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ZitaX (Colorado)
Posts: 10
Posted:
Some members of our community started a small farm here as a private enterprise with community permission. The farm sells produce to the community and to outside restaurants and health food stores, but is essentially a not-for-profit enterprise. Community members running the farm are volunteers and interns are invited in during the season to learn how to grow and are volunteers as well.
The question is, what if we make the farm part of the HOA. In this instance, all members would agree to increase their HOA dues to fund the farm and in return the farm would provide produce to the community for free.
We are organized as a non-profit HOA.
Are there any considerations we need to be award of?
Thanks for any and all help.
ZitaX
ValerieS2 (Michigan)
Posts: 244
Posted:
I'm sorry I don't have insight into your question, but I DO have a Hungarian aunt in Colorado by the name of Zita. You don't have a child with the same name as a bird do you? lol...

By the way I think community gardens/farms make a wonderful use of unused common areas....
JanetB2 (Colorado)
Posts: 4,219
Posted:
Hi Zita:

To do as you suggest would take the majority of everyone within your HOA voting to purchase this property (someone currently now owns), unless they are going to maybe donate it to the HOA.

In order for assessments to be levied and paid to maintain this property the HOA would need to own as part of their common property.

ZitaX (Colorado)
Posts: 10
Posted:
Hi Janet,
The HOA already owns the property.
ZitaX (Colorado)
Posts: 10
Posted:
Hi Janet,
The HOA already owns the property.
ZitaX (Colorado)
Posts: 10
Posted:
Nope!
ZitaX (Colorado)
Posts: 10
Posted:
Janet, by the way, do you know of any legal eagles in Colorado who might really know Colorado HOA law?
JanetB2 (Colorado)
Posts: 4,219
Posted:
I do not understand then ... if HOA owns the property whay are you asking about making it part of the HOA?
JanetB2 (Colorado)
Posts: 4,219
Posted:
Hi Zita:

I know quite a few legal eagles; however, we are not supposed to post names of companies or individuals on this website. What I recommend is to check with your surrounding HOA’s and see who they use and how well the attorney has performed.

Also if you are not aware Colorado has a new HOA Information Office and Resource Center:
http://www.dora.state.co.us/Real-estate/licensing/subdivisions/HOA.htm

Under “Frequently Ask Questions” at the bottom is a link to Colorado Bar Association which will also give a list of potential attorneys. I am not personally familiar with the one posted on this site as a sponsor, but that is also another option as they are located in Colorado.

SteveM9 (Massachusetts)
Posts: 3,699
Posted:
Quote:
The question is, what if we make the farm part of the HOA. In this instance, all members would agree to increase their HOA dues to fund the farm and in return the farm would provide produce to the community for free.


Yeah, I dont see that happening....

Just keep everything the way it is. The price they are getting at market keeps the expenses in check. Expenses go up, prices go up. Once the produce is free, expenses will go out of control, everyone will want their free stuff, and no one will want to work the farm for free because everyone will hate each other.
ZitaX (Colorado)
Posts: 10
Posted:
Janet, thank you. That is so helpful. Some questions we have regarding making the farm an official part of the HOA, are:
Would the Farm be prohibited from making any outside sales? For instance if a neighbor wanted to be able to purchase vegetables? Can sales be made even though we are a non-profit HOA as long as there is no profit at the end of the year?
Would having the farm as an official part of the HOA increase the HOA's liability?
Are there other considerations that maybe we haven't thought of?
Thank you so much for any thoughts.
JanetB2 (Colorado)
Posts: 4,219
Posted:
Hi Zita:

I cannot potentially help as I still do not fully understand your situation:

Is the property owned by the HOA as “common property”? Or, is this property owned by an HOA homeowner and they allowed the farming of the land?

Without more info, I am kind of leaning towards what Steve posted on this issue.

SteveM9 (Massachusetts)
Posts: 3,699
Posted:
Quote:
Can sales be made even though we are a non-profit HOA as long as there is no profit at the end of the year?


Yes. Seek advice from tax expert.

Quote:
Would having the farm as an official part of the HOA increase the HOA's liability?


