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Developing Successful Homeowner’s Associations

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If you are building a community with a homeowner’s association, you need to thoughtfully develop the program. Spending time upfront will increase homeowner satisfaction and reduce the likelihood of conflict with the community at large. Here’s how to create community associations that will attract new buyers and satisfy existing homeowners.

A Fertile Environment for Conflict

These days, there are nearly 300,000 association-governed communities in the United States. Yet, despite their prevalence, many builders don’t know enough about how to plan, create and turn over HOA communities to new homeowners, while minimizing the risk of confrontation and potential litigation.

Builders with communities that have homeowner associations face uncommon risks and challenges. At no point does a builder want to see an entire membership of homeowners band against it over inadequate budgeting, insufficient association reserve funding, inaccurate governing documents, construction defects or other grievances. A smooth transition from building company to community association can reduce the risk of animosity, while minimizing the chances of lawsuits between the parties.

Unfortunately, the typical transition process is fraught with misunderstandings, miscommunication and many times, quite a bit of acrimony. Much of this relates to governing documents, including bylaws, rules, declarations and above all else, money.

Getting Out in Front of Problems

Ideally, builders should keep association dues as low as they can to help sales. That said, if they go too low, builders may leave homeowners with less reserves or even deficits when they turn the properties over. To combat these common issues, it’s a good idea to set a realistic budget, while providing plenty of guidance for the community association, at least during the early years of development. All relevant community documents should also be turned over to homebuyers as early as possible, so they know exactly what they will be getting into.

Builders should also establish risk management plans that help to insulate against key risk areas throughout the entire process. While veteran builders and developers may have had to learn the hard way through experience, modern builders can tap a wealth of knowledge by reading the free developer-to-homeowner best practices report, developed by The CAI Research Foundation, in conjunction with the National Association of Home Builders. This helpful guide includes detailed information relating to governance, construction, document preparation, maintenance of common property, communications, financial control, litigation, budgeting, insurance and engineering reports.

Creating a Self-sustaining Community

In today’s industry, lifestyle is a popular buzzword builders and developers love to toss around to promote their housing communities. To create a fully-functioning lifestyle community, however, builders need someone to control and maintain all the pools, clubhouses, tennis courts, walking trails, workout facilities and other amenities.

A building company’s reputation, and possibly its long-term viability, are threatened if it doesn’t set up adequate reserves, governance documents and all the other essentials that go into a self-sustaining community. In the end, it will always be the builder’s or developer’s responsibility to create and establish an effective association to manage a community’s common elements.

 

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