A homeowners’ association (HOA) is a common element in many communities. The HOA is an organization designed to improve the quality of life for everyone within a community by enforcing certain rules and restrictions within the community. Some associations are very restrictive about what property owners can and cannot do with their property. The level of restrictions is typically set in the Restrictive Covenants for the community.
Before purchasing a home, you need to know whether the home is under the jurisdiction of an HOA and how that impacts your finances, as well as your freedom of choice regarding your property. Below is a discussion of HOAs. We also encourage you to discuss HOAs with your real estate agent.
What is a Homeowners Association?
If you live in a condominium, townhome, or a planned unit development (PUD), you have a homeowners’ association (HOA). The developer usually establishes the homeowners’ association as part of the community’s Restrictive Covenants (restrictions).
The restrictions, also known as Covenants, Conditions, and Restrictions (CC&Rs) govern the behavior of the owners and the architecture of the community. Other rules and restrictions exist about amenities, landscaping, and common issues affecting homeowners in the community. The HOA is the group that enforces the restrictions, maintains the shared areas, and sets new rules for the community. In most cases, the HOA is made up of residents within the community who have volunteered or been elected to serve on the HOA. The value of having an HOA is that the property will be maintained, and community rules will be enforced for all residents.
Homeowners Association Management
As discussed, an HOA can be comprised of homeowners within the community who volunteer to serve or who are elected pursuant to the provisions outlined in the restrictions. In some communities, the HOA is managed by an outside, professional management group. There are pros and cons for both management types. When the HOA is comprised of homeowners, the board members have a personal interest in the board’s actions. They know their neighbors and the issues that are most important in the community.
However, you can have petty politics and personal interests involved when you have homeowners serving on a board. When a company manages the HOA, you remove this personal interest. You may have fewer power struggles and political maneuvering when a management company is responsible for the HOA duties. Regardless of how the HOA is managed, it is important that you understand the restrictions and the HOA organization before you purchase a home because both issues can have a significant impact on your freedom to make decisions about your home’s exterior and your landscaping. The HOA can also have a significant impact on your finances through fees and assessments.
Most HOA boards have the authority to:
- Develop rules for shared areas in the community;
- Enforce the rules outlined in the restrictions and CC&Rs;
- Take disciplinary action against property owners who violate the rules, including issuing fines for violations of the rules;
- Hire companies to perform services for communal areas;
- Develop rules for the use of amenities and communal areas; and,
- Assess and collect fees for repair of shared areas and maintenance of public areas.
Your real estate agent can review the HOA and restrictions with you before you enter a purchase agreement for a home. Below is a discussion of some of the issues that you want to address and discuss with your realtor as you are searching for your new home.
Common Homeowners Association Rules
The HOA rules are defined in the community’s restrictions and CC&Rs. The rules are intended to protect the common interest of residents in the development. Whether it is a community of condominiums, townhomes, or single residential homes, the HOA rules apply to everyone within the community and should be enforced fairly and consistently.
Common areas where HOAs have jurisdiction to enforce rules under the CC&Rs and restrictions include:
- Amenities and Common Areas — The HOA maintains and enforces rules for amenities such as tennis courts, swimming pools, fitness rooms, picnic areas, playgrounds, and clubhouses. In addition, the HOA is responsible for maintaining the common areas such as the sidewalks, lakes, green areas, and community buildings.
- Housing — The restrictions can set rules limiting the colors you can use on the exterior of your home and the architectural changes you can make to the exterior of your home. The rules can also limit and restrict some home improvements, such as adding porches and expanding your home.
- Detached Buildings — Rules regarding tool sheds, playhouses, and play structures usually limit and restrict what homeowners can place in their yards. If you are permitted to construct a detached building or structure, the restrictions probably set forth the rules for the size and materials for the structures.
- Landscaping — Restrictions limit what you can do with your landscaping. You might be restricted as to the types of trees and shrubs you can plant in your yard. At the very least, property owners are typically required to maintain landscaping so that yards are neat and attractive.
- Fencing — Property owners may be required to construct and maintain fences on their property to provide privacy from neighbors. On the other hand, restrictions can also limit the types of fences used in the community, including governing the height, style, type, and color of materials used to construct fences.
- Decorations — Homeowners may be restricted from using certain types of decorations to celebrate various holidays and events. The HOA may limit the amount of time you may leave decorations outside after the holiday passes.
- Parking and Mailboxes — Many HOAs have rules for the types of mailboxes you may use. In some cases, all mailboxes must be identical to provide continuity throughout the community. Parking restrictions, especially parking on the side of the road and storing RVs and boats, are included in the restrictions and CC&Rs.
