Getting along with homeowners
Developers of new urban (NU) communities — founders — are often disappointed and rather surprised to find out that they are not universally beloved by homeowners.
In fact, founders may have more trouble with homeowners, and homeowners’ associations (HOAs), than conventional developers, for the following reasons:
1. In conventional development, the developer gets in and gets out. NU development takes years or even decades, and even when the residential portion is built out, the founder is likely to retain an ongoing interest in the town center.
2. Most founders are, of necessity, control freaks. They have a vision, they are personally invested in their projects — many are individuals or family members, not big corporations — and they persevere. Otherwise, many of these projects would never survive the uphill battle to get built. But the qualities that make them good founders make them poor HOA participants. Homeowners have their own ideas and want to make their own decisions, some of which will be different from the decisions the founder would make. Unless the founder is willing to step back and let go, this leads to conflict.
3. In communities where homes are custom-built, rather than built by production or speculative builders, the architectural review process seems perversely designed to foster ill will. For most, this is the homeowner’s first exposure to the founder. When an application is rejected, homeowners feel that they, and their sense of style and taste, have been personally rejected. This bad feeling festers and carries over to later relationships with the founder.
Having good homeowner relationships is not something that comes naturally. It takes effort and the process is not entirely intuitive. Here are some specific suggestions for founders to improve the relationship with homeowners:
Don’t give the HOA anything you don’t want to kill. Most HOA officials are interested in preserving property, keeping assessments low, and avoiding controversy. A concert on the green may be fun, but it means trash to pick up and wear and tear on the lawn — and fielding complaints from the handful of homeowners who don’t like the noise or the traffic. Limit the HOA to simple maintenance responsibilities for common areas outside of the town center. Keep the town center and any other areas where you want to have lively programming out of the hands of the HOA. Activities can be sponsored either by the merchants or by a 501(c)(3) or 501(c)(4) organization.
Know what hat you are wearing. The HOA is an artificial construct, and it’s necessary to understand and respect the boundaries. From the very beginning, recognize that the HOA is a separate entity — not an extension of the developer — and exists to serve the homeowners. Even when the founder controls the board by electing a majority of the directors, the founder always needs to be aware of the responsibility owed to the homeowners, and to act in the best interest of the community. It’s also important to observe the formalities of operating a separate corporation, such as noticing and holding board of directors meetings and keeping corporate records. (In most states, it’s the law as well.)
Maintain a clear line of demarcation between the founder and the HOA. If at all possible, the developer should not manage the association. Instead, hire an individual to be the HOA manager—even if it’s a part-time position — and give the manager an office with a door that says “Association Manager.” When homeowners show up with complaints that are HOA issues, the founder should direct them to the Association Manager for help. This reinforces for the founder and the homeowner the separate role of the HOA (and saves the founder a lot of time and headaches, too).
Give the HOA exactly what it is owed, nothing less ... and nothing more. The HOA must have a separate bank account. The developer’s share of HOA expenses for the lots it owns must be paid into the HOA account on a regular basis. HOA expenses need to be paid out of the HOA account, even if it means apportioning costs. When the landscapers are planting trees, they are working for the founder. When the landscapers are mowing the green, they are working for the HOA.
If there is not enough money in the HOA account to meet the HOA’s expenses, the developer will, as a practical matter, need to underwrite the deficit. (This is not unexpected in the early months of the association, when there are relatively few homeowners paying into the association.) However, don’t pay HOA expenses out of the developer account. Instead, transfer money into the HOA account and show it as a loan. The founder can forgive the loan later — and the opportunity to do so may give the developer some leverage at turnover.
Founders should resist the urge to provide services without charge. It’s like letting bears feast on your picnic. They get lazy, and then they turn on you. Don’t do it.
Don’t lowball the budget. The amount of assessments is less important to homeowners than whether or not the assessments go up. Even if assessments are modest, owners will resent that they are paying more than they were before.
Train homeowners for leadership, and then turn over control. Developers usually want to hang on to control as long as possible, but there are real benefits to an early turnover. If the founder has reserved the appropriate development rights, kept the town center separate, and properly circumscribed the HOA’s responsibilities and powers, an early turnover greatly reduces tension between the founder and the HOA.
To learn how to manage the association, homeowners need to participate on the board of directors while the founder is in control. When it is time for owners to elect a representative, open two seats, not just one. When there is only one homeowner on the board, that director will feel a responsibility to stick up for the homeowners, and will tend to be more confrontational. Having two or more homeowners on the board, even when they are not a majority, tends to make them more cooperative.
Pay attention to the message being conveyed by your architectural review process. A lot of resentment starts there and resurfaces elsewhere. A town architect with good people skills who can help homeowners through the process is worth a great deal in future good will. Ideally, by helping homeowners informally and making suggestions before plans have progressed too far, the developer can avoid ever having to reject a plan during a formal review process.
Communicate the vision. Don’t assume that homeowners automatically “get” New Urbanism. Many homeowners are attracted to traditional architecture but don’t understand why interconnectivity is important. They like having a restaurant they can walk to, but don’t want people outside their neighborhood to eat there, too. (Never mind that the restaurant wouldn’t stay in business without the outside traffic.) Especially when the residential areas are built first, make sure owners understand what they are buying into.
On the other hand, don’t disclose ideas about what specific businesses or facilities might be built until you are committed to building them. This is one of the dangers of the charrette process, where a lot of possibilities are tossed around but only some will actually be built, so temper expectations during the charrette. Later on, make sure that all master plans or other representations are clearly labeled as conceptual drawings.
Doris S. Goldstein is an attorney whose practice focuses on new urban development. Goldstein is the co-author, with Dan Slone, of a new book, A Legal Guide to Urban and Sustainable Development for Planners, Architects and Developers.