Your Crash Course in Homeowners Associations

If you’re considering purchasing a home in a planned single-family home or condominium development, chances are you’ll need to evaluate—and possibly contend with—a homeowners association (HOA).

An HOA is a governing body that enforces architectural guidelines, maintains common areas and amenities, authorizes particular activities and residential improvements, and cultivates a cohesive neighborhood atmosphere. They can be managed professionally, but more often than not they’re run by community resident volunteers who are elected by association members and serve on the HOA board of directors. The board organizes regular meetings, establishes and maintains a budget, collects dues, and enforces rules and regulations, which are binding and legally enforceable.

Before you buy a home that makes you part of an HOA, you’ll need to decide if life in a planned development is right for you. This will include considering the financial strains an HOA can place on community homeowners, your anticipated use of shared amenities, and your tolerance of or agreement with the HOA’s rules and regulations.

To help you determine if it’s a good move for you, here’s a quick run-down of what you need to know and questions you should ask yourself, any potential HOAs, and your real estate agent.

Restrictions

An HOA’s rules are known as covenants, conditions and restrictions, or CC&Rs. And they can include a lot of guidelines. For instance: how tall your grass can grow, what types of vegetation you can plant or remove, how many vehicles you can park on the street, if you can park an RV in your own driveway for more than one night, the height and color of fences, gardening shed dimensions (if they’re allowed at all), use of particular fertilizers or sprinkler systems, existence of compost piles or rain gardens, use of solar panels, and even the color you can paint your front door.

The upside to the long list of rules is that everyone must abide by them, so you’re less likely to have a neighbor with an unruly lawn, dilapidated front port, or garish “home improvements.”

Fees

In addition to managing its CC&Rs, an HOA charges members monthly, quarterly, or yearly dues. These fees help cover the upkeep of community spaces, shared structures, and sometimes individual utilities, which can include:

  • Water
  • Cable TV
  • Ground maintenance/gardeners
  • Trash pick-up
  • Sewer services
  • Insurance
  • Professional management fees
  • Pool, spa, and/or fitness centers
  • Golf course and/or clubhouse
  • Roads and sidewalks
  • Assigned/underground parking
  • Gate access
  • Security personnel
  • Snow removal

Obviously, the variety of a development’s amenities will affect its HOA fees—the more amenities, the higher the fees. In 2015, a study by Trulia found that monthly HOA fees averaged $331/month.

Fee structures

There are two main ways an HOA can handle financial management: one, they keep a large cash reserve on hand to meet maintenance, legal, or management obligations as they occur; or two, they charge lower dues but rely on special assessments (i.e., fees) charged in addition to regular HOA fees for large or unexpected costs.

While lower dues may sound more attractive at first, you should know that one-off special assessments can run into the thousands of dollars per member.

Before you buy

Any HOA dues will be included in a property’s listing price. But that doesn’t mean you don’t need to do any investigative work to discover what the fees cover and if they’re likely to change in the near future. Here’s a short to-do list if you discover the home you’re considering is part of an HOA:

  • Read the HOA’s bylaws to find out how much fees are allowed to increase every year. Also ask for records of HOA dues for the past 10 years to see how much and how often they have increased.
  • Get a list of all services and amenities covered by your fees. Make sure you’ll take advantage of enough of these to make it worth your while.
  • Check the state law on division of requirements for insurance and confirm the HOA is following those requirements.
  • Compare fees between residential developments in the area to see who’s competitive and who’s overpriced.
  • Learn how rules are set and enforced, including penalties for rule breakers. Know that penalties can include being fined, sued, having a lien placed on your home, or even foreclosure.
  • Read up on the HOA’s conflict resolution process and how rules are changed.
  • Check that there aren’t any residual issues between the current home owner and the HOA that could affect you. If you don’t ask, you could inherit issues once you take possession. Should there be any lingering issues you uncover, get the owner to fix the problem(s) or provide cash for you to make the fixes.
  • Ask if you can attend an HOA meeting or read the minutes of recent meetings. This will show you the dynamics of the group and if they truly work in the best interest of the residents.
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