Academy/HOA & Community Association 101
How an HOA is created
Before there is a board, a budget, or a rule, there is a recorded document. This is where an HOA actually comes from.
An HOA is created when a developer records a declaration, sometimes called CC&Rs, against the land. That recorded document creates the community and the association itself, which then organizes as a nonprofit corporation or unincorporated association under state law. The developer controls the board until a state-mandated turnover trigger ends that control.
A recorded declaration creates the community
An HOA does not begin with a board meeting or a logo. It begins when a developer records a declaration, also called CC&Rs, against the land itself. That recorded instrument is what legally creates the common interest community and the association that governs it. Everything else, the articles of incorporation, the bylaws, the first board, follows from the declaration. None of it comes first.
"any instruments, however denominated, that create a common-interest community, including any amendments to those instruments."
Source: Nevada Revised Statutes Chapter 116, Common-Interest Ownership (Uniform Act), Nevada Legislature
The association organizes as its own legal entity
Once the declaration exists, the association itself typically organizes separately, usually as a nonprofit corporation, sometimes as an unincorporated association. Whether your association is incorporated, and under which state's law, is worth confirming from its articles of incorporation (or their absence) rather than assuming. Being a nonprofit corporation under state law is also a separate question from federal tax status; it says nothing about what the association owes the IRS.
"'Association' means a nonprofit corporation or unincorporated association created for the purpose of managing a common interest development."
Source: California Civil Code Section 4080 (Davis-Stirling Common Interest Development Act), California Legislature
The developer controls the board, until turnover
Right after creation, the developer (called the declarant) runs the association's board, since it is the developer's project and the developer still holds most of the units or lots. That control does not last forever. State common-interest statutes set a mandatory ceiling, a trigger that ends developer control (called turnover) even if the declaration is silent or the developer wants to hold on longer.
The specific trigger, a percentage of units sold, a fixed number of years, or both, is set by your own state's statute and your declaration. Nevada's numbers below are an example, not a national rule; check yours.
"Sixty days after conveyance of 75 percent of the units that may be created to units' owners other than a declarant."
Source: Nevada Revised Statutes Chapter 116, Common-Interest Ownership (Uniform Act), Nevada Legislature
Check yourself
Answer before you read the explanation, recalling it is what makes it stick.
A new subdivision's first legal act, the one that creates the HOA and the community itself, is:
A homeowner insists the developer can keep control of the board forever, since the developer still owns three unsold units. What should a board member tell them?
The governing documents do not say whether the HOA is a nonprofit corporation or an unincorporated association. Where should a board member look to find out?
Sources
- Nevada Revised Statutes Chapter 116, Common-Interest Ownership (Uniform Act), Nevada Legislature
- California Civil Code Section 4080 (Davis-Stirling Common Interest Development Act), California Legislature
Related elsewhere in the Academy
HOA & Community Association 101
Next, find out who actually owns the HOA once it exists: Who owns the HOA?
Whether your association is incorporated, under which state's law, and exactly when developer board control ends are all set by your own state's statute and your declaration, not by a national rule.