What Should Small Condominium HOAs Avoid?

We tend to think of HOAs (Home Owner Associations) as governing bodies for newer subdivisions and large developments with shared amenities and costs. In these places, HOA membership is mandatory for homeowners, as are monthly dues. HOA dues are disclosed when properties are sold, and considered a common cost of home ownership.

HOAs, however, are not limited to large developments. Condominium   and townhome communities as small as 1-4 units can have an active HOA. If you are considering becoming a member of a small HOA you can expect both benefits and problems, depending on the rules, financial management and even the personalities of the members.  Avoid future problems by asking some basic questions.

Is Your Small HOA Financially Strong?

Small HOAs function similarly to larger ones, but with fewer participants. This makes them more vulnerable if members pay inconsistently or default on their HOA dues. Routine maintenance may go undone, and savings for large projects like roofs and HVAC systems may not be adequate to cover repairs. Even if monthly dues are paid, they may be too low to meet future demand.  Assessments might be infrequently assessed or not as all, leaving large repairs undone.

Check to make sure a reserve study has been conducted to determine the financial stability of the HOA. In California, Common Interest Developments (CIDs) are required to know the projected costs of major shared components, and provide adequately for future needs.  A reserve study can be done by the HOA itself, or an experienced contractor can be hired. Regular reserve studies are essential for a small HOA to navigate possible repairs and maintenance issues that arise when everyone is on the same deed.

Does Your Small HOA Meet Regularly?

Smaller HOAs have fewer individuals to carry the burdens of successful management.  It is optimal for your group to assign roles such as President, Secretary and Treasurer to keep track of records and plans, communicate with contractors and oversee funds. This is difficult without regular meetings where concerns about the subject property and major topics can be voiced. If owners are reluctant or unable to participate, roles can rotate to share the time commitment, or the organization can obtain a professional property manager for a fee.  Is Your Small HOA Properly Resourced?

Is your HOA capable and knowledgeable about asking for help when issues become difficult? If one of four owners in your group defaults on their HOA dues are you able to enforce payment? Do you have a tax advisor, reliable contractors, and a short list of experts that the HOA members can contact in the event of a crisis? If your HOA is falling short by not making needed repairs and capital improvements, everyone’s property values could be affected.

Is Your HOA Alert to Legal Liability?

Ideally HOAs can operate collectively like a single homeowner. If outdoor lights and security cameras fail, get them fixed. If clogged drains are causing backed up water damage to the foundation, hire a plumber or a soils engineer. If outdoor decking deteriorates and someone is injured, do you have adequate insurance for the claim? When HOAs cannot commit to risk control, the entire community could be vulnerable. If you find your group is facing a major issue with legal ramifications, act quickly before things get worse. Contact an experienced real estate attorney right away.

Know Your Rights. Protect Yourself.