As your management company, a large part of our job is to be a resource to our associations and to make sure that they are set up in the most advantageous manner possible, reducing risk and minimizing board work. As such, we would like to be sure every association is familiar with the difference between being a Homeowners Association, (HOA) versus a Property Owners Association, (POA). As your managing agent, we believe amending documents to become part of the Property Owners Act is a good decision for most associations; however, the board should always get the advice of their legal counsel before making any decision about the community’s governing documents.
In general, the POA was designed to mirror the Georgia Condominium Act (GCA) in terms of offering a “set” of advantages to HOA communities. In essence, it “upgrades” the community and offers a new bundle of rights including the following benefits:
- Ability to charge late fees and higher interest on past due amounts
- Perpetual covenants that do not require renewal; the absence of this clause may lead to accidental dissolution
- Higher lien priority and ability to foreclose on lien (if necessary), meaning the association gets paid prior to other credits or “moved up” in position as a creditor
- Automatic liens on each property; no need to file ‘paper’ liens to secure the debt
- Standardizes notice requirements, election processes, proxy requirements and other processes
What determines whether an association is a POA or an HOA?
The association governing documents determine the status of the association. In most cases, the developer works with their attorney and records the initial covenants and bylaws. It is their decision whether to create an HOA or a POA. The developer usually retains control of the association as the board of directors during the construction process. Control does not convert to the homeowners until a specific time, usually at a predetermined moment when the project is at or close to completion. At that moment, commonly referred to as “Turnover”, a new board consisting of homeowner is elected.
How does the conversion to a POA from an HOA occur?
An attorney must prepare an amendment to the governing documents that says the association agrees to be bound by the Georgia Property Owners Association Act. The amendment also conforms the provisions of the governing documents to the provisions of the POAA.
How does the association have the authority to add the amendment?
Ironically, this is determined by the original HOA governing documents. Many covenants and/or bylaws require a majority or 2/3 vote of the association membership to pass any amendment. If a membership vote is required, the attorney-drafted amendment must be provided to each owner and it must be approved by the required number of members. However, some documents have a stipulation that specifically allows the board of directors to decide unilaterally to subject the Association to the POA Act. In this case, the attorney-drafted amendment only needs to be provided to the board members and the board’s meeting minutes should clearly reflect a vote by a majority of the board members present at a board meeting (as long a quorum of the board is there) , to adopt the POA amendment. This makes the process of submitting to the POA much more efficient.
Once the decision has been made to covert, what is the process?
After the Association has collected the proper number of votes to adopt the POA amendment, the Association officers sign the amendment, and it must be filed in the county land records. There will be a fee to handle this; however, the exact amount will depend on the attorney and the content of the amendment itself.
Is there a cost to convert?
Silverleaf does not charge to assist in this process; however, the attorney will have an hourly charge or a flat fee associated with their assistance and there will be a filing fee from the county when the amendment to the legal documents is recorded in the land records. Our managers are happy to get a quote for you from your association’s attorney, but Boards should plan to spend from $1500-2000 for the amendment documentation to be drafted by the attorneys, and at least 30-45 days for filing once adopted.
Do the board need to inform the homeowners?
Yes, after the POA amendment is recorded in the county land records, a notice will be sent by the management company informing the homeowners of the change. The notice will include reminders about what this change means to them. Keep in mind that a POA is stronger, more effective entity and as such each homeowner will reap the benefits.
Does this change reduce board workload?
Yes, the POA allows for turnkey systems to handle many issues that are simply unavailable to Homeowners Associations. In the same way having a standard collection policy eliminates confusion and multiple email s, a POA offers the strongest foundation possible for associations that are not condominiums, upon which to build.
If the board would like to amend their association documents to adopt more than just the POA during this process, it is the right time to consider all changes. Whether that would be cost effective would be determined on a case-by-case basis.