If you haven’t had dealings with an HOA before, we’ll walk you through exactly what it means, what it does, and what are the most crucial things you need to know before living in a community that has one.
HOA, which stands for homeowner association, is a private organization and the governing body of a subdivision, condominium or townhouse complex, or any planned development. It is run by a board of volunteers who are residents of the community. The HOA makes and enforces the rules for the properties and their residents, helps manage, organize, and preserve the community, as well as protects and increases property values.
If you become a homeowner in a neighborhood with an HOA, you automatically become a member. This means you’ll agree to their terms, owe them monthly or yearly payments, and be able to enjoy the shared amenities and services they provide.
HOAs usually form when a community is built. When a developer acquires land for a planned community, they create the homeowners association and then hand it off to the people who buy houses in that community. The homeowners vote for a board of directors to run the association. The board then decides on the community’s features and services, collects monthly, quarterly, or annual fees to cover the expenses, and sets community rules and standards. These rules are described in a governing document called a Declaration of Covenants, Conditions, and Restrictions or CC&Rs.
Although some states have statutes that govern how HOAs run, most states do not oversee or control how HOAs function. Instead, many homeowner associations are governed through voting and member participation.
Living in a community run by an HOA can have its pros and cons. Here’s what you need to know before making that purchase!
Parking – Be mindful of any rules regarding parking overnight on the street, leaving your garage door open for an extended period of time, or parking for any commercial vehicles and RVs or trailers.
Property modifications – Some changes you might want to make may require approval from the board and/or your neighbors. Likewise, some property additions might not be allowed at all.
Leasing or renting restrictions – You may need to get permission from the HOA board to be able to rent the home. Or you may be required to join a waitlist if there are already too many homes in the neighborhood that are being rented. This is crucial if you want to use your home as a future investment property.
Don’t forget to also explore any rules regarding:
Yard decorations
Yard work and maintenance
Fencing height and placement
Exterior paint colors and other design choices
Use of shared amenities and common areas (pools, parks, community centers, basketball courts, etc.)
By being aware of exactly how much these dues are and how often you need to pay them, you can calculate them into your total monthly costs. You can then determine whether the HOA fees align with your financial capabilities and expectations.
Furthermore, you should also review the HOA’s financial statements and keep an eye out for the association’s financial health. These documents provide insights into the association’s income, expenses, and reserves. You’d want to ensure that the HOA has a well-maintained reserve fund that can be used to handle unexpected expenses, such as repairs and emergencies.
It’s also a good idea to review the minutes of recent HOA board meetings to become familiar with the issues they’re discussing, including any planned assessments, common homeowner requests, and the timeline for completion of small and large projects.
However, remember to be vigilant when it comes to the quality and upkeep of these amenities. It’s not just important that they are available and accessible; also check whether these spaces are being kept clean, well-maintained, and in safe condition.
In addition to amenities, don’t forget to check the scope of services provided by the association. These may include tasks such as landscaping, trash collection, snow removal, security, and other maintenance and repair duties.
Ask your real estate agent or a community representative for the HOA’s contact information so you can ask them questions directly. This extra step will help you understand how the HOA board communicates, how they handle disputes, their decision-making process, and the level of influence and input individual homeowners have in shaping the community’s policies and rules. Are homeowners encouraged to attend board meetings and are they able to voice their concerns and opinions? You can then get a glimpse of the sense of transparency and inclusivity that the community fosters.
If the association in the community you’re interested in is being managed professionally by a private company, you might want to investigate its reputation. You might want to avoid investing in a property in a community whose HOA is involved in frequent drama and petty politics.
In some HOAs, the consequences may include being fined or sued, or worse, having the HOA place a lien on your property or foreclose on your property.
