“Who’s in charge of my HOA?” Another loaded question! The answer: it has different levels and combinations of people and paper.
The HOA is made of members, as defined by Arizona statutes and the governing documents, but it’s also the residents, management team, contracted vendors and service suppliers. Who’s in charge is the board of directors, whether a developer-appointed or owner-elected board.
The initial level of control is paper: the HOA itself and its governing documents. It’s also IRS regulations, municipal or county ordinances, and Arizona and federal statutes.
HOA governing documents are created at the onset of development, and most Arizona HOAs are non-profit corporations, but not 501(c)3 charitable organizations. The non-profit designation affords tax benefits but prohibits distribution of any profits or surplus back to members. Any profit or surplus is invested back into the community, and depending on the HOA annual budget, there may be additional regulations.
Maricopa HOA governing documents, created by and for developers, include the:
- Articles of Incorporation — establishes the non-profit corporation, articulates the purpose/mission, establishes the developer board and officers, and provides for board or committee indemnification from liability
- Bylaws — establishes how HOA business is conducted, addresses board and Member meetings, defines board responsibilities, powers, and duties
- Covenants, Conditions and Restrictions (CC&Rs) — definitions, membership, voting rights, covenants (rules), architectural control, use restrictions, etc.
The second level is the developer or homeowner board. CC&Rs define the transition threshold from the developer to a homeowner board, which typically depends on reaching a percentage or proportion of owner-occupied homes based on the total lots, or an end date, whichever comes first. Prior to transition, the developer board is the governing body, making decisions without homeowner input or approval.
The developer board typically has “cumulative voting” (multiple votes per lot owned). Ownership switches to the deeded owner(s) upon “close of escrow” (closing), at which time the owner/member signs a binding contract with the HOA acknowledging the governing documents and compliance with their provisions, begins paying regular assessments, and can exercise the “one lot, one vote” rule. Residency is not required, just ownership, and while an owner controls the property, the HOA controls the community, including common areas and amenities as well as multiple aspects applicable to each lot.
The HOA management team is the third level of control, responsible for executing board directives or policies. The management company and the manager are extremely important, and each has specific contracted duties and responsibilities that have significant impact on quality of life and quality of place.
An important distinction is whether your HOA is considered “onsite” or “portfolio,” or a hybrid of the two. Type doesn’t necessarily depend on size but rather the type of amenities or higher expectations related to operations and maintenance. The primary difference of an onsite is having a dedicated HOA manager. Both types are effective, but onsite typically offers greater customer service, expedited resolutions and stronger resident connections.
The manager and management company execute day-to-day HOA functions, receiving direction from the board. Management staff are not HOA members, but critical community partners. They are not necessarily the primary decision-makers but work in conjunction with the board to achieve HOA goals. That’s an important distinction that impacts everyone in the HOA, specified in the management contract as well as board policies.
So, who’s in charge isn’t just one person or piece of paper. It’s a combination of many people and documents, governing by “best practices” and finding the optimum balance between personal enjoyment of a major life investment and following HOA rules.
HOA life is a unique experience. It’s being part of a multi-million-dollar corporation, budgets, inventory, aesthetic and structural assets, and a variety of contracted service providers. It’s collaboration, communication, due diligence, and fiduciary responsibility. Eventually, it’s homeowners in charge, which can be both blessing and curse!
“In charge” is leveraging professional expertise and experience with homeowner enthusiasm and the desire for positive change through self-governance. It’s the right blend that instills pride of ownership and fosters a true sense of community. It all starts with the board of directors, and the next article will take a closer look at HOA boards.