We have some disgruntled homeowners in our HOA that are talking of starting their own association. Is that possible?
The members have run for the board and were defeated. They come to the monthly meetings and air their complaints. The majority of the time, their complaints are more personal than community-oriented.
We, like all communities, have issues and try to resolve them in a logical and friendly way for all in the community, and not just the few. How does one get these homeowners into the fold?
Thank you for the great questions. I have had similar experiences with communities our firm has managed over the years, and how the board of directors (and management) work together to remedy the situation involving disgruntled homeowners can be a defining moment for a board of directors, ultimately impacting the association as a whole.
A productive, peaceful resolution can strengthen an association, while continued infighting and escalating tension can have damaging effects for years to come.
The short answer regarding whether disgruntled homeowners are able to start their own association is, most likely, no.
Homeowners associations are formed through the California Department of Real Estate, typically during the community’s entitlement and development stages. Once formed, an association is a legal, mutual benefit, nonprofit corporation encompassing every subdivided lot within a given community and the association’s covenants, conditions and restrictions, or CC&Rs, are recorded against the title of every subdivided lot, as reflected on each property’s title report.
In order to create a new association, it would be necessary to dissolve the existing association, which, pursuant to Corporations Code 8724, would require a unanimous approval of the membership, including associated lenders.
To then establish an entirely new association, it would most likely be necessary to hire both an attorney and a consultant to draft association governing documents, including bylaws and covenants, conditions and rules, create an association budget, coordinate and compile the necessary documents required for submittal and oversee the approval process through the California Department of Real Estate.
This would be an extremely costly and time-consuming endeavor. Seceding from an existing association by de-annexing certain lots is even more difficult and convoluted. It would be far easier for the homeowners to simply campaign and run for election to the existing association’s board of directors.
However, since the owners in question already tried and were unsuccessful in getting elected to the board, it is unlikely they would be successful in dissolving the existing association or de-annexing their lots and forming their own association.
Although a group of disgruntled homeowners would most likely never be successful at dissolving an existing association and creating a new one, dissatisfied owners can absolutely impact an association and create problems for the existing board of directors.
It is difficult to hold a productive board meeting if the board must regularly contend with unhappy, vocal and disruptive owners in the audience. Additionally, ongoing conflict between a board and its members can potentially impact property values if real estate agents and local residents begin to learn of these types of community issues. Who would want to move into a community with infighting?
My advice would be for the association’s board of directors to try to engage the disgruntled owners and empower them to take a hands-on approach to resolve their concerns.
The board could invite them to join a committee focused on resolving their particular issues or coordinate a homeowner forum outside of a regularly scheduled board meeting to exclusively discuss their concerns.
Most of the time, homeowners become upset when they feel they are being ignored or when they feel passionately about outstanding issues they believe are not being adequately addressed.
I have found that oftentimes empowering owners by appointing them to a committee, where they can share their ideas and work to resolve their concerns, or providing for a homeowner forum where owners are able to discuss their concerns are productive methods to resolve ongoing conflicts.