What is a Community Association?

Before you can market to an organization, you need to understand it. And if you are trying to break into the market as a community association service provider, that can be even more challenging, since getting a big picture of the industry itself can be confusing to newcomers.

But before we can even begin to explore the ecosystem that is the community association industry, we first need to understand the core organism. So what is a community association, exactly?

In the United States, a Homeowners Association (HOA), Condo Association (COA), or Housing Cooperative (Co-Op) are all separate legal entities. Collectively, depending on your state, these organizations will be referred to as Common Interest Properties, Common Interest Realty Associations (CIRA), Planned Unit Developments (PUD), or Community Associations.

The core purpose of a community association is to preserve, protect and maintain the community. In most cases, when a community is first built, the developer will establish the association as a way to keep property values high to protect their investment.

What is it? Is it a government? Is it a business? Is it a social club? The answer is D. All of the above!

But community associations are often much more than just a set of rules to follow.

  • In some ways, they are like a small government – there are rules that need to be enforced, and there are elected officials that uphold and set those rules.
  • In other ways, community associations are a business – they are incorporated, there are shareholder members (the homeowners), and there is a board of directors making decisions in the best interest of the company.
  • Community associations can also be a social club. There are committees, activities for members to join in, and amenities for members to enjoy.

Collectively, community associations are all of these things. And that might be why they are sometimes hard to categorize.

Characteristics of a Community Association

While there are many different facets to community associations, they do have some shared characteristics:

The Shareholders / Members


Collective Ownership

A community Association is owned by the community itself – that is the homeowners who own property within the association. In some cases, this is meant even more literally, such as in a condo or a co-op, in which the homeowners actually own a small portion of all common elements, as well as their own unit.

Common Elements

Outside of the individual lots or units of each home, the community association maintains any shared community amenities or property. These are called common elements, and they can include shared areas such as the elevator, lobby, green space, or parking lot. But also facilities like a clubhouse, swimming pool or gym, and even property, such as storefronts or parks.

Mandatory Membership

Unlike other associations you may join, membership in a community association is tied to the property. If you own a home in a community association, congratulations! You are a member. As a member, you have certain rights, such as the ability to vote in new board members, or even run for a board or committee position yourself.

The Organizational Structure


Governing Documents

In many ways, community associations are like a small government, in the sense that they are ruled by a set of laws. Those laws are called the governing documents, and they are almost always created at the time of the community’s creation, by the developer or builder. The governing documents dictate everything from how decisions can be made in the community to what color paint you are allowed to use on your garage door. Of course, the laws of the land still apply, and always supersede the governing documents!

Boards of Directors

The board of directors for a community association is an elected body that represents the owners’ interests in governing the association. While the board is required to follow the rules set in the governing documents, they also have the power to change them through resolutions and amendments. The board is fully responsible for all decisions that affect the community, such as setting the budget, contracting with vendors, and hiring and firing. Board members are held to a legal standard called their ‘fiduciary duty’, which means they are expected to make decisions that serve the best interest of the community itself.

The governing documents dictate things like how elections work and how long a board member can serve. Board positions are almost always voluntary, but the board will often hire a professional management company to run the day-to-day operations of the community.

Nonprofit Corporations

Most community associations in the US are non-profit corporations. This is not the same as a charity. Nonprofit in this sense simply means that no one individual profits from the association’s funds. Instead, any money collected by the association goes back into the association.

The Money Trail


Assessment Dues

Most community associations collect assessments from the members (homeowners) to cover the costs of running the association. Because membership in the community association is both mandatory and property-based, assessments are lien-backed, meaning that if the homeowner does not pay the assessments, the HOA can place a lien on the home that the assessments apply to.

Assessments are often the sole source of income for the association, and they are needed to not only cover the costs of the day-to-day operation of the community but also to create a ‘rainy day fund’ called a reserve, that predicts and pays for future costs. This is vitally important because the association’s members are collectively responsible for ALL costs in the association, not just what they budgeted for. So if a community gets hit with a big cost they don’t have the funds to cover, the homeowners might get hit with a huge ‘special assessment’ bill to cover that cost.

Reserves

Reserves are specific funds that have been put aside to cover the costs of future ‘big ticket’ items that the community will need to address. In community associations, predicting how much these reserves will need to be, and when they will be needed is a big deal. For example, if you know that an elevator unit has an average life of 20 years and a price tag of a few million dollars, you might want to start saving up for that now, so that you are able to pay for it when it does break down.

Budgets

In community associations, predictability is everything. The community’s budget gets approved once a year at the Annual General Meeting. Part of that budget sets the assessment that each owner will be expected to pay for the year. Because the community has little to no income outside of assessments, and the reserves are earmarked for specific items, there is very little room for surprises in the budget.

How to Target Marketing to Community Associations

So if you are a business that wants to provide services to a community association, there are a few things we’ve learned:

1. Identify the Decision Makers

First, the officers on the board of directors are your decision-makers. So if you want to sell your services to a community association, you will first need to identify who the board members are, and learn how to connect with them. You may also be able to connect to the board through the management team, if the board has hired one.

2. Follow the Rules

Remember that the board is beholden to the governing documents, so it’s a good idea to learn early what the rules say about hiring new vendors. Some documents will require a certain number of bids be received, while others call for a blind bidding process, still others spell out a complicated RFP process that must be followed.

3. Timing is everything

The budget is going to be a big obstacle for you, so you need to get yourself on it if you want the community to hire you. Find out when the community works on their budget. (Community Association budget season is usually in September/October.)

4. Get Professional Help

You are the professionals in your field. But if you want to get in with HOAs in your area, you may want to call in a professional to help. Frontage Marketing Group is experienced in marketing services to community associations nationwide, and can help you get your message to where it needs to go! Schedule your free consultation today.