LIVE BOZEMAN STYLE

Homeownership is a thrilling relief, providing freedom from a landlord and the rules of their property, but may not necessarily mean that you are footloose to do whatever you’d like on your property. Depending on the location of your new home, you may be subject to City Regulations, County Regulations, Covenants, and/or a Homeowners Association.

The City of Bozeman Planning Department and Gallatin County Planning Department requires neighborhood “rules” to be established when a Developer submits plans for a new subdivision. Those community rules are called “covenants” and define the new neighborhood's lifestyle. Covenants are of “public record” and are therefore recorded with the County Treasurer to ensure any potential property purchaser can be alerted to the existence of covenants. Covenants will likely contain Design Guidelines, By-Laws, and general rules for the community. 

THE ELEMENTS OF COVENANTS

Design Guidelines:

Design Guidelines outline homes' acceptable color and style, acceptable finish materials, building style requirements, and landscaping and fence requirements. 

Covenants:

Covenants are the foundation of the rules for the community, and they can be very general or myopic. There are covenants in Gallatin Valley that simply state “no cattle, (or no cattle except those for 4H use) and no home businesses with signage” and others that are incredibly specific, outlining the acceptable style of construction, use of the property, limitations on outbuildings, designate where your guests can park, and even specify the maximum allowable length (and grass type) of your front yard. 

Covenants set the standard for a neighborhood and are a critical consideration in the purchase process. Remember, the potential new neighbors likely purchased in that particular neighborhood because the covenants worked for them, and they will ensure any new neighbors also follow the community's rules.

Bylaws:

The Bylaws define what is required to be a member of the Association Board, when the board will meet, and if the board will collect dues from the members of the Homeowner’s Association to fund the needs of the neighborhood. 

Many Bozeman and Gallatin Valley neighborhoods have community parks and open shared spaces. Those areas require funds to maintain them, and the members of the Association (neighborhood homeowners) are responsible for paying those maintenance expenses. By collecting Association dues, the Homeowner’s Association can pay for common area lawn care, equipment maintenance and of course, insurance. 

MANAGING A HOMEOWNER’S ASSOCIATION

Homeowner’s Associations are required by the State of Montana to register as a business, just like any other LLC or Corporation. By registering and obtaining an EIN, associations can open business checking accounts and collect association dues. Further, maintaining a checking account allows the Treasurer, President, or any other board member, designated by the bylaws to pay the bills on behalf of the association. 

Of course, with checking accounts and EINs, Homeowners Associations are also responsible for filing and paying Federal and State taxes and maintaining their business filing in good status with the State. Due to this overlay of responsibility, many Homeowner Associations elect to hire a property management company to manage their association, maintain the tax reports and enforce the community rules. This model has many benefits, as it takes the responsibility of managing the Association from its members and ensures an educated third party follows Fair Housing and financing requirements. As you can imagine, it is also much easier for neighbors to complain about an unsatisfactory neighbor’s shaggy lawn to the HOA management company than to confront that neighbor directly; management companies serve as neutral enforcers, ensuring that the complaint is valid and enforced. 

Condo Associations - Special Considerations:

Condo associations may benefit greatly from outside management, as condo associations (COA) are not only financially responsible for mowing the grass and maintaining the parks like an HOA, but they are also responsible for paying the water, sewer, and exterior insurance bills for the association. 

When a buyer considers purchasing a condo, if they have financing, their lender will audit the health of the condo association and ensure that the association is financially stable, with enough funds in reserves to cover a catastrophic loss of the structure. There are specific tolerances that bankers accept in COA budgets, and a management company will be familiar with those rules, helping ensure that the neighborhood stays financeable. 

Selecting a Management Company:

Not all management companies are created equal. It is important to vet your potential management company and determine what service items the management company provides. Each management company structures differently and may include the daily operations in the management cost or instead offer a less expensive monthly commitment but then nickel and dime your neighborhood for day-to-day management expenses. Lastly, the board needs to determine whether the management style of the management company they are pursuing matches the vibe of the neighborhood the company would represent. 

To help your board identify the right management company, I have cultivated a list of interview questions and ideas to explore when reviewing HOA proposals. 

HOA Questionnaire:

• Does the Management Company have competing management contracts that could prevent proper and acceptable management for your association? 
• What are the fees associated with the management company?
• Does the Management Company charge a transfer fee? (Fee for management every time a unit changes billing addressee)
• Does the Management Company file your annual taxes? 
• Is the Association comfortable with the HOA Manager filing the annual taxes, or would the board prefer an accountant do it? 
• Does the Management Company file your Secretary of State business filings?
• Does the Management Company have experience dealing with delinquent HOA/COA Dues?
• How does the Company split the fees associated with delinquent collections with the Association? 
•  Has the Management Company handled a foreclosure? 
•  Are they versed in the steps to file a lien against a property?
• How are fines for Homeowners determined?
• How are the fine fees split between the association and the management company? 

Meetings and Correspondence: 

• Does your Association want to have annual or quarterly HOA meetings? 
• Does your Association want a live meeting or virtual or hybrid? 
• Does the Management Company provide a virtual option (with enough bandwidth for your association), and is that an additional cost to the HOA?
• Does your Association want a newsletter sent out to the Owners, and if so, in what timeline? 
• Is exclusively electronic communication acceptable to the Board? 

Neighborhood Maintenance:

• How often does your Association want your HOA Management Company to visit the neighborhood and assess fines/warnings for neighborhood violations? 
• What systems will the Association have in place to ensure that the Management Company meets the monitoring timeline outlined in the management contract? 
• Will your HOA rely on self-reporting?
  
• Will your neighborhood have “rules” in addition to the covenants? 
• What are the risks associated with rules? 
• How will your board ensure that any potential purchaser is informed of the rules before their purchase?
• Does your neighborhood have any owners exempt from Covenant filings?
• How will you ensure that the Management Company is aware of any exemptions?
  

A final tip: ensure the final contract presented to your association is the same or similar enough to the draft/sample given during the HOA/COA interview process to meet the association's needs.