What is a homeowners' association?
Unlike most groups and associations, membership in homeowners associations (HOAs) have compulsory membership. When you purchase a home, it might come with an obligation to join the HOA, pay dues, and follow the rules and standards set by the HOA for the community. Collectively, these HOA obligations are called Covenants, Conditions, and Restrictions, or CCRs.
HOAs are common in many communitiesHOAs are most often found in planned communities, which are areas of land developed for residences along specific guidelines or patterns. HOAs can include condominiums, townhouses, subdivisions of houses, or any combination of residences within a planned community.
Often, the realty company that develops the planned community sets up a HOA in advance. Every person that purchases a home in that area does so by agreeing to CCRs and agreeing to allow the HOA to enforce those CCRs. It is important to note that there are other types of obligations attached to the property that are not associated with a HOA. The purchaser of a home should ensure they know the basis of any obligations they are under and what the legal authority for those obligations are.
Variations and structure
HOAs can take many forms depending on the community that they oversee. Generally, the HOA must take the shape of a legally recognizable entity, such as a corporation, non-profit, or unincorporated association. Because the various states have different standards for these organizations, HOAs will have different options for structure among the various states. The states have laws that regulate HOAs specifically, defining the duties, powers, and limitations of HOAs according to the state’s law.
Despite this variability, it is common for an HOA to have a board of directors and one or more executive members, such as a president or chairperson. In most states, the board of directors and executive members must be drawn from the general membership of the HOA, which means that they necessarily own property in the community.
A HOA will also have internal documents that define its goals, powers, and rules. These documents could be bylaws or articles of incorporation, and could be subject to modification over time. These documents will describe what community rules are enforced by the HOA, the dues and fees policy, and any other fundamental aspect of the HOA’s operation. Importantly, the bylaws or articles of incorporation will also describe how the board of directors and any executives are elected.
Is and HOA-governed community right for you?
HOAs can provoke strong opinions from homeowners. While their policies may protect the neighborhood, at times, they may also inconvenience you personally. The following list addresses common HOA powers and the pros and cons presented by those powers:
When you buy a home within an HOA, you are required to pay the dues mandated by the HOA. Generally, these dues will track to the general property value of the homes in the community, with more expensive homes or harder to upkeep more expensive dues.
Pro: These dues go towards the maintaining of common areas and the upkeep of the HOA, meaning that the benefits of the HOA are being divided amongst you and your neighbors. Common area problems, such as weather damage or vandalism, might be easier to solve by pooling resources.
Con: You might be in the position of paying into an association you don’t experience much benefit from.
HOAs will set standards for the how properties are to be maintained or modified, sometimes to preserve a neighborhood or building’s uniformity, and sometimes to avoid a decrease in the community’s property values by one resident’s actions.
Pro: The property value of your home can be negatively impacted by your neighbor’s decisions – failing to maintain repairs, allowing overgrowth, or disrupting the “feeling” of a neighborhood can cause property value drops throughout the neighborhood.
Con: If you do not comply with the CRRs enforced by the HOA, then you can be legally required to comply. Failure to do so could result in fines or fees.
Arbitration of disputes
Some HOAs will coordinate arbitration of disputes between neighbors, particularly if the disputes involve common areas of the community.
Pro: Dispute resolution can present a neutral space for solving problems between neighbors, the HOA may be able to streamline the process to avoid escalating conflicts.
Con: Dispute resolution can be an unwanted expense, and could present obstacles to addressing the conflict in some other way, such as through the courts.
Prior to purchasing a home, investigate the HOA. Meetings are usually open, and you should review their rules and history of enforcement to avoid problems in the future. If you’re uncertain about particular HOA rules or practices, ask a real estate lawyer.