A homeowners association (HOA) can be a blessing or a curse to those who belong to one, depending on whether the association is well-run, has reasonable fees and isn’t overly restrictive.
If you’ve never lived in—or even heard of–an HOA, here are some things you should know about one of the fastest-growing trends in home ownership. Now lets get into what is a Homeowners Association and how they work.
What Is a Homeowners Association?
A homeowners association is a membership organization run by a board of directors–usually neighborhood volunteers–that regulates and manages a building, set of attached homes or a single-family neighborhood.
The HOA will set regulations governing a variety of issues, and assess HOA fees–to be paid annually, quarterly or monthly, and sometimes through special assessment–that go toward the upkeep of a neighborhood.
In many cases, an HOA is started by a real estate developer, and the company might hire a community association manager to assist the board in its duties.
Types of HOAs
Many HOAs share the same characteristics, but there are some differences based on the types of homes and financial or community arrangements. HOAs can exist in:
- Planned communities. These might include single-family homes, or a mix of homes, townhomes and apartments, and have amenities such as a pool and community center, as well as 24-7 gated security. Single-family homeowners would likely own the land their homes are on as well as their yard, but might not be in charge of yard upkeep.
- Townhome-focused HOAs. Townhome owners usually own the land their home is on and are responsible for the upkeep of the interior and part of the exterior. But the HOA could provide some exterior maintenance such as roof, gutters, trim and siding, as well as lawn care for the common areas surrounding the buildings.
- Condominium-focused HOAs. Condominium HOAs are focused on amenities, such as pools, community areas, the buildings themselves and parking lots and lawns. Condo owners will take care of the interior of their homes.
Housing cooperatives, or co-ops, while not technically part of an HOA, offer a similar oversight structure as HOAs. Co-op owners follow rules established by a board and owners likely pay a monthly maintenance fee. They also have to pay their share of operating expenses for the building they live in.
Inner workings of an HOA
If you’re looking to buy a home in a neighborhood with an HOA, make sure to review the rules and regulations as soon as possible because once you purchase the home, you will be a member.
The rules, also known as covenants, conditions and restrictions (CC&R), can range from the common to the arcane, and will often set the tone for the neighborhood.
For example, an HOA can set strict rules on the type of changes you can make to the exterior of your home. Here are some other common things an HOA may regulate:
- Common areas/land: It’s likely your HOA fees will primarily cover upkeep for common outdoor areas, snow removal, building upkeep and–if your neighborhood has them–community fitness and gathering areas.
- Pet ownership: An HOA could specify whether you can own pets, how many and how big they can be.
- Parking: You might have rules that govern the types of vehicles that can be parked in a driveway or parking lot–for example, RVs might not be permitted–and if overnight street parking is allowed.
- Renting: An HOA might take a hard line on renting regulations to prevent the neighborhood from having too many temporary residents.
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How to Research an HOA
There are a few ways you can check out an HOA before you purchase a property. You can start by asking for:
- Association bylaws. Your rights as a member and the power of the board of directors would be addressed here, including how often the board will meet, the budget and how assessments will take place.
- Financial documents. You’ll want the HOA to have a reasonable assessment fee–especially if it is not in charge of much more than the upkeep of common areas–and enough cash in reserve to pay for major repairs and projects. It may be difficult for you to assess the HOA’s finances on your own, so you may want to ask your real estate attorney to examine the financials, as well.
- CC&Rs and rules. This is where your tolerance for oversight will be tested. If any of the rules are deal-breakers, it might be a good idea to take a pass on the HOA and look for another house.
- Board meeting records. If there are major problems with how the association is run, you’ll likely see the signs in the meeting minutes. For example, there might be major disputes between the board and residents, or even with board members themselves. You also could find out about major projects and potential financial issues that could result in one-time assessments.
In addition to reviewing records, you could:
- Talk to the community association manager, who can likely clarify questions you might have about the bylaws and rules.
- Reach out to any residents you might know, or happen to meet while checking out the area.
- Conduct online research on review sites such as Yelp, although it might be difficult to get into closed social media groups for the neighborhood.
How Much Does an HOA Cost?
HOA fees should be disclosed along with the sale price for a home, but realize that, like taxes, HOA fees could go up every year. Fees range from about $200 on the low end to several thousand dollars for HOAs that are responsible for multiple community buildings.
If an HOA is well-run, it should have a full accounting of where the fees are spent and also put away a designated portion in reserve to pay for major projects such as new roofs/gutters and exterior repairs. If an HOA doesn’t save adequately for unanticipated costs, the board might need to implement one-time assessments on residents, which can add quite a bit to the monthly cost.
The fees are generally non-negotiable, meaning if you live in the neighborhood, you have to follow the regulations, and paying fees is one of them.
Frequently Asked Questions (FAQs)
Can an HOA increase property value?
Homes in an HOA had an average of 4% higher value than similar ones that were not in an HOA, according to a recent study by researchers Wyatt Clarke of IBM and Matthew Freedman of the University of California-Irvine. A well-run HOA can have a positive influence on how a neighborhood looks, such as making sure home exteriors look neat and consistent and hiring landscaping companies to keep common areas clean.
Why do some people hate HOAs?
If an HOA is overly aggressive about its rule enforcement, doesn’t care about enforcing any rules or is not financially stable, residents–and the neighborhood itself–could suffer. For example, if an HOA board looks the other way when residents change the exterior of their properties or don’t take care of their lawns, it can cause neighbors to get upset about the condition of the neighborhood and its effect on property values.
How do HOAs enforce their rules?
