What is a homeowner’s association (HOA)?
A homeowners association (HOA) is an organization in a subdivision, planned community or condominium that makes and enforces rules for the properties and their residents. Homeowners associations are started by property developers, then turned over to the homeowners after a certain number of properties in a subdivision have been sold.
Initially, in a new development, the purpose of a HOA is for marketing and selling homes and lots. After the majority of homes are purchased and occupied, the purpose of the HOA transitions and becomes primarily focused on management and upkeep of home exteriors and any shared communal areas to maintain the corporate property values for the subdivision as a whole, and that it functions fairly and efficiently.
Generally speaking, if a home within the boundaries of an existing HOA is purchased, the new owner becomes a member of that HOA as a compulsory condition of owning the home. As a member, they will be required to pay fees, and agree to abide by all the rules and regulations laid out in any applicable HOA governing documents regarding their home, including but not limited to Articles of Incorporation, CC&Rs (Covenants, Conditions, and Restrictions), and By-laws.
HOAs have a board of directors or governors, elected to enforce and oversee the HOA’s rules and regulations. Typically, the board of directors is comprised of homeowners also living within the boundaries of the HOA. An HOA describes its rules in a document called the Declaration of Covenants, Conditions and Restrictions (CC&Rs), which set certain conditions on owners and their properties. The conditions may include structural restrictions such as the type of fences or landscape allowed, or minor selections such as the color of paint on a house. This document usually also outlines the penalties for violating the CC&Rs, which may include fees, forced compliance or in some cases, litigation.
Some things that may be covered by these types of governing documents include (but aren’t limited to):
- Paint colors
- Maintenance standards
- Rental guidelines
- Pet restrictions
- Meeting information
- Membership fees
- Fees for Common Area Maintenance (C.A.M.) or amenities
- Penalty disclosure for violation/non-compliance
How prevalent are HOAs? Approximately 25% of homes today are governed by HOAs.
Pros and Cons of HOAs
- Homes governed by HOAs tend to maintain higher property value and resell at premium prices because of overall community standards being kept high.
- A HOA could potentially pay for or subsidize high cost repairs or upgrades such as roof repair or major landscaping.
- HOAs promote tight-knit community bonds, sometimes organizing neighborhood activities such as movie nights, holiday themed events, or babysitting co-ops.
- Safe, clean, and well-maintained common areas and amenities like parks, pools, and community rooms.
- Increased community pride, neighborly communication, and sense of belonging.
- Added layer of support when dealing with issues such as neighbor disputes.
- HOAs are a deterrent for “troublemakers,” thus naturally weeding out less desirable neighbors.
- Can be costly.
- Management is different from HOA to HOA.
- Rules can be restrictive, a con for free spirits wanting carte blanche on personalization of home exteriors. Not ideal for those wanting Aquamarine colored homes, or 3 am block parties, for instance.
- If you break the rules, fines up to and including home liens can be imposed against you.
- Total privacy is not a probable expectation.
Before you buy:
When deciding whether to purchase a home governed by a HOA, here are some factors to consider.
First, you will want to read and understand all of the governing documents, and make sure the regulations and restrictions outlined are something with which you are comfortable living. Consider not just move-in, but any future plans might that be affected by the rules listed, such as exterior painting, remodeling, home addition, or outbuilding possibilities.
Secondly, look at the fees, and factor the costs into your home budget to make sure it is financially viable, understanding that many HOA fees are an annual, semi-annual, or even monthly recurring expenses.
Third, you may want to speak personally to a few homeowners within the area you are looking to purchase. Ask them how easy, or difficult, the HOA has been to work with to determine if it is something that suits your family, lifestyle, and temperament.
For some people, living in an HOA-controlled community is the right place for them. Others prefer the freedom and independence of living in a property free of outside oversight. As you select a home or community to live in, a good realtor will help you learn the ins and outs of each neighborhood so that you make the decision that is right for you.