Many Florida-based planned communities were started with a Homeowners Association already in place. However, a number of existing neighborhoods in the State of Florida have not yet formed an HOA to govern their communities. In such cases, a group of residents may take it upon themselves to launch an HOA. Doing so requires a degree of effort, focus and consideration of several factors. It also involves the inclusion of trusted advisors including legal counsel and an insurance agent or brokerage that can help manage the risks involved.
If a group of residents are considering starting an HOA here are six steps that could be taken to ensure the best outcome possible:
1. Consider the Pros and Cons of an HOA
When residents are set on creating an HOA for their community some thought could be given to whether the advantages of creating an HOA outweigh any perceived disadvantages for all residents.
One of the main advantages of an HOA, is that it puts into place a mechanism for maintaining common areas with amenities and services that add value to the neighborhood. These amenities could be a pool or pools, gardens and walkways, a golf course or a clubhouse. Services usually include refuse and recycling removal, janitorial services and landscaping and security cameras and personnel. The HOA is also inherently a conflict resolution center that allows for residents to resolve disputes between themselves or between any one resident and the community at large. Having an HOA is also a great way to get to know neighbors. There is a social aspect to periodic gatherings for votes and town hall meetings that otherwise may not exist without the HOA. All of these mechanisms, amenities and services provided by an HOA improves both the property prices and the “curb appeal” of a neighborhood benefitting all owners of existing properties by raising the value of the equity they have in their homes.
However, there are the disadvantages of establishing an HOA in a community. Many HOAs impose restrictions on renting out homes for either long term leases or short term leases via platforms such as Airbnb and Vrbo. Homeowners are frequently assessed for fees – but regular fees and “special assessments” which may erode the real return on investment of the property.
Finally, HOA’s limit a homeowner’s right to make improvements and changes to their own properties or run businesses from their homes. In many cases, homeowners may need to get written board approval before you can take such actions.
2. Establish a Relationship with a Law Firm with HOA Experience
HOAs and condo associations are governed by statute in the State of Florida.
Strict regulations, explicitly stated local and state laws and specific legal procedures must be adhered to when establishing and operating an HOA in Florida.
While personal knowledge of these laws and regulations can be helpful, a lawyer with extensive association experience can help navigate the pitfalls in the initial formation and eventual running of an HOA.
Lawyers will also be helpful in drafting the governing documents required by law for HOAs in Florida. These include the bylaws and the Covenant, Conditions & Restrictions (CC&Rs).
Finally, lawyers will help establish the business entity under which the HOA will be run. Florida law specifically calls for HOAs to be established as non-profit entities (although condo associations may be either non-profits or for-profit LLCs or corporations). With company formation comes more paperwork that is best handled by an experienced law firm. These include providing a unique name for your business, paying certain fees, applying for a federal tax number (FEIN), drafting articles of incorporation, and establishing bylaws.
3. Gauge The Level of Interest in Your Community
Creating an association is a group effort and the members of the association are generally equals whose input in the formation and running of the association should be respected. As such, it’s important to determine whether homeowners in the area want to be part of an association.
This may require some persuasion on the part of those who wish to establish the HOA. In such a case, the pros of being part of an association could be “sold” to local homeowners. Another method to ease in the concept of a new HOA for a community is to make membership optional. In such a case, only members will be allowed access to certain amenities with other residents having no access or having to a pay fee for access.
4. Seek Expert Insurance Advice
An HOA insurance policy is an important risk management tool that legally and financially protects a neighborhood. Often referred to as a “master policy”, HOA insurance provides the association financial protection should a member or guest get injured in the common area or while using common amenities of the HOA. An HOA policy will also cover the association for damages to the common areas (and in the case of condo association, damage to exterior walls and other community-owned areas). Founder of an HOA would want to seek an experienced agent or broker that can advise on the many caveats and disclaimers in each policy to allow the HOA to make an educated decision.
“While personal knowledge of [HOA Law] can be helpful, a lawyer with extensive association experience can help navigate the pitfalls in the initial formation and eventual running of an HOA.”
5. Elect a Board
Once the HOA is set up, an HOA board made up of elected individuals is required by law. Most boards are made up of people who are skilled in areas relevant to managing a community such as law, property management, landscaping and maintenance. However, it may be equally important to select members of the community that share the vision of the founders in the sense that they also want the best for the community.
Diversity and inclusion is important, not simply for the sake of fostering an inclusive community, but also because there is a federal and state legal requirement not to discriminate in housing matters. Standardization of the election process as outlined in the governing documents prepared by the HOAs legal counsel must be followed for all elections to ensure fairness and best results for the community
Once elected, board members will have the responsibility to meticulously document meeting records and other activities conducted by the HOA. They will also be called upon in committee or as individuals to resolve disputes, keep accurate financial records, manage budgets and expenses, fairly enforce rules and regulations and maintain the communities common areas.
6. Consider Hiring a Property Management Company
Many associations in the state of Florida manage their properties with the professional assistance of a property management company. A property management company is a third party entity that is contracted to handle the day-to-day operations of a real estate asset. Whether or not to hire a property management company depends on a number of factors that includes the size of the property an association has responsibility for and the association members’ areas of expertise. If an association lacks the time and experience to manage every aspect of the property for which they are responsible, then it makes sense to look for a property management company to help carry the workload.
When searching for and selecting a property management company, there are important factors for an association to consider, which we explore here.
South Florida Law
The complexities of Florida’s HOA and condo association law make it difficult to navigate for even experienced HOA board members. Be sure not to “go it alone”. Here at South Florida Law we have boutique firm attention to detail with the big firm resources necessary to draft and review HOA documents and represent HOAs and Condo associations. Call us today at 305.900.8885 or reach out via our contact form.