Living in an HOA

The residence we own in Big Sky, MT is a part of an HOA.  Many owners do not think about joining an HOA when they buy residence.  This is because they are excited about their new purchase and often spend little time on the fine print.  Later, depending on the community, owners may realize rules in many HOA’s can be very complex.

A few years ago, I was elected to the Board of our HOA and subsequently elected as the Board Chairperson.  I was actually elected to the Board at an Annual Meeting which I did not attend. Though I had been asked to serve on the Board prior to the Annual Meeting, I was not worried about being elected to the Board.  I thought my fellow owners had much higher standards. Sadly, they did not.

I became chairperson of our Board five minutes into my first Board Meeting because the previous Board chairperson had recently resigned from the Board.  It was not so much I wanted to be chairperson as no other Board member wanted it. It is an example of when there is a request for a volunteer and everyone else takes one step backward and suddenly I was standing by myself.

The following are a few of the things I have learned about HOA’s since joining the Board.

• By-Laws or Declarations:  These are the rules and regulations [R&R] of the HOA which many new owners do not read when they buy a residence governed by an HOA.  Later, when owners receive a notice of a violation of the R&R, they are often surprised and indignant. First, because there are rules, second the rules apply to them, and third, they have to follow them or there are consequences.  If you have not done so, I would suggest you read your HOA's R&R.  Note, because they are written by attorneys in legalese, they are incredibly boring.  They are, however, almost a sure-fire cure for insomnia.
• Common Elements:  This along with Limited Common Elements is what is owned and controlled by the HOA.  In our HOA, this is everything from the drywall out.  Often an owner will say to me, "my roof or my yard" and then I patiently point out, unless the roof or yard is inside the drywall of their unit, they do not have a roof or yard.  Or, they are percentage owner of a whole lot of roofs and yards.  I have yet to have anyone thank me for sharing this bit of wisdom.  Maybe tomorrow.
  • By the way, if the roof on your unit does not have a leak and the roof on a unit on the other side of the HOA has a leak, you are part owner of one roof that does not leak and one that does.

• Professionals:  One of the most important jobs of the Board is to contract with professionals who are experienced in HOA Management.

  • Attorneys: You need attorneys to draft the R&R, then explain them to you and the owners regularly, then when an owner violates the R&R to explain the HOA enforcement options, and finally update the R&R when they are out of date.  Updating starts the entire process all over again. 

  • Accountants:  Accountants keep track of money going in and going out. For HOA's like ours, with a total budget of over one million dollars, this is a very important responsibility and needs to be as detailed as possible.  At the Annual Meeting, if the money going in exceeds the money going out the accountant smiles.  If the money going out exceeds the money going it, the accountant says they are just doing the numbers and then looks at the Board chairperson.   

  • Insurance agent:  Bad things can and occasionally do happen at any HOA.  Risk management for HOA's can be complicated as some potential events are uninsurable and others are not.  When a bad thing does happen, you do not want the insurance agent who says, "Wow, that really sucks, we should have thought of that".  You want the one who says, "that's covered".  
  • HOA Management Company.  This is the Board's best friend as they handle all aspects of managing an HOA. They have to be skilled in a wide variety of areas.  Their most important skill is smiling when an owner is complaining.  For one of the staff members at our HOA Management Company, it takes most of Saturday to have the member’s face going back to normal after having a frozen smile on it for five days.  I suspect this is true for a lot of service workers.  

  • Quality professionals are expensive.  Not having quality professionals is even more expensive.  Our HOA has outstanding professionals, but do not tell them, as it will go to their heads and they may try and raise our rates.

• Assessments:  This is the fee owner's pay to own a residence in an HOA. These often seem high to many owners because they do not appreciate the costs for their HOA.  For example, in Big Sky to plow roads, shovel sidewalks, do grounds-keeping, repair problems or damages to units, manage major projects and all the other items that maintain a campus and enhance the quality of life for residents, cost a lot of money. 
  • Often, An owner will tell me HOA fees are more expensive than wherever they have lived before.  I then say, “look around does this look like Florida, Boston, Minnesota or wherever they are from”.  The reality is for us in Big Sky and I suspect this is true for many HOA's in a variety of areas, the cost of living is increasing and I suspect this will continue for the foreseeable future.

• Reserves:  You can tell the IQ of an HOA by its reserves and assessments to reserves. Low reserves and contributions to reserves, low IQ.  Adequate reserves and adequate funding towards reserves, high IQ. 
 

• Complaints:  Complaints are what happens when you have a bunch of people living together in a community with community rules.  As an owner, it is important you bring a concern to the Management and Board’s attention.  It is also important to be considerate and respectful.  Honey does attract more bees than vinegar.  You do not want to be “that owner” who when a staff member for the Management company sees your name in either a phone message or email, that person immediately decides to go on vacation.   

I would suggest HOA Boards and Management Companies have three objectives.

1. Maintain and hopefully improve the quality of the HOA campus.
2. Maintain and hopefully improve the quality of life for both full-time and seasonal residents.
3. To the extent HOA’s are able to accomplish one and two, three is to enhance property values.

The HOA R&R is the document that enables the Board and Management Company to accomplish all of the above.

Having an HOA taking care of many if not most of the problems and hassles of owning a residence enables residents to spend more time living and hopefully enjoying life.  In many HOA's, the HOA also provides and manages amenities as part of the overall HOA services.   If you are part of an HOA, it is important you be an active knowledgeable participant.  It is also important you treat Boards, committees, HOA professionals, along with other owners with courtesy and respect.     

Finally, I start each Board and Annual Meeting by saying, "thoughtful intelligent people can disagree without being disagreeable.  If you are not thoughtful and intelligent, you are at the wrong HOA meeting."