Should HOA's merge?

At our recent BOD Meeting, an interesting topic was tossed around, so I thought I would come here to see if anyone has come upon this before. Any/all opinions would be welcome.

We are a very small HOA/POA, fairly young, with limited funds, and no amenities (no swim, tennis, golf, trails, parks, etc). Just one little street of 27 individual homes.

The idea of seeking to combine our HOA/POA with a nearby HOA (we have no idea if any other HOA would want us) to help offset management compay costs (we cannot afford one on our own) and attorney costs.

Does this sound like an idea that has any basis to succeed?
What would be involved?
Would either HOA benefit?
What are the legalities that would need to be faced?

As I said this was just a thought thrown out, so I am hoping someone out there has some experience. I know that many may have opinions, if not experience. And we still welcome those.

Thanks,
Gloria

Gloria - WHY would another HOA want to merge with yours?

You must have something to bring to the table for any HOa to pick you up in a merge.

Check your documents to see what the voting threshold would require for any kind of dissolution of your HOA.

The motion would be to dissolve yours and become members of the other HOA. Their motion would be to accept your members into their association. You would then be govern under THEIR CCRs, bylaws and rules and regulation.

Lots to think about . . .

Actually I think the process would require one HOA to dissolve and merge into the other or both HOAs would dissolve and a new one would be created. An HOA attorney would have to be consulted and, as Roger advises, it would all be dependent upon what the CCRs of both assn's say about annexation or adding more property. My CCRs state that new property can only be added by the declarant.

Just because two assn's merge doesn't necessarily mean the combined expenses would be a savings to one or the other HOA. Of course the amount of the assessment would be dependent upon the size of each assn and if there are amenities other than common areas and street right-of-ways to maintain, but could result in a higher assessment for all the owners, or it could really mean a higher assessment for one set of owners and perhaps a lower assessment for the other set. For ex: Assn A pays $50/mo and Assn B pays $75/mo. After being combined the assessment is $65/mo; therefore requiring Assn A members to pay $10/mo more and Assn B members to pay $10/mo less. What would be the advantage to Assn A members?

Well, if you're as low maintenance as you make it out to be, I would want you in our association.

I guess it depends on more than just financial things. An example...my association is townhomes, and we also have no amenities, and everyone pays their own utilities. About the only expenses we have is regular maintenance and lawncare. Yes, we have others, but those are the biggies. I would IMAGINE that a maintenance contract and a lawncare contract would be more favorable to a larger (combined) association. Other things, maybe not.

However, there is an association directly behind mine, also townhomes. They pay $85/month, we pay $75/month. We're brick-face. They're wood siding. They need to be painted every few years at a HUGE expense. We don't. It wouldn't make financial sense for us to merge with them, although it would for them. We're lower maintenance, so more of our money goes into our savings/reserves. They pay out almost the exact amount they bring in.

Sounds like you're even lower maintenance than us, so move your complex to Colorado, and we'll set up shop!

Maybe they just want your money? More income and little upkeep?

Why do you have a MC?

First, in answer to Susan, we do NOT have a management company.

As to why we have an Association, it was put in place by the builder/developer, and turned over to the HomeOwners when the street was nearly completely built out.
We had no choice. It was already registered with the county.

As to what our Association does for the HO, that depends on whom you ask.
Those who support the existence of HOA's, believe that it protects the value of your real estate by virtue of the CCRs.
Those who do not support the existence of HOA's, believe that the HomeOwners would maintain their high end investment anyway (I happen to support that theory having lived in six high end homes in different states, non of which were governed by HOA's).

As to considering dissolution, that is a question we can bring to the HO's at our Annual Meeting, after we have researched just what will entail. But here in this area of Georgia, practically every subdivision belongs to an HOA, so the prevailing thought is that it protects home values.

As to the common areas, the only thing that is considered a "common area" per our CCR's is the signage, columns, fencing, sprinklers, lights and landscaping at our front entrance to our one dead-end street. These structures are not on any land deeded to the Association, but on land owned by the HO's on the end of the street. The Association has an easement per our CCR's to enter the property in order to maintain the exisiting structures, which are commonly owned by the Association.

As to a reserve fund, we are trying to have some monies set aside for replacement (if necessary) of the previously described structures at the front entrance.

It seems to me that dissolution would be beneficial, but again, that is just my opinion, and I am certain it is not shared by everyone. And again, we would have to come up with HUGE legal fees.

We have a 4 person BOD (couldn't get a fifth this year). Our total dues collected per year are $8,900. We have a landscape company, pay for water/electric at the front entrance, D&O liability insurance, insurance on the structures at the front entrance, etc. Our proposed operating budget = $8,710. Pretty close, huh? We are trying to grow a "reserve fund", and have carried over approximately $2,000 from last year. Since we are so small, we don't have a separate "reserve fund" account and just have the extra money in the general funds. The thought process is if we can grow the fund, great. If we need it for unexpected expenses (such as what we are experiencing with legal for the first time), then we can use it.

Because we are so small, if just a few people don't pay their dues, we can get into financial trouble quickly.

It should be no problem for our small BOD to handle our small Community...if everyone would just cooperate. We have the same problems as any other community, just not on a grand scale.

Gloria,

27 homes and no amenities? What does the board do? IF owners are responsible for the upkeep of their particular home it appears the board doesn't even have to get repair bids. I am curious what the board does.

Gloria,

Your small HOA is faced with the same problems as my former HOA of 49 homes. After my term on the board was up where I served as Treas, the board didn't have anyone capable of taking over those duties. They decided to hire a bookkeeping service to take care of all the finances. Still they've had difficulty getting members to serve on the board and take care of the A/C violations; however they've been able to get by for the past 6 years without employing the services of a mgmt co. Hiring a bookkeeping service to handle all the finances takes a big resp. away from the board. That may solve your problems.

Gloria,

Having an accountant or a bank send out assessment bills and receiving the payments will greatly reduce the board's responsibilites. I recently heard about something called a lock box that a bank will handle and we were quoted $5.00 per member. Check with your local bank.

Is it possible the board can get a committee formed to share some of things that need to be done? We formed a landscaping committee (we have 101 townhomes) and it was only for the common areas.

Now the big problem, people ignoring the covenants. I hate to say this is an ongoing problem. We have a management company and they send out violation notices which usually have no effect. If it's bad enough we have an attorney send out a letter which also seems to accomplish little. Unfortunately there are always selfish owners who want to do their own thing.

We have a very small park where most owners take their dogs to do their thing so we put up a sign "Doggie drop off" with plastic bags and garbage can so owners would clean up after their pets. This has had some success but one main offender is on the board..what to do? We've even had some owners who find "leavings" on their property deposit them at the offenders door (if they knew who did it). I doubt this problem will ever be solved.

I can understand why your board is getting burned out after so many years but want to warn you that having a management company (even if you can afford it) will not solve all your problems. Perhaps you can get a quote from a management company and send out a letter to the owners something to the effect of "since we have experienced violations that are going uncorrected and have no volunteers with ..." the board will be voting to hire a management company which, unfortunately gives us no choice but to increase assessments". Maybe this scare tactic will work. Good luck!