You form a homeowner’s association (HOA) the same way you would form any other corporate entity (an LLC or a corporation) because a homeowner’s association is considered a corporate entity. Although the laws in setting up a corporate entity vary from state to state, there are some general guidelines to follow when setting up a corporation. Many states also have specific laws or guidelines that need to be followed when setting up and governing a homeowner’s association, and you’ll need to be sure to watch for those laws.
To form a homeowner’s association you should follow these guidelines.
Consider hiring a local real estate attorney to work with you on the formation of the association. Since there are a lot of laws and statutes that need to be strictly adhered to when forming the homeowner’s association, having an attorney who is an expert in local real estate laws will make the process go much more smoothly and save you from making some big mistakes.
Choose a name for your homeowner’s association. It may seem like a small part, but until you have an official name, you can’t file the paperwork. The name you choose may not be identical to any other corporation already on file.
Appoint a director for the homeowner’s association or a board of directors. It is customary to have these people be members of the community that the homeowner’s association will govern. The initial director and board need not be voted in.
File the articles of incorporation with the state’s corporate filing office.
Create your homeowner’s association’s bylaws. These are the rules that control the operation of the association and the rules that the member’s of the homeowner’s association will need to follow. You may want to get community input on drafting these bylaws since the people living in the community will be the ones abiding by the association’s rules.
Set your membership fees.
Hold your first homeowner’s association meeting. At this meeting the board of directors can elect officers, adopt the association’s bylaws and make them official, and take care of any other business. This meeting is very important as, in most states, a corporate entity does not come into legal existence until it holds its first meeting, even if all the proper paper work has been filed and approved. Check with you local laws to see if you need to announce to the public when and where the meeting will take place. Sometimes, neighborhood associations are considered quasi-governmental entities and, as such, may be subject to open meeting laws.
From time to time, review what the homeowner’s association is doing with the real estate attorney that you hired to help form the association. This will ensure that you are still operating within the legal boundaries of real estate law.