Q&A of the Day – What Happens to Common Areas When HOAs are Dissolved?
Each day I feature a listener question sent by one of these methods.
Email: brianmudd@iheartmedia.com
Social: @brianmuddradio
iHeartRadio: Use the Talkback feature – the microphone button on our station page in the iHeart app.
Today’s entry: Submitted via Talkback: Hey, good morning, Brian. I'm following up on your HOA analysis. I'm assuming that this is for new construction going forward because existing condo and homeowners associations have things like pools that need to be maintained and common ground that require maintenance, and in many instances, building insurance. Any thoughts on that?
Bottom Line: So yes, it’s an excellent question and point you’re making about many of the specific challenges that would come about for existing communities if abolition of HOAs were to take place. I wanted to address today’s follow up question to Friday’s Q&A on HOAs, because at this point there are far more questions than answers, and I’ve heard from numerous people with additional questions about the topic.
The key to this conversation currently is something I referenced on Friday. The conversation to potentially end homeowners' associations is entirely theoretical. While Miami Representative Juan Carlos Porras has regularly discussed the prospect of abolishing HOAs in recent months, he’s yet to put pen to paper (or fingers to keys) to propose a bill that we could specifically understand and address. It’s also unclear if he actually will. For that reason, my initial analysis was entirely from a macro perspective where I pulled three potential positives that could result from the abolition of HOAs, to three potential negatives, and three significant changes that would likely produce neutral outcomes.
In answer to today’s question, we don't know if the intent of legislation would be to only ban HOAs for future construction projects, or for all HOAs, existing and future developments. To date, Representative Porras has spoken of banning all associations. As for what might occur in the specific example cited of planned communities with pools, recreational spaces, etc. that require regular upkeep and maintenance... We do have an idea of what could occur because there are numerous examples, and precedent that’s been set overtime with HOAs dissolving during bankruptcy proceedings for communities.
Under Florida law there are three potential outcomes that occur when HOAs are dissolved:
- Joint Ownership by Homeowners: Common areas like pools and recreational centers would likely revert to "joint and several" ownership among all residents, as is stipulated in many communities’ governing documents. This means every homeowner shares equal responsibility for upkeep, but without mandatory dues, participation would be voluntary.
- Local Government Takeover: If homeowners can't agree on management, counties or municipalities could step in, as would immediately occur for essential infrastructure like roads, drainage and public safety features. Florida law allows for "receivership," where a court-appointed overseer manages assets until resolved (attempting to do this at full scale would be quite the undertaking to say the least).
- Privatization or Sale of Amenities: For non-essential features (clubhouses, pools, tennis courts, etc.), communities might vote to sell or divide them among owners. Pools could be filled in and converted to private lots, or recreational centers leased to third-party operators charging user fees.
As I mentioned in discussing the potential joint ownership option, many communities have contingency plans for dissolution of HOAs are addressed, so if you’re in a planned community and curious as to what it might look like for you, reading through those documents might provide the answer.
I’ve seen multiple interesting outcomes result from HOA dissolution, or plans put in place in lieu of for planned communities. The most creative examples I’ve seen have included conversation of HOAs into corporations, where each community member owns shares in the public spaces equal to their property’s share of the community. This has included board members and often a compensated CEO who overseas and is responsible for maintaining public spaces. Again, that’s just an example, but perhaps provides more specific insight into the view of the possible.
For now, the bottom line is that we’ll wait and see what’s proposed, if anything.