- Home-based Businesses — Many HOAs strictly prohibit home-based businesses or limit the type of businesses that you can operate from your home.
The rules and restrictions can be modified and changed according to the terms of the restrictions. However, most developers include a clause that prohibits changes to any terms for a certain period to prevent an HOA board from changing all the provisions the developer included in the restrictions.
When you review the restrictions and CC&Rs, make sure that you understand how disputes are resolved and whether you can appeal a decision by the HOA. Also, you need to understand the process for obtaining approval for various actions and obtaining approval for exceptions to the rules.
Can a Homeowners Association Fine You?
Yes, most HOAs have the authority to issue fines to property owners who violate the rules in the restrictions and CC&Rs. For example, if you park an RV or boat in your yard in violation of the restrictions, the HOA can fine you for each day you keep the RV or boat in your yard after being notified to remove it. Likewise, if you build a play structure or construct a fence in violation of the rules, you can be fined for the violation.
Before you purchase a home, you should be clear about the rules for the community and the actions the HOA can take to enforce those rules. A battle in court over HOA rules and fines can become very costly and cause hard feelings between neighbors. It is best to understand the restrictions for the neighborhood before you sign a purchase contract. If the rules are too restrictive for you, then you should probably search for another home that might not be subject to restrictive covenants.
Also, do not assume you can move in, get involved in the HOA, and make the changes you want for the community. While you might be able to effect some changes, those changes could take years to accomplish, and some changes may never happen. Again, it is best to understand the rules and the HOA before purchasing a home to ensure you can live within the boundaries and rules governing the community.
Average Homeowners Association Fees or Dues
The homeowners’ association fees and costs can significantly add to the cost of a home. While there is not a set fee for all HOAs, the typical HOA fee is somewhere between $200 to $400 per year. However, fees can be much higher in expensive communities and urban areas.
In addition to annual fees, HOAs can also charge monthly dues and special assessments. Monthly dues can cover the expense of maintaining and operating amenities and public areas, as well as pay for garbage pickup, cable service, and other services. It is very important to question the amount charged for dues, including asking for a list of the dues charged over the past few years so that you can see how often and by how much dues are increased for the community. The restrictions and CC&Rs should set forth when and how dues can be increased.
In addition to fees and dues, HOAs can also charge special assessments for various purposes. Assessments are charges for one-time expenditures such as emergency repairs or expensive renovations, such as replacing roofs or replacing the tennis courts. Assessments can be very expenses, totaling many times more than the annual fees or monthly dues. Again, it is a good idea to request a list of all special assessments within the past ten years to get an idea of how the HOA uses special assessments.
Before purchasing a home, you need to make sure that the home will not place too much of a strain on your finances. HOA dues, fines, and assessments can be an expensive cost of owning a home in some communities. In addition, you should know what actions the HOA can take if you do not pay your fees or dues.
In some areas, an HOA can place a lien against your home for failure to pay fees, dues, or assessments. The lien is filed in the county deed records for public notice. A lien for unpaid HOA fees and dues can prevent you from selling your home or refinancing your mortgage until the lien is paid in full. Some states allow these liens to be foreclosed by the HOA.
In addition, if your mortgage company forecloses because of non-payment, the money you owe to the HOA for dues and fees through the date of the foreclosure may follow you after the home is sold. You may continue to be legally liable for the HOA fees through the date your home is foreclosed or sold.
Can I Be Forced to Join a Homeowners Association?
Yes, you can be forced to join a homeowners’ association. However, it is not so much a matter of being “forced” to join the association as it is a conscious choice to become a member of an HOA.
When you purchase a home that is in a community with an HOA, you are automatically a member of the HOA. You cannot “opt out” of being included in the association. The property is subject to the restrictions and CC&Rs, which automatically includes your membership in the HOA. Therefore, you should carefully consider whether you want to live in a community with an HOA. While you may not be required to be active in the association, you are bound by the same rules and restrictions as all other property owners within the community, including the payment of all fees, dues, and assessments.
Before signing a sales contract, ask your real estate agent for a copy of the restrictions and CC&Rs for the community. You need to read the covenants to make sure you understand the rules and restrictions, including the amount of money you will pay each year for living in a community with an HOA.
Many HOAs offer positive benefits for property owners, but there could be issues that you should be aware of in advance. Ask the HOA for a list of complaints and disputes within the past few years to get an idea of the level of conflict within the community. The HOA’s history can give you an idea of whether you want to join the community as a property owner. Your real estate agent can also offer sound advice and counsel when you have questions about an HOA.
This information is provided courtesy of The Eastside Real Estate Team. Keep us in mind for all your real estate needs. Call us today at 425-200-4093.