Laying the Groundwork for the Perfect HOA: Your Governing Documents

After 15 years working side by side with homeowners associations throughout Utah, I’ve spent a lot of time considering the idea of “the perfect HOA.” It may sound like a pipe dream, but it’s a very real goal to strive for–one that would increase property value, simplify the home-selling process, reduce board member workload, minimize frivolous lawsuits, and provide a level of peace to your community. In this series of articles, I talk about what an HOA needs to be perfect both on paper and in practice so that all of these results can be seen in your community.

“The Perfect HOA.” What a concept, right? To say the “perfect” anything exists is already a bit of a stretch. (Unless we’re talking about the perfect midnight snack because I think we can all agree that it’s double-stuf Oreos and milk!) So the idea of perfection in something as complex and challenging as a community association can feel impossible.

But after so many years working in this industry, I am certain it’s a reality for many, and an achievable reality for many more. 

When talking about perfection in a community, most people immediately think about the outward appearance: perfectly manicured lawns and clean streets, for example. That’s all well and good, and those traits are a good indication that an HOA has a good landscape vendor in place. But good looks alone are not what constitutes “perfection” in an HOA. 

As the saying goes, real beauty is on the inside. It’s the structural integrity and policies your community establishes that make or break the ideal mold. So when examining your own community for proof of perfection, here are the areas you’ll want to pay the most attention to:

• Your Governing Documents
• Board Member Education
• Homeowner Relationship Management
• Community Maintenance & Emergency Preparedness
• Homeowner Compliance

A Foundation of Documentation 

At the very core of your HOA is the information generated that brought it to life: the governing documents. These are the things that help maintain structure, order, and efficiency, and are all major contributors to that “perfect” moniker.

Ensuring you have met the legal requirements for the documents your community needs, and that those documents are as clear and straightforward as they can be is critical. Establishing a Record Retention Policy will also be important to help keep your documents on track and ensure that homeowners know what records they have access to.

All eight of the following documents are recommended for every community association in Utah, but the first four are ordered in a very specific manner. This is a general order of operations, and it’s ordered in this way because each document is superseded by the previous document in the list if there are contradictions within the documents. The Plat Map and the Declaration in conjunction inform the Articles of Incorporation, which informs the Bylaws, etc. So keeping these documents appropriately ordered is just as important as having them in the first place.

1. Plat Map – Also known simply as a “Plat,” this is a to-scale map that shows the property lines throughout the community.
2. Declaration and/or CC&Rs –  This document spells out the legal description of your HOA, as it must be filed with the county recorder. It also clearly defines your physical description, which is why it immediately follows the Plat Map. Covenants, Conditions & Restrictions, or CC&Rs, are also known as the Declaration. These are the rules and expectations for the community members in the HOA, written out as thoroughly and comprehensively as possible. (Many communities also generate a Rules and Regulations sheet or an FAQ sheet to reference in addition to the CC&Rs, but these should never replace or be read instead of the CC&Rs.)
3. Articles of Incorporation – “The Articles” as they are sometimes fondly referred to are all the boring legal details. Very important, but very dry. This is where the association name and the assertion of non-profit status live.
4. Bylaws – Where the CC&Rs are the rules for the residents, the Bylaws are the rules for the community as a business entity. These dictate important expectations like when meetings are to be held, how to notify residents of future meetings, and other functional responsibilities of the community. 

These next four documents often have state-specific legal requirements dictating how often they need to be ordered, or how long the records must be maintained. Some of these laws even go so far as to specify how long they need to be maintained in both physical print copies AND digital copies, and those time frames can be different even in the same state. This is just another reason why having a Record Retention Policy for your HOA will be critical. 

We’re going to focus on Utah laws, so it’s important to verify your own state’s requirements (if there are any) to ensure you stay in compliance. 

• Reserve Study – Also called a “reserve analysis” in some legislation, the reserve study is a survey of your community conducted to provide a deep dive into the lifespan and sustainability of each component in the community. Whether that’s the roof of the condo building, the integrity of the tennis court, or the durability of the community jungle gym, this study will break down the expected degradation of each component given average wear and tear, and the costs associated with ongoing maintenance, necessary repairs, and full-on replacements. The state of Utah requires a reserve study be conducted, at minimum, every six (6) years.
• Insurance Notice – Utah state law requires that the association inform each homeowner of their obligation for the community’s insurance policy deductible and any changes to that deductible. This notice is incredibly important because if the association fails to provide it, they are partially responsible for covering the homeowner’s share of the deductible or the deductible’s increase.
• Notice of Reinvestment Fee: Reinvestment Fees are funds set aside specifically for the betterment of the community. Legally they cannot be paid to any other entity or used for any other purpose or project. Because these fees are paid at the closing of the purchase of a home in the community, the state of Utah has legislation requiring that the community have a notice of this fee recorded with the County for potential future homeowner awareness.
• Financial Reports / Budget – The annual budget is an immensely important document for any community association. It sets forth the expectations of the community operations for the coming year and gives homeowners an inside look into what their seemingly ever-growing assessment fees are actually doing. In the state of Utah, the budget is a legal annual requirement.

The governing documents are the basis for success in an HOA. They provide a convenient box in which community and board members can safely and consistently operate and feel successful. Although they are not the only thing that a community should have, they are the first (of many) steps toward achieving perfection in your HOA.

Building Blocks for Success

The perfect HOA isn’t just wishful thinking. HOA Strategies has 15 years of experience guiding and supporting Utah community associations to help them achieve success. If your community is struggling to organize and maintain documentation, call us today for a free strategic evaluation. We’re ready to help you achieve perfection.