Understanding the reality of HOAs and their functions

What is an HOA in reality? ” I mean in real, understandable terms and not legalities.

A common statutory definition of an HOA includes a governing body that owns common areas, and has mandatory membership and dues based on CC&Rs.  So, if the community doesn’t have common areas, or is a voluntary membership entity, then it is not an HOA according to the above definition.  However, the members are still bound to the CC&Rs, but state HOA statutes don’t apply.

A better understanding for the average resident is to look at the attributes and characteristics of HOAs, because they are not monolithic and vary according to size and primary function.  First, let’s understand what we mean by HOA (applies to PUDs and condos). My CCLG webpage contains this definition of “HOA”,

If we are to make progress, we must distinguish the concept of a planned community, which is a real estate “package” of homes, landscaping, amenities, and rules, from that of the HOA, which is the undemocratic governing body of the planned community.

In my proposal for the “muni-zation” of HOAs (as compared to nationalization), I further clarified what HOAs are:

Let me clarify at this time, that there is an important distinction between the HOA and the subdivision real estate “package” known as a “planned community”.  HOA supporters continually cloud this distinction, because a planned community can exist without the private, undemocratic governing body known as the homeowners association. “Doing away with HOAs”, as sometimes seen in the media, falsely implies doing away with the planned community real estate package.  No, it doesn’t. But the HOA special interests want you to think so. There is no need to impose undemocratic private governments over these communities of Americans that operate outside the 14th Amendment and the Constitution.  (“Proposal for Muni—zation of HOAs,” email letter to AZ Legislators, August 23, 2004.)

HOA types by function

Now that we have better idea of HOAs are all about, allow me to further categorize the above general description of an HOA into types by function. In my Analysis of 2005 CAI HOA survey, I wrote,

I classify planned communities as either Residential, Resort or Retirement. With the last two categories, home buyers have a higher acceptance of rules and regulations, and the obligations to conform in these “institutionalized” settings. With respect to Residential, buyers’ expectations can run from “just buying a home” to “a property value protection association”, as the proponents argue as a reason for choosing HOAs.

Note that the “Resort” and “Retirement” types can easily be viewed as a 365 day, annual, timeshare or “vacation ownership” (in today’s terms) HOA.  The only difference is the length of time ownership.

CAI in its 2016 report on “Large Scale Associations” (News and Information From CAI, “LARGE-SCALE COMMUNITY ASSOCIATIONS REMAIN POPULAR WITH HOMEOWNERS AND LOCAL”) included “private clubs” as a category.  This category doesn’t really fit as an HOA type, since nothing about the tradition understanding of a private club concerns CC&Rs and mandatory memberships. However, some residential HOAs function as a private club when the HOA provides for a pool, tennis court or golf club for the HOA members only.

Why is an understanding of functional types important to HOA reformers?  Because of their size, and size means money $$$$$. And money means influence, especially in regard to state officials and legislators.

HOA size

An important question to ask is: What is the distribution, the breakdown, of HOAs by size?  Are large HOAs dominant or are smaller HOAs dominant?  The only info that I could obtain on HOA size distribution is from a 2011(?) Nevada CAI LAC document entitled,Why Legislative Advocacy Matters.”  The left-hand column reveals the following breakdown (“CIC” means HOA):

Percent units (total of 2,837 units; % rounding error)

Less than 200              78.5%

201 – 500                      16.5

501 –  1,000                    3.5

1,001 – 8,000                2.0

If Nevada is representative of other states, this is a startling piece of information!  Almost 80% of HOAs have less than 200 units, and a whopping 95% are under 500 units!  This is very important because we know that “HOA-Land” is highly fragmented, which means lacking in political clout unless strongly organized.  Consequently, the miniscule large HOAs are largely unopposed and have the clout.  For example, my master planned HOA of some 9,000 units has annual revenues around $20,000,000.

It is easy to understand why CAI and its LACs are focused on what CAI refers to as “Large Scale Associations” (see above). I now also have a better understanding why 1,000 is the arbitrary number that CAI uses to categorize HOAs. Its LSA report sets a limit at 1,000 units and in Arizona, for example, HOA statutes contain this arbitrary boundary of 1,000 units in applying certain statutes to HOAs.

Where is the justice for the 95% HOA members?  Or, don’t they count because money speaks in this society.  Shame, shame!


Published in: on July 27, 2017 at 12:30 pm  Leave a Comment  

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