Homeowners Associations (HOAs) are legal entities that are formed for the maintenance of common areas. Majority of townhome societies, condominiums and now single-family subdivisions have appointed Homeowners Associations, which are elected after the development is built to completion and most residents have moved in.
When homeowners have finalized their residential documentation, they are provided Covenants, Conditions, & Restrictions (CC&R’s) which they have to comply with at all times, and one of the primary functions of the HOA is to ensure that all homeowners do just that. This is done to make sure that the quality and value of the properties involved do not deteriorate.
Salient Functions of a Homeowners Association
The following functions of an HOA are the ones we see most prominently, in no particular order:
- All property owners have to be members of this association. It is compulsory.
- Members are charged a required fee for the association.
- HOAs can enforce design and maintenance standards along with those established by city ordinances.
- HOAs have official bylaws, and they have a governing board that brings on a property management company for enforcement and maintenance related matters.
- They may also have a newsletter.
- They have to determine a fee for the funding of neighborhood operations and have to ensure their collection from all members. It is their responsibility to maintain the budget and ensure enough funds are coming in to pay for maintenance and projects. We always recommend HOA accounting software for this function.
- They maintain (or oversee the maintenance of) the landscaping of the community. This includes recreational or community facilities, if any.
- Arrangement and provision of space for events held in the neighborhood.
- They ensure that all residents get the highest level of security possible.
- Street maintenance also comes under their domain.
- They enforce any and all kinds of deed restrictions.
- They oversee and ensure the upkeep of anything pertaining to exterior building maintenance, typically defined as anything behind the drywall.
- Other miscellaneous issues like garbage control, street parking, approval of landscaping, plant types to be kept, fencing restrictions, pool restrictions, basketball hoop erection, garage door opening or closing, number of pets, storage of RVs and boats, and other items as outlined in the CC&R’s.
HOA: Can’t Live With or Without Them
Many people appreciate the HOA while many loathe them. The people who like the HOA will tell you that they protect the value of their homes and ensure that the neighborhood stays safe and looks appealing. They ensure this by prohibiting people from painting their homes in colors that might not be tasteful, parking large trucks or RVs in front of their homes, leaving dismantled and rusted vehicles on the road, or conducting business in their driveway.
People who hate the HOA say that these people may have their own set of laws that govern their lives, and they do not like that. Many of their laws are too restrictive and dictate where people place their clothesline, the kinds of plants they can keep and whether or not they can plant flags that may be offensive outside their homes. Sometimes the fee increments are also too high and unjustified, and since it is mandatory to pay it, they cannot get away from it. Such people paint a very tyrannical picture of the HOA, and in some neighborhoods, it may even be justified.
There are arguments to be made on both sides of the coin. But it should be said that Homeowners Association board members should always act responsibly and with the best interest of the owners in mind. Be sure to look at the bigger picture before latching onto a small issue that may create a long-lasting conflict. On the other side of the coin, homeowners should realize that these board members are volunteering their time for the sake of the betterment of your investment. If you are the type of person who can’t handle such regulations, look for a property without an HOA.
Tips for Prospective Home Buyers
Prospective home buyers should ensure the following before closing:
- Go through all the CC&R’s before signing your ownership papers so you can determine whether the rules are not too restrictive for you and if you can easily live around them.
- Find out about the current outstanding dues payable to the association. They have to clear before you own the house, otherwise, you will be liable to pay them, since you are the owner. If you do not, you can be evicted and the home could be sold to liquidate the debt. This amount can run into hundreds or even thousands of dollars depending on the amenities provided to the community.
- Ensure that the Board has term limits and if the members have been trained in efficient HOA management.
- No litigation should be pending on the HOA’s account.