Who's the culprit?

Question

BP Fam,

Who decides if a subdivision has an HOA and how is that actually decided?

Matt Devincenzo · Answer

The most simple and basic answer is State law decides.

A longer version is, everything requires maintenance; roads, sidewalks, landscape etc. Who and how it is maintained is ultimately decided during the subdivision process. If you want municipal maintenance, then you need to design and build to municipal standards so that the City will own and maintain these items. If you want something different, then you need to privately own and maintain then which means State law says these likely come under an HOA. They come under an HOA because all of those private items are what is known as 'common area' or that everyone in the development has a 'common interest' in the areas.

Many jurisdictions could in theory allow for subdivisions with public roads and utilities etc, but don't want the costs for these type of items to be on the municipal budget. And many developers today don't want public facilities because the standards don't provide the aesthetic their buyers would be looking for in a neighborhood. So together you get more HOA subdivisions now a days.

In theory there's another option, which is private maintenance agreements where everyone agrees to just pay the actual cost of maintenance when a bill is sent to them. You typically will only see these in more rural County subdivisions and usually only for access roads. There's a practical limitation to how many people you can get to just pay as needed when a bill gets sent out vs. having an HOA with the ability to collect monthly costs and budget etc.

Stuart Udis · Answer

Exactly, it's a strategic tool used to entitle land in instances where the base zoning is at conflict with the desired housing density/site plan. This is going to be municipality specific but HOA's are often conceived as part of the entitlement process strategy.  Here is an example:

I purchased a 55,000 SF parcel in Philadelphia. The Parcels zoning requires:

- 25 feet of frontage

-2,250 SF of lot area

-8 Ft side and front yard & 20 ft rear yard

-50% open area

Unfortunately, the parcel measured 160x256 (with some irregularities in the rear) meaning I only had frontage for 6 homes despite having lot area that met the 2,250 minimum lot area for 26 homes. If I subdivided the site into 26 parcels I would have triggered dimensional refusals for 26 applications. Instead, we submitted a site plan with multiple buildings on one lot and generated two refusals: multiple buildings on one lot and in Philadelphia clustered townhomes are treated as multi-family use. The placement of the homes met all dimensional requirements, so no refusals were triggered for any dimensional conflicts with the zoning code. It was a far less burdensome process seeking the variance contesting two refusals vs. likely 70+ refusals spread across 26 separate applications.

That's why I recommend you research how the housing community was first approved by the municipality. There is often logic behind how and why the housing communities are entitled specific ways.

Michael L. · Answer

@Stuart Udis, now, everything in your first reply☝🏻makes more sense👍🏻.

So to sum this up. If the municipality decides to enforce the HOA, the burden then falls on the owner of the subdivision, and the only way around it would likely be something like downsizing the project or removing certain amenities that attract the higher quality buyers, thereby annihilating the project's value. Did I unpack this conversation sufficiently?

Michael L. · Answer

@Stuart Udis, this is a lot to unpack and all the technical jargon makes it a bit confusing🤯, so i'mma take this one in small bites if you don't mind.

So, is part of what you explained saying that developers will sometimes apply the HOA feature themselves to make their project more appealing to the community and to get around some of the zoning qualifications of the municipality?

Stuart Udis · Answer

This is usually determined when the land is entitled. Local municipalities will dictate when recorded HOA agreements are required. Furthermore, HOA’s and PUD’s are common entitlement tools where the use is not by-right and that may influence whether an HOA exists even in instances where an HOA may not be necessary per local municipality guidelines.

To add some context, let’s say you own land that meets the dimensional requirements for a 3 home subdivision (meets all dimensional requirements-frontage, lot size, set backs etc.) but you would like to build 10 homes. Instead of generating multiple refusals or whatever the local zoning denial lingo is, many developers choose to go the HOA/PUD route because they generate fewer refusals making the zoning appeal “ask” appear more reasonable. Often instead of 5-6 dimensional refusals for each proposed parcel the zoning relief is limited to multiple buildings on one lot or I’ve seen multiple buildings on a lot also treated as “multi- family use” because a single parcel approach is utilized to obtain the approvals maintaining the base zoning dimensional requirements. Thereafter, separate tax ID’s are obtained when the homes parcels are sold off.

Evan Polaski · Answer

Take this with a grain of salt, because I have never done land development.  @Jay Hinrichs may be able to help more.

My understanding is the jurisdiction that the neighborhood is being built in that ultimately decides if one is needed or not.

Michael L. · Answer

@Jay Hinrichs, I'm picking up what you're putting down😎!

Michael L. · Answer

@Matt Devincenzo, this was a lot to take in  but highly informative, so I thank you kindly for sharing this.

Basically, I'm getting that the owner of the subdivision should pick their poison (to HOA or to not HOA) b/c that could have an impact on their investment. Sound about right?

Michael L. · Answer

@Jay Hinrichs, thanks for chiming in. So will the jurisdiction impose the HOA when the developer submits the plans to the municipality, and can that be negotiated in or out of the development?? B/c not all communities have an HOA.

Who's the culprit?

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