How to Form an HOA in Georgia

To be honest, I’m not really going to tell you everything about how to form a Homeowners Association (an “HOA”) in Georgia.  Much like everything else in the land of things legal, it is both simple and complicated at the same time.  To tell you that would be to write a book. . . but I will try to give you some guidance as to the basics.

 Before you decide to form a homeowners association, you need to consider why you want (or need) it, what you want it to do, and what’s already in place.

 If you said “huh?” to the “what’s already in place,” let me back up. 

 It is far different, and easier, to put a homeowners association in place in a neighborhood that is in development.  There’s typically less owners and lenders involved that need to agree to the necessary documents. 

 In a situation where you have an already developed neighborhood with a number of owners and lenders, things change.  You have lots of varying ideas about what is good for the neighborhood and what those owners will agree to.  It is often much, much harder to get in contact with the lenders on the various lots to consent to any necessary documents. 

 On the plus side, you may already have some of the necessary documents in place that you can work with, such as in a fairly new development where the developer was unable to finish building out the subdivision and it was taken over by the bank.  Part of the standard “package” of governing document may already exist and you merely need to take some additional steps, such as incorporating the association or drafting bylaws. 

 Underlying all is the concern that you must be sure that there is legal authority for the actions that you are taking, so that the documents can really bind the members and be used to govern.

 I urge caution in each instance — and not simply as a matter of job protection for myself.  I’ve seen enough mis-matched documents to know that you can create a world of problems, despite some very good intentions.  At best, there may be ambiguities, redundancies, and omissions.  At worst, you find ambiguities, redundancies, and omissions because of a dispute over an election, assessments, or other matter.  The confusion makes the situation worse.   I’ve seen where attorneys make this mistake too, so it has little to do with whether one is a lawyer or a layman.  It has to do with familiarity with how an HOA functions and what it needs to do the job it has been given.

 The problem that often arises is that folks don’t understand how the documents fit together.  Moving forward with a “this looks good” mentality, they create problems for the future.  Other times, there’s genuine mistakes such as confusing by-laws (the document that governs the corporate functions of the association) with the covenants, conditions, and restrictions (a document that creates obligations and rights as part of ownership of a lot in the subdivision).  Other issues can be mistakes as to the tax status that the association qualifies for under the IRS tax code.  A homeowners association *may* qualify for tax exempt status under 501(c)(4)  but it may not.   You would need to go to a reputable tax professional to receive guidance on what the association will qualify for.

 I know, I have still not answered the question “how to form an HOA in Georgia.”

 The bottom line is that you need the governing documents: a declaration of covenants, conditions, and restrictions that creates rights and obligations arising from ownership of a lot, you need articles of incorporation to form the association as a separate, nonprofit corporation, and you need by-laws to set out the rules for how the corporation functions.  Each of these documents needs to be written so that it functions with the others.  Certain rights and obligations need to be in the document best-suited to provide the authority and/or enforceability to carry forward the intention behind the words. 

 It sounds easy when I tell you that, but hopefully you see now that there’s more to it. Just as I said above, it is both simple and complicated at the same time.   The level of complication rises when you consider whether the homeowners association you form should be subject to the Georgia Property Owners Association Act.  Depending upon your situation, the Act can be helpful for the association’s functions.  However, in some cases it is not.  

 If you are contemplating forming a homeowners association, I urge you to get legal advice from an attorney experienced with dealing with this practice area.  They can point out common pitfalls and other issues.  They may have suggestions, based on experience, about better ways to structure things.  If you have budget constraints, discuss them with the attorney up front.  I know I always appreciate knowing about such issues and I try to work with my clients to identify costs upfront on projects like this, where at least part of the fees associated with the work can be estimated. 

Do you want to use this blog article?

You may, as long as you include this complete bio with it:

 Amy H. Bray is a Georgia attorney, focusing her practice in community association and real estate law matters. 

 Her firm, Andersen, Tate & Carr, P.C., works with all manner of clients in business and personal matters, providing “big firm” sophistication with suburban law firm attention and service.

Website: www.atclawfirm.com

Blog: www.andersentatecarr.wordpress.com

 Copyright © 2012, Amy H. Bray & Andersen, Tate & Carr, P.C.

Advertisements
%d bloggers like this: