Indiana Code 32-25.5-2-1 outlines the requirements for homeowners associations (HOAs) in the state, affecting approximately 1.5 million homeowners. The statute regulates the creation, management, and operation of HOAs, providing a framework for the relationships between homeowners, the HOA board, and the community at large.
The statute is effective as of July 1, 2018, and applies to all HOAs in Indiana with annual assessments exceeding $1,000.
Homeowner Association Structure
According to Indiana Code 32-25.5-2-5, an HOA must be organized as a non-profit corporation, with a board of directors responsible for managing the community’s affairs. The board must consist of at least 3 members, with a maximum of 9 members, and must hold meetings at least quarterly. The statute also requires the board to maintain detailed financial records, including an annual budget and a reserve study, to ensure the community’s financial stability over a 20-year period.
In practice, this means that homeowners can expect a certain level of transparency and accountability from their HOA board, including access to financial records and meeting minutes, within 30 days of a written request. The board must also adhere to the Indiana Nonprofit Corporation Act, which governs the operation of non-profit corporations in the state, and comply with the $500 threshold for procurement contracts.
The HOA’s governing documents, including the declaration, bylaws, and articles of incorporation, must be recorded with the county recorder’s office within 60 days of adoption, and must comply with the standards set forth in Indiana Code 32-25.5-2-10, which requires a minimum of 2/3 majority vote for amendments.
Indiana’s Specific Requirements
Homeowner Rights
Indiana Code 32-25.5-2-15 provides that homeowners have the right to inspect and copy the HOA’s financial records, including budgets, financial statements, and meeting minutes, within 10 days of a written request. Homeowners also have the right to attend board meetings and participate in the decision-making process, with a minimum of 48 hours’ notice for special meetings.
In plain terms, this means that homeowners have a significant amount of control over the management of their community, including the ability to review and challenge the HOA’s financial decisions, and to participate in the election of board members, with a $200 filing fee for candidacy.
Board Member Education
Indiana Code 32-25.5-2-20 requires that all HOA board members complete a training program within 90 days of taking office, which must include at least 4 hours of instruction on topics such as financial management, conflict resolution, and Indiana law, with a cost not exceeding $500 per member.
This is where the law gets teeth, as board members who fail to complete the training program within the 90-day time limit may be subject to removal from office, and may be required to pay a fine of up to $1,000.
Dispute Resolution
Indiana Code 32-25.5-2-25 provides that homeowners and the HOA must attempt to resolve disputes through mediation before seeking judicial relief, with a minimum of 30 days’ notice for mediation, and a maximum cost of $2,000 for the mediation process.
In practice, this means that homeowners and the HOA must engage in good-faith negotiations to resolve disputes, with the assistance of a neutral third-party mediator, and must comply with the standards set forth in the Indiana Alternative Dispute Resolution Act, which governs the mediation process in the state.
Legal Process in Indiana
Homeowners who believe that their HOA has violated the statute or the community’s governing documents may file a complaint with the Indiana Attorney General’s office, which must be submitted in writing within 180 days of the alleged violation, with a filing fee of $25.
The Attorney General’s office will investigate the complaint and may take enforcement action against the HOA, including filing a lawsuit in state court, with a minimum of 20 days’ notice for responsive pleadings.
The court may impose fines of up to $5,000 per violation, and may also award damages and attorney’s fees to the homeowner, with a maximum award of $10,000.
Penalties and Consequences
HOA boards that fail to comply with the statute may face significant penalties, including fines of up to $10,000 per violation, and removal from office, with a minimum of 30 days’ notice for removal proceedings.
In addition, the HOA may be required to pay damages and attorney’s fees to homeowners who have been harmed by the board’s actions, with a maximum award of $20,000, and may also be subject to a $500 per day fine for non-compliance.
The statute also provides that homeowners who are harmed by the HOA’s actions may seek injunctive relief, which may include a court order requiring the HOA to take specific actions to remedy the harm, with a minimum of 10 days’ notice for injunctive relief hearings.
Comparison to Other States
Indiana’s HOA laws are similar to those in other states, such as Illinois and Michigan, which also require HOAs to be organized as non-profit corporations and to provide certain rights and protections to homeowners, with a minimum of 2/3 majority vote for amendments.
However, Indiana’s laws are more comprehensive than those in some other states, such as Ohio, which does not require HOAs to provide the same level of transparency and accountability, and may have a higher threshold for procurement contracts, exceeding $1,000.
Practical Steps
Homeowners who are experiencing problems with their HOA should first try to resolve the issue through internal dispute resolution procedures, such as mediation or arbitration, with a minimum of 30 days’ notice for mediation, and a maximum cost of $2,000 for the mediation process.
If the issue cannot be resolved internally, the homeowner may file a complaint with the Indiana Attorney General’s office, which must be submitted in writing within 180 days of the alleged violation, with a filing fee of $25, and must comply with the standards set forth in the Indiana Administrative Code.
Recent Changes and Current Legislative Status
The Indiana General Assembly has recently considered legislation that would strengthen the state’s HOA laws, including a bill that would require HOAs to provide more detailed financial disclosures to homeowners, with a minimum of 10 days’ notice for disclosure, and a maximum cost of $500 for the disclosure process.
The bill, which is currently pending in the Indiana Senate, would also increase the penalties for HOAs that fail to comply with the statute, including a maximum fine of $20,000 per violation, and may also require HOAs to comply with the $1,000 threshold for procurement contracts.
The court is currently reviewing the constitutionality of the statute, with a decision expected within the next 6 months, and may impose a stay on enforcement of the statute pending the outcome of the appeal, with a minimum of 20 days’ notice for responsive pleadings.
- U.S. Department of Housing and Urban Development. tenant rights and fair housing
- Consumer Financial Protection Bureau. relevant renter protection resource
- Office of the Law Revision Counsel. relevant federal housing statute
