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Homeowners associations (HOAs) have long played an important role in maintaining neighborhoods, managing shared amenities, and protecting property values. But growing scrutiny of how some associations operate has prompted lawmakers to reconsider HOA authority, accountability, and homeowner protections.

Recent legislative debates and proposals across several states have raised broader questions about HOA governance, homeowner rights, and the circumstances under which communities may be able to dissolve their associations. 

For HOA board members, the debate raises an important question: How can associations strengthen their communities and reduce their risk exposure?

What's Driving the Backlash Against HOAs?

While many HOAs are managed by dedicated volunteers, concerns about how some associations operate have prompted calls for reform. 

Four issues have received particular attention:

• Inconsistent Enforcement and Rule Disputes: Inconsistent or perceived unfair enforcement of community rules can create tension between homeowners and boards.
• Rising Costs and Reserve Funding Challenges: Rising maintenance costs and insurance premiums, combined with inadequate reserves, can put pressure on association budgets and may lead to higher assessments or unexpected expenses. 
• Foreclosures and Collection Practices: HOA liens, collection practices, and foreclosure authority under applicable state law have raised questions about homeowner protections. 
• Board Challenges and Volunteer Burnout: Financial oversight, disputes, and administrative responsibilities can overwhelm volunteer board members.

What Happens to Insurance and Liability When an HOA Dissolves?

Even if an HOA dissolves, the community's shared responsibilities don't necessarily disappear. Consider a neighborhood with private roads, a swimming pool, or stormwater drainage systems. The HOA may currently maintain these properties, manage repairs, and purchase insurance. 

If the association dissolves, who assumes those responsibilities?

Depending on state law and governing documents, ownership and maintenance obligations may need to be transferred or shared among homeowners. 

An HOA's insurance program may include property coverage for common amenities, general liability protection, and directors and officers (D&O) liability insurance for certain claims involving board decisions.

Dissolution raises questions about existing claims, ongoing liability, coverage termination, and whether new insurance arrangements are needed. Simply ending an association does not automatically resolve those exposures.

6 Ways HOA Boards Can Reduce Risk and Strengthen Their Communities

Regardless of whether legislative proposals advance, strong HOA risk management can help boards take practical steps to address many of the concerns driving the debate.

1. Establish Clear and Consistent Enforcement Procedures

Community rules should be easy to understand and consistently applied. When homeowners believe rules are enforced unfairly, even minor disagreements can escalate into legal disputes. Boards should document decisions, establish procedures for handling violations, and provide opportunities for homeowners to raise concerns or appeal decisions. 

2. Strengthen Financial Planning and Reserve Funding

Rising operating costs, aging infrastructure, and unexpected repairs can put pressure on HOA budgets, potentially leading to higher assessments or postponed maintenance. Regular financial reviews, realistic budgets, and updated reserve studies can help boards anticipate expenses. Transparent financial reporting also helps homeowners understand how their assessments are used. 

3. Prioritize Property Maintenance and Safety

An aging clubhouse roof, damaged sidewalk, poorly maintained pool, or drainage issue can increase the potential for property damage or liability claims. Boards should establish inspection schedules, address hazards promptly, and document maintenance and repairs. Working with qualified contractors can also help reduce potential risks. 

4. Review Insurance Coverage and Board Liability

HOA insurance needs can change as property values rise, buildings age, or association responsibilities evolve. Coverage that was appropriate several years ago may no longer reflect current exposures. Boards should periodically review property limits, general liability coverage, deductibles, and D&O protection, including applicable exclusions and limitations. 

An insurance advisor familiar with community associations can help identify potential gaps and explain how policies respond to claims. 

5. Improve Communication and Transparency

Homeowners may question board decisions when they don't understand how or why those decisions were made. Clear communication can help reduce misunderstandings and build confidence. Boards should provide timely updates about budgets, maintenance projects, and rule changes. Accessible meeting minutes and financial reports can also improve transparency among homeowners.

6. Invest in Board Education and Succession Planning

Volunteer board members may have limited experience managing budgets, overseeing vendors, interpreting governing documents, or understanding insurance requirements. Training, clearly defined responsibilities, and guidance from qualified professionals can support informed decisions. 

Boards should also establish procedures for transferring records and responsibilities when members leave to help maintain continuity.

Good HOA Governance Starts With Preparation

Growing scrutiny of HOAs reflects changing expectations about transparency, accountability, and homeowner rights. While dissolution may sound straightforward, the financial, legal, and insurance implications can be complicated. 

Working with an experienced insurance advisor to review your association's coverage, liabilities, and potential gaps can help your board identify where the community may be exposed and how to better protect it.