How do we set up a cost-sharing agreement with a neighboring HOA for a shared road, gate or amenity?

By OurHOA · General information · Revised October 19, 2026

How two HOAs split the cost of a shared road, gate, pond or pool: who can sign, allocation formulas, what the agreement covers, taxes and recording it.

Part of the HOA board handbook: vendors, projects and upkeep.

The short answer

Put it in a written agreement that both boards approve by recorded vote, that says exactly what is shared, how each cost is split, who runs the work and pays the vendors, and how either side gets out. If the arrangement should bind future boards and future buyers, record it in the county land records. A handshake between two presidents works until one of them moves, the road needs $90,000 of asphalt, and the new board on the other side has never heard of the deal. This is the common fix when two subdivisions share an entrance road, a gate, a detention pond, a boundary wall or a pool built by the same developer. It is also what most boards actually want when someone floats a merger. Our guide on whether two HOAs can merge or consolidate explains why a merger is usually more than the problem needs. Rules vary by state and by each community's governing documents, and this guide is general education, not legal advice.

Check what is already recorded

Before negotiating anything, find out whether a deal already exists. Developers who build in phases often record a shared maintenance agreement, a reciprocal easement or a cost-sharing clause in one community's declaration, and then nobody reads it for fifteen years. Pull three things from the county recorder for both communities: each declaration with every amendment, each recorded plat, and any easement or agreement that names the shared road, gate, pond or amenity. The plat and the deeds tell you who owns the land under the facility. That matters more than who has been paying for it. If your association owns the road and the neighbors cross it under a recorded easement, the easement may already say who maintains it. If a document already allocates costs, your agreement fills gaps in it. It does not replace it. Also ask the other board what they have been paying and why. Informal arrangements leave a trail of old invoices, and those invoices are the best evidence of what both sides have treated as fair.

Who can sign for the association

In most associations the board can sign a cost-sharing contract without an owner vote, because it is an ordinary contract for maintenance. Texas Business Organizations Code section 2.101(5) gives a corporation the power to make contracts. Florida section 617.0302(7) gives a nonprofit corporation the power to make contracts and incur liabilities. Colorado's common interest act, section 38-33.3-302(1)(e), lets the association make contracts and incur liabilities, and 302(1)(i) lets it grant easements, leases, licenses and concessions over the common elements. An owner vote may come into it in three cases. First, a permanent easement or transfer of common area. Colorado section 38-33.3-312 requires 67 percent of the votes, or more if the declaration says so, to convey common elements, so a deal that hands land to the neighbors goes to the owners. Second, your declaration or bylaws may require member approval for contracts over a dollar amount or a term of years. Third, the shared cost may push the budget past an assessment increase limit in your documents. Check all three before you sign, and have the association's attorney read the final draft.

Pick a formula both boards can defend

The split is where these deals succeed or fail. Four formulas cover almost every case. By lots. Each association pays in proportion to its number of homes. It is simple and owners understand it. With 40 homes on one side and 60 on the other, the split is 40/60. By use. Useful when one side clearly uses the facility more, such as a road that is the only entrance for one community and a back way for the other. Base it on something you can count, like a traffic count taken once, rather than opinion. By benefit. Used for drainage. A detention pond that takes most of its runoff from one community can be split by the acreage that drains to it, which an engineer can state. Fixed percentage with a review date. Agree on a number, such as 55/45, and revisit it every five years or when either community adds homes. A worked example: repaving a shared entrance road costs $90,000. Split by lots between 40 and 60 homes, your association owes $36,000, or $900 per home, and the neighbors owe $54,000. Run the same numbers for routine costs like mowing, streetlight electricity and gate repairs, and set a reserve contribution for both sides so the next repaving is funded before it arrives.

What the agreement should cover

Ask your attorney to draft it, and bring a term sheet that answers each of these. The facility, described with a map or plat reference, and what counts as maintenance versus improvement. Who manages the work. One association usually takes the lead, gets bids, hires vendors and sends the other a bill. Name it. The budget process: when the lead association sends a proposed annual budget, how long the other has to object, and the dollar amount above which both boards must approve a project in advance, such as $5,000. Reserves: whether each side funds its share annually into its own reserve or into a joint fund, and who holds that money. Payment terms: invoice timing, due date, late interest and what happens if one side stops paying. Insurance and indemnity: each association names the other as an additional insured on its general liability policy for the shared facility, with stated minimum limits, and each indemnifies the other for its own negligence. Records: either board may inspect invoices, bids and contracts for the facility. Disputes: mediation before anyone sues. Term and exit: how long it runs, how either side ends it, and what happens to the facility and any joint reserve if it ends.

Money and taxes

Keep the shared facility on its own line in the lead association's books, so both boards can see every dollar in and out. Send the other association an itemized invoice with copies of the vendor bills, not a single total. Talk to your CPA before the first payment changes hands. The IRS instructions for Form 1120-H define exempt function income as dues, fees and assessments from the association's own members, and list money received from people who are not members as income that does not qualify. A payment from a neighboring association is not a member assessment. Your CPA will decide how to report it and whether the costs it reimburses offset it. One way to keep the books clean is to have each association pay the vendor directly for its share under the same contract. That works well for big projects. For small recurring bills, a lead association with a clear invoice is easier.

Record it so it outlasts both boards

A cost-sharing contract signed by two boards binds the two associations. An agreement that affects land, such as an easement or a covenant to maintain, should also be recorded so it is enforceable against later owners and shows up in title work. All three focus states tie protection to recording. Texas Property Code section 13.001 makes an unrecorded conveyance of an interest in real property void against a later buyer who paid value without notice of it. Florida section 695.01 says an unrecorded conveyance of real property or an interest in it is not good against creditors or later buyers for value without notice. Colorado section 38-35-109 lets agreements affecting title be recorded and makes an unrecorded instrument invalid against a later buyer with no notice of it. Your attorney will decide which parts get recorded and in what form. Keep the signed original with the association's permanent records.

A sample timeline and motion

Month 1: pull the recorded documents for both communities and gather five years of invoices for the facility. Each board names two directors to negotiate. Month 2: the negotiators meet, agree on the formula, and write a one-page term sheet. Each board reviews it in an open meeting. Month 3: one attorney drafts, the other side's attorney reviews. Split the legal fees by the same formula. Month 4: each board votes. Record the agreement and send owners in both communities a short notice of what changed. Motion to copy: "I move that the board approve the Shared Entrance Road Maintenance Agreement with [Neighboring] Homeowners Association in the form presented, allocating costs 40 percent to this association and 60 percent to [Neighboring], and authorize the president to sign it and record it in the [county] real property records."

Mistakes that sink these deals

Paying for years on a handshake, then trying to formalize it after a large repair bill arrives. Agree on the split before the estimate, not after. Leaving out an exit clause, so one side can walk away the year before repaving. Forgetting reserves. Splitting only the routine costs leaves both communities facing a special assessment when the big job comes due. Letting one association run the facility with no right for the other to see bids and invoices. Suspicion grows fast when one board writes the checks. Skipping insurance. A gate that closes on a car or a pool injury will name both associations. Confirm the additional insured endorsements every year at renewal.

Sources

These guides are general education for HOA boards and residents, not legal, tax, or financial advice. Rules vary by state and by your community's governing documents - check with a professional for your situation.

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