Your Guide to HOAs

Before you buy a house that's part of a homeowners association, know the basics and what to look out for.

U.S. News & World Report

Your Guide to HOAs

Aerial view of a neighborhood with pool

Make sure you read the rules and understand what services are included before purchasing a home in an HOA community.(Getty Images)

When searching for your next home, the neighborhood or community you choose matters when it comes things like affordability and its proximity to work and the right schools for your kids.

If the neighborhood you like best is governed by a homeowners association, you'll have a few more factors to consider, from the additional monthly cost involved to whether you’ll be willing to abide by certain rules. First, it’s important to understand exactly what a homeowners association does.

What Is an HOA?

A homeowners association, or HOA, is a group of all the homeowners in a defined area. It'srun by a board of neighbor volunteers that oversees services such as the maintenance of common areas, regular trash pickup and snow removal, and it establishes and enforces community rules.

HOAs are common in communities constructed by a single developer. The Community Associations Institute estimates that about 69 million people in the U.S. live under a community association, which includes HOAs of single-family houses, condominium associations, townhomes, master-planned communities and cooperatives.

All HOAs are nonprofit corporations initially created by the developer who establishes the subdivision. The developer agrees to form an HOA in order for the local city or county to agree to the planned neighborhood and ensure basic services are provided for residents. A group of neighbors can form an HOA for an existing community as well, although they're more likely to be voluntary and serve more of a social and political role than an HOA that organizes utilities and other services.

If you’re considering buying a home that’s part of an HOA, you may find that you love the additional services the community provides and the subsequent boost to your property value, or you may find that the rules and regulations many HOAs establish to be restricting. When you buy a home in an HOA community, you’re agreeing to abide by the rules and pay dues as decided by the governing body. Here are five things to know before you close on the deal.

1. Read the rules.

When an HOA is created, the developer establishes a declaration, which is “sort of like the constitution for the community association,” explains Andrew Fortin, senior vice president of external affairs at Associa, a homeowners association management company. To accompany the declaration, the first bylaws are written by the developer.

Eventually, the developer will turn over management of the HOA to the homeowners, represented by an elected board of volunteers within the community. The board can discuss and propose changes to bylaws, establish the annual HOA budget and choose vendors for work throughout the community.

All homes built under the HOA are forever tied to the association, which means if you purchase a house that’s part of an HOA, you are agreeing to comply with the rules regardless of whether you think they make sense. You may need permission to put a shed in your backyard, or you may not allowed to paint your front door blue, for example. If you’re not willing to follow the rules, your best option is to buy a house elsewhere.

You do have the opportunity to know what you’re getting into ahead of time, however. “Prior to me buying in a community association, I get, or the seller is required to give me, a stack of documents related to that association. So I get a copy of the declaration and the bylaws and the budget and all the things that are going to be relevant to me in assessing if this is going to be the right community for me,” Fortin says.

In many cases, rules enforcement is lax and board members are mainly focused most on ensuring residents receive utilities and regular municipal services. But some HOA bylaws can be limiting – and they can also be cost-prohibitive.

2. Know what you have to pay.

Depending on the size of your community and its amenities, monthly HOA fees can be as low as $50 per home or reach beyond $1,000.

Costs vary based on what services the HOA needs to organize. For example, if your sewer maintenance and trash collection are paid for separately, your HOA dues don’t have to cover those services. Some subdivisions need only utility and maintenance care. Others focus more on making the space feel like an exclusive community, with tennis courts and gatherings maintained and planned with dues.

You’re required to pay all dues established by the HOA, even if you don’t take advantage of things like common areas. If you refuse to pay, you can find yourself in a heap of financial issues, including a lien on your property that can keep you from selling your house before paying off the debt.

In California, for example, in the same way a bank can pursue foreclosure when a homeowner doesn't pay his or her mortgage, “the associations have that same power” when a homeowner hasn't paid dues or otherwise owes the HOA money, explains Steven Tinnelly, managing partner of Tinnelly Law Group, a California law firm that represents community associations.

If you find yourself owing money to the board for another reason – because you damaged a fence or sign, for example – you’re liable for those costs, too.

“Let’s say a homeowner does something to damage the common areas. The association has to fix it, and then go after the homeowner to recover those costs,” Tinnelly says. You're also required to pay fines you rack up by violating bylaws, such as renovating without permission.

3. Inquire about your HOA’s legal power.

Most states have laws clearly defining the role of an HOA that areoften adopted from recommendations in the Uniform Common Interest Ownership Act, created in 1982 by the Uniform Law Commissioners, a nonpartisan group of attorneys that established the general legislation for HOAs and have regularly maintained it since. The uniform law includes guidelines for holding HOA board elections and what bylaws may or may not prohibit.

“It’s very comprehensive,” says Dawn Bauman, senior vice president of government and public affairs at Community Associations Institute. “Then some of the states adopt certain versions of that. They don’t usually adopt it wholesale because it can be quite cumbersome.”

Even with states defining an HOA’s autonomy and restrictions, some homeowners naturally oppose their community association. And in some cases, if state law guarantees the HOA rights that an individual doesn’t agree with – like rules preventing you from parking on the street overnight or painting your house a certain color – it becomes proposed state legislation rather than a fight between the homeowner and the association.

According to CAI, an average of 1,000 to 1,500 pieces of legislation regarding community associations are introduced each year in the U.S. But if you’re looking for a simple fix to an HOA bylaw you don’t like, advocating for new state law isn’t the most direct way of enacting change in your neighborhood. Becoming an active member of your HOA is more likely to help you achieve the change you want to see, as long as your argument is compelling to your neighbors.

4. Pay attention.

Once you’re living under an HOA, it’s important to pay attention. You not only want to know the existing HOA rules before you take ownership of the house, but you also want to read the minutes of previous and upcoming board meetings to know what’s going on.

If board meetings are open for all members to attend or there are occasional public forum meetings, it’s important to attend and be able to weigh in on future decisions. HOAs often only feel restrictive when you aren’t aware a decision you don’t like has already been made.

Having a dispute with the board is probably the biggest concern for most homebuyers considering a property under HOA jurisdiction, but the number of property owners who report being dissatisfied with their HOA is in the minority. A survey conducted by CAI in March 2016 found that 65 percent of community association members reported their experience living in an association as positive.

5. Get involved.

The best course of action to ensure you support any moves your HOA makes is to get involved yourself. Running for a board or committee position will help you get to know your neighbors better, and if you’re elected, you’ll have a key role in ensuring all voices are heard. Not to mention that you’ll have a say in rules and policies to ensure they improve the community and increase property values without overreaching.

Updated on Nov. 28, 2018: This story was originally published on Sept. 8, 2016, and has been updated to include more recent information.

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