About 25 percent of home buyers purchase properties within common-interest developments, commonly referred to as homeowner’s associations
(HOAs). If you are looking to move into a community with an HOA, it’s important to understand what they actually are, how they are governed, and how they could affect your bottom line.
Here are some basic facts home buyers should know about HOA laws and fees.
What is a common-interest development?
When you buy a property in a common interest development, you are not just buying your particular unit. You also are buying into a larger entity that typically owns
the building structure, the roof, the parking garage, the clubhouse, the pools, etc. A common-interest development would generally be a condominium building, a town home community or lofts, or it could be a single-family home community, private neighborhood or other similar arrangement. Buyers in the development or building agree to live by the community rules and regulations.
These regulations mean that as an owner you have certain rights and restrictions as outlined by development documents commonly called CC&Rs (covenants, conditions and restrictions). The CC&Rs govern your allowed ownership
, use and behavior at the property — everything from use of your unit to parking restrictions, insurance, architectural rules, paint colors, storage of RVs or boats, pets, allowed inhabitants and more. These rules and regulations can be changed, subject to approval by a majority of the owners.
How are HOAs governed?
To interpret and enforce the rules and regulations, most HOAs elect a board of directors who follow the regulations of the community and make prudent financial and operational decisions. As an owner, you get to vote for the board members (this process is usually outlined in the community bylaws).
However, most owners in a typical community don’t go to board meetings and don’t get involved in the operations of the community. And that’s fine, as there’s no requirement for an owner to vote or otherwise be involved. Most owners only show up to meetings when HOA fees are raised or if they are affected by a particular issue. Keep in mind though, if you have an issue or disagree with a restriction in your community, you should attend the board meetings and work with the HOA toward finding a solution that the majority of owners can agree with.
Are there financial risks with HOAs?
HOAs are nonprofit organizations, but their complex financial and legal operations can sometimes cause owners significant financial pain in the form of unexpected dues, increased fees, and special assessments.
Many people don’t like having to follow rules and decide to avoid living in an HOA-governed community altogether. But don’t forget, the HOA makes sure your neighbors don’t park cars in their front yards and/or that a neighbor doesn’t paint a house pink or carry out other nuisance behaviors — any of which could easily occur in an area not governed by an HOA.
Do you live in an HOA regulated community? Share in the comments!