not cover everything in this article. It's just the basics. I wanted people to understand when you say "HOA" it is NOT a "They or Them" situation IF your owner controlled and owned. You want your HOA to manage your utilities/sewer?? That means you ALL as HOA members are to make, fund, and make the decisions amongst yourselves. It is best to do it as a corporate structure the HOA is to provide you each as individuals protection as a whole. Otherwise, if you let someone else handle your business, you lose a lot of rights, control, and money if you don't understand the HOA concept.

Former HOA President
RichardP13


Posts:0


03/26/2015 7:36 AM  
Over the past two weeks, my firm has been in discussions with a property that apparently has been self-managed since its inception in 1984. There are 23 units. We gave them a price, then changed it once, as Paul Harvey would say, once we got the "rest of the story".

As I said, self managed, Board comprised of five, two couples and one other homeowner. They have filed federal taxes, incorrectly, they admitted afterwards, but no state tax or the all important state corporation forms for 15 years. They have been suspended as a corporation, which means they open themselves to lawsuits and can't defend themselves. No Board meetings for five years, no elections for a longer period of time. No financials, no reviews, no minutes, no reserves, no reserve study, no budgets, no disclosures.

They now want to negotiate the monthly fee downwards. I said thanks and the very best to you in your further endeavors. Apathy in a HOA is a ticking nuclear bomb waiting to go off.
MelissaP1
(Alabama)

Posts:10576


03/26/2015 7:45 AM  
Thanks Richard for posting that. It kind of shows my point. That when people do not understand what a HOA is or their responsibility in it, things like this happen. Ours was self managed except for the financials. All other decisions we made amongst ourselves. So it is possible to be a self-managed HOA just as long as you know what that means.

It's the people who don't understand what part they play in their HOA. As a member/owner, you either vote for someone to represent you, run yourself, or participate in apathy... You get out of your HOA what YOU put into it or the OTHERS you voted for to represent. Apathetic doesn't protect you. It effects everybody.

Former HOA President
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