To HOA or Not to HOA

Bertha

Is this 3 unit building the only building? Regardless of the answer there will be shared things like roofs, pipes, sewage, electrical service, colors, siding material, etc.

Let us use a real life example. 3-4 unit townhouse buildings that had ice dams issues often requiring repair including some siding repair. Not a major issue but a bit of a pain in the neck until the siding used was no longer available. Now the fun/agony begins. Simple answer is we have to change the siding. It will cost about $18K for the entire building. OK people pony up $6K each. One of the 3 says no. If not Covenants, etc. (controls) how do the other 2 get the one to go along?

PS
In the real life example there were some other issues like porch steps, garage doors, etc. but the siding was the main issue and the cost ended up being $25K per unit.

In any type shared living (building, grounds, entrance, pool, etc) there has to be "an understanding" as to how things will be shared/done. If not, then do not live that way.

At the simplest level, yes there are shared resources and a master insurance policy will be needed to cover the building......

Sooo........

No HOA? equals no master insurance.
No mater insurance, no underwriting which equals no mortgage.
No mortgage? equals cash only buyers.

ps. no HOA also means PERSONAL liability for any event occurring in a 'common area'

However, that agreement needs to be in writing and, in my opinion, attached to the deed.

I appreciate all the responses!

Yes, there are only 3 units. There is space between the dividing walls of each unit. I'm told this makes them effectively 'separate' houses. However, they look attached, in that the front and back facades cover the separation. It looks like a big rectangle building on a rectangular lot. The lot has been divided into 3, one for each owner.

So far the banks seem to be willing to do the long term financing separately, and home insurance is separate as well.

I can't run from this project. I honestly wish I could. My life situation has changed during the time this project has taken. It started out as my totally affordable dream home, but its turning out to cost far more than I ever could have imagined, and now the HOA stuff is making me feel that I'm in way over my head.

I bought the lot with cash, but my name is on a construction loan that has been maxed out. I can't sell because the way the builder has done his accounting, I don't know what the final cost will be, until I'm closing. Unless you see another option, I'm stuck in it until it finishes. Luckily there seems to be some equity built into it. I just don't know how much yet.

Right now, I must deal with my present situation, which is that I have no clue how to run an HOA, much less set it up with all the right items. I also have a full time career and a small business. So it puts quite a lump in my throat to think I'm going to have to operate another 'business'.

There was a scenario offered in this forum, where some expensive repairs are needed, and we need to force a stubborn owner to pay up. My biggest fear is the other two owners have more income than I, and will gang up on me to pay for expensive renovations/repairs. I fear they won't be frugal and think rationally. I've already seen this in how one of them is choosing his fixtures/colors, etc. He is eccentric, and has to have everything a certain way.

I REALLY appreciate all the advice. However, so far I am only hearing one side of the story. There is a lot of advice for why we need an HOA in this tiny 3 unit townhouse project. To be objective, I would like to hear if there are other options.

It if means anything, the sewer and water mains are separate and do not cross property lines. The gas main is shared, but that is deep under ground, and in 20 years of owning homes, I've never seen a gas main go bad or get clogged.

While we own our lots, mine is bigger as it includes the shared driveway entrance from the street. We all have back and front yards with xeriscaping. The back yards are separated by a divider. Each as 2 car garage in back, built as one long building, but separate garages, like the living units. There is a fence along 2 sides of the property.

Does anyone know if its an option to have CC&Rs to restrict what you can do to the outside of the property, but not have an HOA?

From what I am hearing, it sounds like I'm going to have to take my HOA medicine, even if begrudgingly. It just looks so complicated.

If anyone has ever been in my situation, new to the HOA game, but being forced to play, please tell me it isn't as scary as it sounds.

Thank you!

Bertha

Start reading.....

http://www.investopedia.com/articles/mortgages-real-estate/11/forming-homeowners-association.asp

There are quite a few small HOA's (less than say 1/2 dozen units) especially where older homes/buildings were converted. Smallest I ever saw was a 2 unit HOA. Plenty of split votes there and not one I would enter into.

I checked out the link. Thank you! There is a lot of helpful information there.

Good point. I have arranged to get together this weekend to discuss CC&Rs with the other buyers.

I am going to focus the discussion on keeping things simple. There are only a few common areas, and most are already covered by city ordinances, such as keeping roofs/fences/yards in good repair.

I am starting to have hope that maybe we can get away with including only trash removal, and perhaps fencing and driveway maintenance as the items covered in the HOA. Seems like everything else, such as being required to maintain roofs, siding, windows could be enforced via city ordinances that are already on the books.

I am hoping CC&Rs can be kept fairly simple too. Something along the lines of 'keep everything on the exterior structure and landscaping exactly as it is', with any changes requiring unanimous vote.

I know there will be other details, such as no signage in windows, parking restrictions, limits on pets, smoking, noise, etc., and am hoping to find boilerplate language that covers that.

I'm open to thoughts whether its even possible to keep things simple, and whether its ok to leave something items out, to be enforced by city ordinances.

I will get more understanding as I go, but I realize am coming at this from a totally naive perspective at this point.

Thank you!

Bertha, you and your neighbors are in a very good position actually, in respect to forming an HOA. Very, very lucky. The vast majority of us here on this forum did not have the opportunity to write up our CCR's etc. We are all stuck with poorly written and confusing boiler plate of pieces of paper.

Do not be scared or worried about HOA's, which is what you may do after spending time on this forum doing research. You can not worry or consider the what if's when it comes to future repairs etc. They can be of benefit to all of you. Can your scenerio happen? Yes, but that shouldn't stop you from looking into how an HOA can benefit the three of you.

Find an experience HOA attorney who can help guide you to what you three have as options. It's not as difficult as some people here think it is.

When you meet up with your new neighbors, tell them about this forum so they too can be knowledgeable about what is or what isn't allowed. Be proactive and positive about whether or not you should or shouldn't. Include all three in all discussions and concerns and you may well be surprised at how an HOA can be a positive thing. Good luck.