Insurance. Someone gets seriously hurt during an accident, you would need adequate insurance. If the insurance didnt cover it, each individual homeowner of the association would be sued. If homeowner couldn't pay, foreclosure would happen.

Quote:
Are there other considerations that maybe we haven't thought of?


Labor issues. Even though its volunteer, labor issues may arise. Because your working with dirt, tetanus shot should be recommended.
SusanW1 (Michigan)
Posts: 5,202
Posted:
This could get complicated. You may get into the commercial food handling/agriculural business, which may have restrictions, healith dept. and licensing issues.

Keep it private and provide for your own "family" (HOA members) only.
Since you will want to get rid of your stock, you can give it to your members and they can give it away to others. But be sure no on tries to "sell" the donated goods.

Better yet, donate the leftovers to area food banks.

If your group insists on getting into this, see if a local farmer or produce stand will take you under his liability "wing" and purchase your goods. But you will not sell to the pubic, yourself.

ZitaX (Colorado)
Posts: 10
Posted:
Hi Janet and Steve,
I do so appreciate your perspectives and information. We are a rural HOA with 225 acres held in common. The HOA as a whole allows certain members to farm 35 acres as a private enterprise. The members do not pay a lease for the using the HOA land, however the HOA overall benefits by the improvements to the soil and infrastructure. The community also likes the interns who come to work the farm in the summer. And, the community likes having local organic food produced for their consumption. The stated purpose of the Farm is to provide food for the HOA community which they are doing through a little store in the common house. Currently the Farm is funded by some of the members who pay up front for a certain amount of produce and outside sales to commercial establishments. Other members who don't pay up front can come and pay as they go during the season. Even with no land, water, or labor costs, the farm just breaks even.

The people running the farm would like to have the farm be an integral part of the HOA--receiving funding through dues and in turn providing the food for the community at no charge.

This would simplify the finances for those running the farm and encourage more of the residents to eat more of the produce as they could come and get it from the store as needed without having to pay every time.

This is the proposal before the committee. One of our members who is a lawyer (personal injury-type) feels that by allowing the farm to operate, we are already incurring the liability. (The owner of the property is liable for all activities on the property.)

Steve, what labor issues do you see possibly arising?

ZitaX (Colorado)
Posts: 10
Posted:
Thanks Susan,
This is something we have not considered before.
JanetB2 (Colorado)
Posts: 4,219
Posted:
I agree with the attorney.

With what you are potentially doing here there could be liability which would affect everyone in the HOA. I hope you utilize very good iron clad contract with the other non-profit using the land regarding liability and get copy of their insurance policy.

Potential scenario: If someone cut themselves, it becomes infected, potential amputation occurs … who will be liable when an individual who is sue happy files a lawsuit? This could cost everyone in the HOA hundreds of thousands or millions of dollars, if someone is injured or possibly dies in an accident.

ZitaX (Colorado)
Posts: 10
Posted:
Hi Janet,
What you say is true, however the HOA already insures itself from all kinds of activities more dangerous than gardening--for example--there is a full scale workshop with power saws, etc; a sledding hill,....
We always scratch our heads about this...if we were to stop all activities on the property--we still wouldn't be exempt from lawsuits. While it's good to minimize risk--do you do so to the extent that you paralyze the community?
JanetB2 (Colorado)
Posts: 4,219
Posted:
Hi Zita:

The attorney is correct in that Owner’s are liable for activities on their property. I could have someone slip on my sidewalk in the winter even though I shoveled the snow, and still be liable. I personally take risks; however, they are risks with my personal life or personal property.

The issue with HOA’s is certain risks affect not only ourselves, but also our friends and neighbors. Therefore, some measure of caution should be taken to some extent to not potentially cause financial harm to others, unless everyone in the HOA is in agreement to all take the risk. An example would be while some of us in my HOA do well financially we also have a neighbor who is a young couple with two very young children. If someone sued our HOA for a large amount and potentially insurance did not cover everything for some reason, it could destroy some individual’s lives financially.

Your HOA carries insurance for the property owned by the community and against certain items enjoyed equally by everyone in the community. Some communities have pools, golf courses, airplane landing strips, etc., but these are all items for the community members and covered by the various insurance policies.

