Water

Two ways your association gets water

Almost every association falls into one of two setups. Either the association buys water from a municipal or investor-owned utility and the meter sits at the property line, or the association owns and operates the system itself, typically a well or small treatment plant serving the community and nothing else.

Which setup you have changes who regulates the water and who is on the hook if something goes wrong. A board that has always bought municipal water rarely needs to think about drinking-water compliance directly. A board that inherited its own well system from the developer does, and the rest of this lesson is for that board.

The federal question: are you a "public water system"?

If your association owns its own water system, the first question is not who owns it, it is how many people it serves. Federal law does not care about ownership structure when drawing this line.

"A system for the provision to the public of water for human consumption through pipes or other constructed conveyances, if such system has at least fifteen service connections or regularly serves at least twenty-five individuals."

Source: 42 U.S.C. 300f, Safe Drinking Water Act

Cross either threshold, fifteen connections or twenty five people, and the system is a public water system under federal law, full stop. That triggers water-quality testing, monitoring, and reporting duties that a board cannot opt out of by being small, private, or nonprofit. The U.S. Environmental Protection Agency's public water system guidance is the place to start confirming what applies to a specific system.

The state question is separate: does your utility commission even claim jurisdiction?

Whether your state's public utilities commission regulates an association-owned water system for rates and service is a completely different question from the federal one above, and states answer it differently. Check your own state; do not assume either example below.

Idaho exempts homeowner associations that own and operate a water system from public utility regulation outright, because its definition of a regulated water company excludes nonprofit operators run at cost. North Carolina takes a narrower approach: its exemption only holds if the system serves association members exclusively, not the general public. Two states, two different tests, same underlying question. A board in a third state has to look up its own answer rather than borrow either one.

The trap is assuming that clearing the state test also clears the federal one, or the reverse. It does not. A system can be fully exempt from state utility rate regulation and still be a federally regulated public water system on the safe-drinking-water side, at the same time, because they are two different tracks measuring two different things.