HOA governance can be frustrating for new board members. Nobody teaches you how to run a community, after all. This article will break down the process and make community governance more understandable for new board members.
What is HOA Governance?
Homeowners are usually familiar with the HOA’s general responsibilities, like common area upkeep and fee collection. However, there is more to HOA governance than just collecting dues for maintenance. In essence, homeowners associations exist to preserve property values. While upkeep is a part of that, it is not the only thing responsible for keeping property values high.
HOA governance encompasses everything required to oversee a community and create the ideal neighborhood. It involves many more things, like conducting meetings to discuss community issues, upholding community rules, and enforcing architectural standards to keep the neighborhood attractive to buyers. Moreover, the board has other responsibilities like financial management, policy creation, and vendor relationship management.
The Fundamental Aspects of HOA Governance
In the following sections, we’ll discuss the main aspects of HOA board governance and how they achieve community goals.
Common Area Management
Common area maintenance is arguably the most famous part of HOA governance. Even those not part of an HOA know associations are responsible for upkeep. They must ensure the roads, streetlights, and amenities are well-maintained by working with vendors to keep them in good condition.
In a condominium association, the common areas include the hallways, stairwells, elevators, roofs, fences, and building facilities. Many condos also charge plumbing and electrical elements even though they cover individual units.
Well-maintained common areas are vital because they are the clearest sign of a healthy community. Clean and well-kept common areas help the residents feel at ease knowing the board uses their fees for upkeep. Moreover, they play a crucial role in making an excellent first impression and attracting potential buyers.
Apart from upkeep, the HOA is also responsible for capital improvement projects. For example, the community might decide to construct a new amenity like a pickleball court or a community pool. Capital improvement projects also include renovations, big landscaping projects, and facility upgrades.
Violations and Rule Enforcement
Enforcing the HOA association rules and regulations is one of the board’s major responsibilities — and for good reason. The rules in the governing documents exist to make sure the community is organized and effective. They clarify the responsibilities of both the board members and average residents.
Homeowners associations can levy fines when a member breaks a rule. The board can remove the homeowners’ rights and privileges and even take legal action against them. It’s important to note that HOAs have a legal right to do this as granted by the governing documents.
In addition, many states have laws specifically granting this power to associations. For example, California’s Davis-Stirling Common Interest Development Act Section 5650(b)(2) states the association may recover a late charge not exceeding 10% or $10, whichever is greater, for delinquent assessments.
With proper rule enforcement, homeowners can avoid violating the rules without consequences. This can be disruptive for the other residents and cause a lot of conflict. Homeowners might also refuse to pay HOA fees, leaving the common areas disrepair.
Architectural Applications
A close cousin to rule enforcement is architectural application review. In fact, it is a part of enforcing the rules because the architectural guidelines are outlined in the CC&Rs. Nevertheless, it deserves a separate section because it affects property use rights and often invites conflict.
A community’s architectural guidelines delineate what homeowners can and cannot do with their property. Many HOAs have restrictions on fence heights, paint colors, and the types of plants they can have in their yard. Regardless, all of these guidelines exist to ensure the community remains somewhat uniform.
However, HOA board members must tread carefully when implementing new architectural policies. Homeowners often have legal rights to specific displays and architectural improvements, such as solar panels and political signage. For example, California HOAs cannot prohibit the display of non-commercial signs, flags, banners, or posters on a separate interest unless it violates the law or compromises public health and safety.
In many associations, the architectural review committee (ARC) or HOA board further develops the policies to clarify minor details. Homeowners must submit an application before undertaking any home improvement project to ensure it’s approved by the board or ARC. Likewise, the board may penalize or discipline any violators.
Meetings and Notices
Homeowners associations act like mini countries with elected leaders, legally enforceable rules, and sanctions for violations. However, this does not mean the homeowners have no say. While the directors are responsible for HOA governance, they should also consider the members’ opinions. After all, they have a fiduciary duty to act in the community’s best interest.
This is where neighborhood meetings come in. Typically, homeowners may attend HOA meetings that are not executive sessions and provide their input. Moreover, they have the right to vote on community matters — especially if the decision requires a majority vote from the membership.
In addition, the board must send the necessary notices to all HOA members. These include notices about upcoming meetings, violations, assessment increases, and new policies. Communication is key to good governance, as it will limit the number of violations and ensure active community involvement.
Financial Management
Homeowners associations have to manage their money well. The HOA board must be wise about spending HOA money as it should be put mostly into upkeep, operations, and community improvement. Moreover, they have to save enough money in the reserves in case of emergencies and major repairs. To do this, HOAs must develop and manage budgets, collect assessments, and establish good financial practices to build trust in the community.
Managing the community’s finances is one of the most complex parts of HOA governance. Nonetheless, it is crucial because it keeps the community alive. Poor financial management can lead to losses and too many debts, and the HOA may not be able to fulfill its maintenance obligations even if it wants to.
Tips for Effective HOA Governance
HOA governance is no easy task. How can the board manage the community effectively? Here are some tips that might help.
1. Create a Consistent Structure
A clear structure for HOA governance is foundational to success. It defines each board member’s responsibilities and provides a framework for decision-making. This way, everyone in the community will know how things work and who to turn to for specific problems.
We recommend turning to the community’s governing documents if you don’t know where to start. The documents often outline the board’s main responsibilities, including those of the officers. From there, you can create a structure, define voting rights, and form a chain of command so decision-making becomes easier.
In addition, the governance structure must be consistent and transparent. Each operation must be clearly outlined, especially the budgeting and election processes. This keeps the board accountable for its decisions and gives it guidance on what to do in certain situations.
2. Foster Open Communication
Homeowners associations must foster open communication within and between the board and residents. Communication channels should be clear and easily accessible. Moreover, the board should communicate with the members regularly about important issues, upcoming events, and major decisions.
Make sure to use communication channels everyone has access to. It’s also important to use multiple channels instead of just one. Doing this will ensure everyone is in the loop — even the youngest or most elderly residents.
It’s also a good idea to allow residents to provide feedback. This creates a culture of open communication and trust, reassuring the residents that the board is listening. It will help you create a better sense of community, encouraging participation and compliance.
3. Be Financially Responsible
HOAs must be financially responsible to ensure success. Otherwise, the community could easily fall into debt and be forced to increase its monthly assessments. It can place a big financial burden on the homeowners and even cause conflict.
What does it take to be financially responsible? First, the HOA must create a well-crafted budget that is accurate and realistic. Board members should work closely with the vendors, HOA accountant, and HOA management company to reflect the community’s needs.
Furthermore, the HOA should also create a system for financial reporting. When should they generate reports and financial statements? Moreover, how often should they conduct an audit? Doing this keeps the HOA accountable and provides a better picture of the community’s financial status.
The Bottom Line
HOA governance involves many responsibilities. The board has to oversee all operations, manage finances, maintain common areas, and enforce the rules. It’s a lot to handle — especially if the board members do not have the experience or skills to run a planned community.
For this reason, many homeowners associations choose to hire an HOA management company. This allows them to outsource many of the board’s toughest responsibilities, including budgeting, accounting, rule enforcement, and collections.
Does your community need help? Personalized Property Management offers premier HOA management services in Southern California. Call us at 760-325-9500 or email us at info@ppminternet.com for more details!
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