When you buy a property, you’ll normally receive more than just 4 walls and a back garden. In many planned communities, condos and suburbs, you’ll become a member of a Homeowners Association.
The Homeowners Association (HOA) is a body set up to manage common areas, set community standards and provide services in the area. They’re usually run by a board of homeowner’s and funded by regular payments.
Some people will love having an HOA as it can keep property values high and ensure your community is well kept and organised. Others may see the rules and charges as restrictive. Knowing how a Homeowners Association Work can help you make an informed choice when buying a property in an area with an HOA.
How does a Homeowners Association Work?
A Homeowners Association is usually set up by the developer when they build the community. It may then be handed over to the residents, with a board of Directors being elected.
This Board will make decisions on behalf of the community and can include:
Managing finances
Hiring gardening, maintenance and security companies
Enforcing rules
Maintaining common areas and facilities
Creating annual budgets
Collecting HOA payments
Planning maintenance and improvements
They may also employ a property management company. This company will handle the smaller admin tasks. But the board will usually take responsibility for larger decisions.
There will usually be rules that HOA members must adhere to including the declaration of covenants, conditions and restrictions (CC&Rs), bylaws, architectural guidelines and community rules.
What do HOA Payments Cover?
One of the most important aspects of a Homeowners Association are the regular payments. These are usually known as dues, assessments or HOA fees. How much you pay will depend on where you live, the size of the community and what facilities are available.
HOA payments can include:
Gardening
Snow/ice removal
External maintenance
Bin collections
Insurance for common areas
Private roads and pathways
Swimming pools and gyms
Club houses and communal areas
Gates, security and lighting
Administration and management
In a Condo community the HOA fees may also include external maintenance of the building, roof, lifts, corridors, communal plumbing and other common areas. This means you may pay higher fees in a condo association than a single family community.
Homeowners may also have to pay special assessments. This is an extra charge which can be used for unexpected maintenance or large scale improvements. This could include roof replacements, retaining wall repairs and private road resurfacing. Before buying a property ask if there are any special assessments planned.
Common Rules & Restrictions
The HOA rules are there to ensure that the community has a certain standard and protects the common interests. Whilst rules can vary, many will have rules around external changes and usage.
Common rules can include:
Paint colours and external materials
Fencing, sheds and gardening
Driveways and parking
Christmas decorations
Noise, pets
Short term lets
Home businesses
Satellite dishes, solar panels
Building and renovations
Number of vehicles allowed
You may have to get permission to do things like build a decking area, replace your front door, add fencing or change your garden. An Architectural Review Committee may look at whether your planned changes fit the guidelines.
Whilst they’re not trying to control everything in your life, HOA’s can put rules in place around how you can use and change your property. It’s important to read through the rules and regulations to ensure you know what you can and can’t do.
Benefits of living in an HOA
A well run HOA can give you many benefits. One of the main ones is that your property will be regularly maintained. You will have clean common areas, well kept gardens and nice facilities.
HOA’s can ensure that your property value stays high by ensuring that the community isn’t left in a state that could cause issues to neighbouring properties. They may have rules around leaving vehicles abandoned, having very run down gardens or unsafe changes to the external of your property.
Other benefits can include:
Communal facilities
Well organised events
Professional property management
Private roads and facilities maintained
Formal complaints process
More uniformity
HOA’s can be a great option for people who want to live in a community with set standards and facilities. Some developments also have easier payment of association fees.
Disadvantages of an HOA
Although HOA’s can have many benefits they won’t be the right choice for everyone. Main concerns are usually around the fees, rules and enforcement.
HOA’s can have increasing fees over time. This is due to increased insurance, maintenance and labour costs. You will need to consider this when budgeting and also any special assessments. Just because the fees are low doesn’t mean the community is in good financial health. They may just be putting off essential maintenance.
The rules can be seen as restrictive. If you want to carry out some renovations and the HOA say no you may become frustrated. You may also receive complaints about your garden, parking or external decorations. In some communities you may be fined for repeat offences.
If the HOA is being well run with an active and responsible board you may not have any issues. However a poorly run HOA can have issues around slow maintenance, unclear communication, low reserves and lots of arguments between residents.
Before buying a property make sure you’ve looked through the financials of the association. Have a look at the minutes of meetings, reserves, insurance and special assessments. It’s also wise to find out if they’re currently involved in any litigation and how often they issue complaints or fines.
Rights & Responsibilities
Whilst there are responsibilities there are also rights. The HOA should follow their rules and regulations and any relevant state/local laws. They should also ensure that they’re applying rules fairly.
Depending on where you live you may have rights to:
Receive notice of meetings and rule changes
View the records of the association
Vote in elections
Appeal fines/complaints
Attend board/member meetings
Request financial information
Install certain safety and accessibility features
Raise concerns regarding board decisions
As a homeowner you will have responsibilities to pay the required assessments, follow valid rules, maintain your allocated sections and responsibly participate in the association.
If you have a problem with the HOA start by looking through the rules and speaking to the board in writing. Many issues can be resolved with an internal hearing, mediation or formal process. The legal requirements will vary depending on the state, but if there is a serious issue you should seek advice from a qualified lawyer.
Questions to ask when buying
When buying a property it’s important to ask detailed questions about the HOA.
Ask:
What are the current HOA fees?
How often can the fees increase?
What do the fees include?
Are there any upcoming or recent special assessments?
How much is in the reserve fund?
Are there any pet, let, renovation or parking rules?
How are complaints handled?
Is the association involved in any litigation?
Who maintains the roof, external walls, windows and garden?
Are there any large scale maintenance or improvements planned?
Ask for copies of the CC&Rs, bylaws, rules, budgets, financials, minutes, insurance documents and recent assessment notices. This can be looked at during your inspection/due diligence to avoid any nasty surprises.
Conclusion
A Homeowners Association is a body to manage common areas, collect assessments and enforce community standards. They can be a great option for easy maintenance, nice facilities and organisation. However they can also have ongoing fees, rules and a board.
Not every HOA will be the best option for every homeowner. It’s important to understand what the HOA is like. By looking at the rules, financials and asking the right questions you can decide if the costs and requirements of the community are what you want for your lifestyle and long term plans.