The issue I see with what you have described is you are allowing in essence private business utilize HOA owned property. The question here is does your insurance cover the HOA with regards to allowing this situation? Sigh … as I’m writing this I am starting to see a side that you are potentially looking at achieving.

Well … you will need to check on a lot of items before potentially proceeding just a few of which are:

1) Are all the members on board regarding this issue, as the majority would have to vote in agreement. Otherwise it is time, effort, and potentially money wasted (as you will need to definitely hire an attorney).
2) Speak with a very good Attorney who can insure idea is viable and let you know regarding all potential liabilities or other issues such as potential problems regarding non-profit corporation.
3) Speak with a very good tax consultant to insure potential issues regarding your non-profit status and tax liabilities.
3) Insurance regarding liability for volunteers and potential hired workers on the farm.
4) Insurance regarding if you give away OR sell produce (even if you give it away or donate there still can be potential liability).

Etc. … I’m sure the attorney will have a list of other items.
RobW (California)
Posts: 279
Posted:
I can't advise you on the legalities, but I can say something about formalizing free-spirited, "organic" enterprises. Every spontaneous community enterprise has its own life force, and its own life span. When you apply a rigid organizational structure to a free-style effort like the one you have, you automatically change its nature, and you may not like what it morphs into.

If you look at the people who are keeping your farm going, I'm betting you can easily identify 2 or 3 natural leaders who inspire all of the rest, and they're doing it on their own. It may very well be that the reason the farm is successful is because of this particular mix of personalities, unfettered spontaneity, and the very lack of rules. If you integrate the farm into your HOA government, you may lose those leaders, and the next thing you know, the farm will become another burden on the association, rather than the whimsically creative enterprise it is today. If it sounds like I'm speaking from experience, I am.

On a practical level, what happens if the HOA takes on the costs of running this farm, and a homeowner doesn't want any vegetables? Every homeowner has to pay for the food, whether they want to eat it or not? What happens if a blight of some kind attacks the produce? What happens if there's a salmonella outbreak? What if there simply isn't enough production to make the farm profitable, or to feed everyone?

My gut feeling? Leave it alone.

Rob

JanetB2 (Colorado)
Posts: 4,219
Posted:
Thank you Rob ... you stated what I have been feeling, but was having a hard time stating.
ZitaX (Colorado)
Posts: 10
Posted:
Hi Janet, Steve, and Rob,
First and foremost THANK YOU for your time and personal energy that you have put into your posts. I can't tell you how valuable it is to have some outside input. We are a very close knit community of 75 adults and children--of varying levels of prosperity and we operate on consensus. There is a desire for supporting our neighbors in the realizations of their dreams and expressions--and the community values the move towards more self-sufficiency in food and energy production. So with these two currents of energy operating in the back ground, it is difficult to see clearly what some of the issues are with making the farm an integral part of the HOA.
If you have any other thoughts please share them. As it is, you've given us a lot to chew on.
May you all have beautiful days.
BarbaraB10 (California)
Posts: 117
Posted:
What if someone sees the opportunity for another source of revenue - flowers & fresh herbs for a restaurant?

What if someone wants to provide fresh eggs and free-range chickens? What if someone wants to install windmills or solar panels to create energy for the HOA - would consideration be given to use the common areas for these purposes?

If someone wants to compost or use worms to enhance the quality of soil, would your HOA give fair and reasonable consideration to enable these individuals fair/equal access/opportunity to the use of the land? Would their use of the common area be permitted or restricted?

Who determines the priority for land use (example: farming over energy use)?

If the HOA does not have guidelines or enable fair and equal access to any member, how is the association prepared to handle it?

For the time being, the HOA has concensus - realistically, it may not last. I would not want to see your HOA victim to a Pandora's box scenario.
RobW (California)
Posts: 279
Posted:
I've had an - how can I best say it? - interesting life. My father retired from the navy when I was 12, and bought a farm in North Carolina. I worked that farm for 4 years, and then left home when I was 16 to work in the Civil Rights movement. I was part of the commune movement in the 60's, and was a community builder in various collectively-owned farms and alternative energy-based, semi-enclosed ECO-systems and lifestyle experiments. Somewhere along the line I ended up doing a stint in the army, where I worked in yet another commune (a halfway house for alcoholics and heroin addicts coming home from Vietnam).

