The HOA Time Bomb

At the APAColorado state conference in Telluride, Clarion Director Don Elliott, FAICP, and attorney Mark Payne of the Winzenburg, Leff, Purvis & Payne law firm discussed “The HOA Time Bomb”. The time bomb arises from community desires to promote high quality development while requiring that residential neighborhoods be responsible for the maintenance of those facilities. For example, many cities and counties require that new developments include small open spaces, trails, or landscaped entryway features, and also require the creation of a Homeowners Association (HOA) to ensure that those features will be maintained in good repair over time. In most cases, the local government is simply trying to limit taxpayer costs to maintain public facilities, but the resulting HOAs may be likely to fail over time. Mark and Don discussed the various legal requirements and administrative costs that each HOA bears (e.g. requirements for annual meetings, holding elections, filing annual reports, maintaining liability insurance, and collecting enough money to perform the required upkeep of its facilities). Even when maintenance costs are relatively low, the costs of running the HOA can be high, and those costs are often spread over relatively few homes (particularly in the types of infill developments many planners want to encourage). The smaller the development, the more personal the relationships within the HOA, and the harder it is to enforce payment of maintenance dues by uncooperative neighbors. In a small development, nonpayment of dues by even a small portion of the residents can result in inadequate maintenance funds, and very few HOAs maintain the kinds of reserve funds necessary to cover major repairs. In some cases, the eventual failure of the HOA is fairly certain, and that failure often results in calls for the city or county to take over the HOAs maintenance. When the city or county declines to do so, neighborhood quality may erode for residents of the development and their neighbors. To avoid this result, local government should think carefully about requiring that smaller developments create HOAs to maintain minor amenities, and may also want to rethink whether smaller infill parcels should be required to provide the types of amenities that will require significant repairs or maintenance over time.