The power of HOAs varies by association and is regulated by state law. HOAs have specific methods for rule enforcement detailed in their bylaws and regulations. If fees are not paid, for example, some HOAs might have the power–if granted by the state–to fine residents, and eventually put a lien on their home and possibly foreclose on the property. Other issues, such as a dispute about a rule on exterior design, could end up in civil court.
Planning for the Future
The only constant is change, and the board must plan for the HOA’s future. This involves determining long-range needs and establishing long-term goals, along with implementing a strategy to attain those goals. The board should set annual goals, as well as those for a longer time frame. Performance goals are also set by the board.
Bottom Line
HOAs are not for everyone. If you don’t want to answer to an HOA and its board about how you upgrade your house and whether you want to rent it out or not, it may not be a good fit. But HOAs can offer some key advantages, including consistent upkeep of all homes and enhanced security. That’s why it’s just as important to know what you want in a home and neighborhood as it is to research the background of an HOA in any area you’re considering buying a home.
Homeowners' associations can be your best friend when they prevent your neighbor from painting her house neon pink, but your worst enemy when they expect you to perform expensive maintenance on your home that you don't think is necessary or impose rules that you find too restrictive. Before you purchase a property subject to HOA rules and fees, make sure you know exactly what you are getting into.
Let's take a look at the full picture of an HOA
HOA fees often range from $200 to $400 per month. The more upscale the building and the more amenities it has, the higher the homeowners' association fees are likely to be. In addition to monthly fees, if a major expense such as a new roof or a new elevator comes up and there aren't enough funds in the HOA's reserves to pay for it, the association may charge an extra assessment that can run into thousands of dollars.
Because multiple parties live in the same building or complex, all residents of condominiums and townhomes must be equally responsible for maintaining the common areas such as landscaping, elevators, swimming pools, clubhouses, parking garages, fitness rooms, sidewalks, security gates, roofing and building exteriors. Many of these types of common areas, such as pools and tennis courts, also exist in subdivisions of single family homes. Regardless of whether the HOA governs a building, such as a condo or townhome structure, or a neighborhood of individual houses, HOA fees help maintain the quality of life for the community's residents and protect property values for all owners.
In addition to maintaining common areas, HOAs also set out certain rules that all residents must follow called covenants, conditions and restrictions (CC&Rs). In a common building, rules may include what color front door you may have, whether you are allowed to line dry your laundry outside, whether you can have a satellite dish, the size and type of pets permitted, and so on. In many ways, these rules are similar to the kinds of rules apartment dwellers must follow.
In a subdivision with individual homes, regulations may include what color you can paint your home, the exterior landscaping you can do, the types of vehicles you can park on the street or in your driveway (no RVs, for example), permissible type and height of fences, and restrictions on window coverings for windows facing the street. If you want to do anything that differs from these rules, you will have to convince the HOA to grant you a variance, which is probably unlikely.
No matter where you live, you are likely to be subject to city ordinances and restrictions related to the use of your property. HOAs add yet another layer of restrictions, and because their members are more likely to know what you're up to, the HOA is more likely to enforce the rules. Below, we'll take a look at some of the rules and regulations you need to know about before you decide to join one of these communities.
Are your community Documents Updated?
Homeowners Associations and Condominium Associations have three governing documents: the Declaration, the Bylaws, and the Articles of Incorporation.
The Declaration is the “contract with the membership” – it contains things like pet restrictions, vehicle restrictions, guest rules, the ability to do background screening on incoming buyers and tenants, insurance obligations, and other things that affect every community member’s everyday life.
The Bylaws are your go-to for procedures such as who gets to vote? How many members comprise the board? When are your elections? Who can be on the board? Who can call meetings? When is the annual meeting?
And the Articles of Incorporation are your contract with the State of Florida that incorporate you as a corporation-not-for-profit.
All three documents reference one another, and it’s important to have congruency.
Take Action today; select one of our Legal Members for a comprehensive, custom-tailored update to all three community association documents—the Declaration, the Bylaws, and the Articles of Incorporation
Covid-19 & New Laws have brought many changes; every community should have the new laws added to their governing documents.
The Process of updating governing documents.
The board shoulders a bit more responsibility – giving us lots of information about your association—and then we collaborate together on the tougher provisions, ensuring you have the very best guidance and governing documents that are perfect for your community.
- Search of original documents and amendments all the way through the mailing of proxies and finally recording of your new documents..
- Our presence at town hall meetings, board meetings, or assistance with mailings.
- There will be a lot of questions from owners, we can help answer these for your community.
Legal Members can provide not only guidance about your community standards, but also lots and lots of ideas from all of the other communities with whom we work! Some of the most popular updating provisions these days include: preventing AirBNB and sober homes, creating a non-smoking building (while grandfathering in current residences), eliminating investors, protecting the association from corporate takeover, and screening new residents and tenants for criminal histories and good credit references!
How much time does it take to update documents?
This depends quite a bit on you! As soon as you retain our services with payment, we send you a packet of information you need to get started. We also are ready to schedule your telephone conference within the following fourteen days. That said, some associations need a bit of extra time—someone’s on vacation, or it’s hard to coordinate calendars with everyone. (And that is perfectly alright!)
You will also have an opportunity, after our phone conference, to review everything before we create your docs. Rewriting 60-100 page documents takes a bit of time! We ask for six-to-eight weeks to create your new documents, and then we send them to you.
Once you get them, you’ll start “getting the vote” in your community! Some Associations can do this within a few weeks—and for others, the process can be months! This timeline is what fits best for your community, and we are happy to provide support in any way needed.
Updating governing documents can be an exciting time for your community—there are so many incredible updates to protect and modernize your association!