After the army, I joined the "Back to the Land" movement, and bought a big piece of land with some friends in Idaho. When that didn't work out (we had widely differing views on conservation and forestry), I formed another group and we all went to Hawaii to buy land to form another community-based farm. Afterward, I gave up on the whole idea of Utopia, got married, started a business, had a bunch of kids, sold the business and went into the Internet consulting and web development field.

Now it's been 24 years since I moved to this CID, and through all of this, I have learned a few things.

First: Cooperation and from-the-heart consensus is a great mix for starting something like a community or a business; but neither a business nor a collectively-owned community can be sustained that way indefinitely.

Second, a CID, such as what most of us live in, has to be run like a business, and a business has to be run like a business. That means all the laws have to be followed, or it's a lot like playing Russian roulette: it may be exciting, but you wouldn't want to grow old having to regularly spin the cylinder and pull the trigger.

Third, it is extremely difficult to succeed in business. 90% of all small businesses fail in the first year. Of the 10% that make it into the second year, 90% of those fail by the end of the third year. After 5 years, only a fraction of those original dreams are still viable. One of the biggest mistakes entrepreneurs make is thinking that their hobby would make an excellent business. They tend to let it sort of evolve, because they already know how to do whatever that hobby is. What they don't realize is that their labor of love, which they get so much creative expression and relaxation from, becomes transformed into an obligation and a burden that they can't get away from, even if they could, which of course they can't - not for several years, at any rate - until the baby is walking a bit on its own. And the thing has to be planned down to the last seed and corncob.

My biggest concern in this case is that the HOA would be trying to start a small business, integrated with the social architecture and legal framework of the HOA. Just because there is already a sort of communal/consensus effort going on with the farm, the business aspects of such an enterprise that need to be defined and organized are completely different from the current enterprise. They may look the same, but they will have completely different sets of rules for accounting, accountability, and fiduciary responsibility, and the real danger is that it will fail, and along with it, yet another small business dream, and all at the expense of the homeowners.

Every change in life involves taking calculated risks, but I'm not sure I would take this one. Granted, I'm not there, and I really don't have all the details, but I would proceed very, very cautiously.

Rob

AndyD3 (Arizona)
Posts: 1
Posted:
Hello Zita,

I have discussed this idea with other students, colleagues, politicians, and family members in the past. I am very interested in how things are working out for you and your community on the "Farm issue" with the HOA. What some of us in Arizona have started to realize is there is probably no way to get an already established community to go with the Farm idea included in the HOA. Although if a community was developed with the farm already included then it would appeal to those certain individuals who would want to become a member of the community. I have noticed others mention, not directly, that a community would have to be very careful as to not create a "socialized government" within the community. Such as everyone pays the same premium per month in their HOA yet everyone benefits differently. Some families may be smaller or larger than others, or have completely different health and nutrition needs/wants. So a single person living in a single home does not need as much produce as a larger family with different aged children for example. To be fare would the HOA give each household the amount needed to sustain the smallest household and the difference is paid out of pocket from the larger families? I have seen in Arizona that it is not uncommon for a larger home pay higher HOA fees than the smaller homes depending on what services were provided. Could it be possible to charge an individualized fee per each household depending on their needs or wants?
I am hoping to open this discussion back up and hopefully gather ideas across the country to see what new ideas can come out and if they can be successfully accomplished. Hopefully others can discuss or comment on the ideas below.

Develop a community center owned by the HOA community with tools or resources that allow a community member to utilize these tools to make profit. A generic example: sewing machines available to all members though members can utilize the tool to make clothing, blankets, etc. for profit.

Another idea is to make farming an option. Where each household is able to rent a small section of the land for farming or gardening and is allowed to work the plot of land themselves or hire someone to do it. In Arizona we pay HOA fees which most of the time do not cover landscaping of our own yards which we hire landscapers to do if we choose and usually costs on average 50 dollars a month. With this option one could sell for profit their produce, flowers, etc.

More ideas to come.

Most of these ideas would more than likely not work for an already established community.

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