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Can We Pull the Plug On the HOA?
We live in a new community with 20 homes. The developer supplied our water, free of charge until last year. Now we worry that the developer may turn over control of the water supply service to a now non-existent homeowner’s association.
None of us want to have an HOA, and no one wants to be in charge or be president. What can we do if don’t want an HOA?
You likely have the bare bones of an HOA in place already, but it has not been turned over to the owners. This should surprise no one because when you bought the property you agreed to be bound by its rules, including no doubt the formation of an HOA.
The developer has supplied free water, but that can’t continue eternally, there has to be a point where each homeowner is responsible for their water usage. The developer wants out of the water business and has the HOA in place to take over from him. That’s entirely reasonable.
What’s not so reasonable is ending an HOA; that can be profoundly difficult. Depending on your jurisdiction and the HOA rules, you my need unanimous approval from all homeowners to dissolve the homeowners association. If you can actually get the required level of support for dissolution, then the fun begins. Let’s look at some potential issues.
If you terminate the HOA, who supplies the water? Do all the homes have separate meters? If not, without an HOA, how will homeowners get water? Separate meters are a much better deal because then you’re not paying for a neighbor who likes to take 28 showers a day. Instead, everyone pays on the basis of household usage.
Are there common areas? Without an HOA, who owns them? Who pays for insurance?
Will deeds need to be re-written? If the deeds are changed, will new mortgage paperwork be required? What will attorneys charge for such work? What if a lender or homeowner balks at the costs? Do your HOA documents include provisions for termination? If so, what steps do you need to take?
Rather than dissolve the HOA, the better and more practical option is likely to embrace it.
I once owned a home that was part of an HOA with fewer than 30 households. There was an understanding among all owners that no one wanted an intrusive HOA. As a result, our HOA met just once a year, generally for 15 minutes, and collected dues for such costs as common area insurance and mowing. It adamantly refused to get involved in anyone’s business or in disputes between homeowners. It probably produced three-pages of material a year, including a budget and meeting minutes. The annual HOA fee was $50 per house and the association had a two-year surplus.
My suspicion is that when you and the neighbors get together and run down the costs of dissolution, the better option will be an “HOA Lite,” an HOA that does as little as possible, costs virtually nothing and bothers no one.
Peter G. Miller is the author of The Common-Sense Mortgage and a veteran real estate columnist. Have a question? Please write to email@example.com.View Foreclosure Article Archives
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