Starting a HOA in an existing community (insurance, house)

[rledesma65]

Our neighborhood is trying to start a HOA so far 12 property owners voted yes 7 did not attend their meeting, but now their campaigning to the rest of us saying it will protect us from any liability of any accidents that may occur on a common road used to access our property. So my question is are they misinformed wouldn t our home owners policy cover any liability. We are also being told their moving forward with HOA being formed.

[IC_deLight]

The HOA corporation won't protect you from squat. It will be the biggest threat to continued ownership of your property.

First, the liability people claim to be concerned about would arise only if individual homeowners own the road. Even then it's remote and can be addressed by individual insurance policies. Second, in order to shift liability to the HOA corporation, the HOA corporation would have to own and be responsible for maintaining the road. This would mean existing owners would have to transfer their interest in the road to the HOA corporation. Absent 100% participation, the HOA corporation won't own the road in the entirety. If somehow the HOA corporation gained ownership of the road, inevitably this scheme will obligate homeowners to pay assessments to the HOA corporation for the purpose of maintaining the road. Except it won't stop there because the proponents will expect insurance for the board members of the HOA corporation. So now you will be paying fees to the HOA corporation for the road, for an insurance policy for the HOA corporation, and for an insurance policy for the board members of the HOA corporation. To ensure funding for the HOA corporation, the debts of the HOA corporation will be secured with a lien on your house. Does this sound intelligent?

At the end of the day, the proponents are seeking to secure the financial health of the HOA corporation with a lien on your house. This lien will ensure your house is security for the debts (and costs of operation) of the HOA corporation. You can lose your house for failure to pay the HOA corporation what its board members demand from you. You have no assurances that the money you pay into this HOA would actually be used for what the HOA is supposedly being formed for. Finally, in the event there was some judgment that exceeded the insurance policy for the HOA corporation, your house is security for paying that debt. Having insurance yourself in this case won't do you any good because the judgment would not be against you AND insurance doesn't cover agreements to indemnify others.

There is no scenario in which the HOA corporation is a positive thing for you. Any design they come up with will be far more expensive and risky than simply buying individual policies to protect against the alleged risk. You would pay far more and have far more at risk with an HOA corporation.

[lorilove]

I was under the impression that they had to have 100% participation in order to form a HOA - this is not something they can simply move forward with and force you to be subject to their bylaws.

Most HOA are formed originally by the builder and at the time you buy the house you agree to be part of the HOA. At some point the actual residents take ownership or control of the HOA. It is very difficult to form one after the fact.

I live in a neighborhood where the original builder went bankrupt and the residents never went through the steps to take over the HOA at which time it became defunct and cannot simply be resurrected 30 years later.

[cully]

I, too, am curious how you all planned to pay for road repairs on your common (private, not state) roads. Is there anything else owned in common? Did the builder/developer have a HOA and pass it on to homeowners who let it lapse?