Homeowners associations provoke strong emotions. Depending on who you ask, they are viewed as either the neighborhood’s protector of home values or, in some cases, a small group of residents who take community rule enforcement to the extreme. What is an HOA and why do they exist?
Simply put, an HOA is a private regulatory organization for a neighborhood development. Buying a home in a neighborhood governed by an HOA means that membership is mandatory. An HOA transfer fee is typically charged when a new owner buys an existing house in the neighborhood. These fees are meant to compensate the HOA for its time and expense in assisting with the home’s purchase and sale. For example, the HOA may have to provide copies of the development’s governing documents, HOA financial statements, or documentation of outstanding dues, fees, or HOA liens on the home.
The HOA is created by the developer of the subdivision and for an initial period, while the neighborhood is still being built, the HOA’s directors are the developer and a few elected residents. As the neighborhood is completed, the developers are replaced entirely by elected homeowners.
The HOA has covenants and declarations defining its existence as well as rules and regulations for homeowners. Rules govern things like parking, sheds and other out buildings, animals, landscaping, and acceptable colors a home may be painted. Violations may result in fines. Homeowners pay monthly or annual dues to finance the maintenance of common areas such as parks and pools. HOA’s may have rules for conducting a home business, especially if it involves shipping and receiving or affects neighborhood parking.
An HOA also may have a reserve fund in which a portion of dues is set aside for long-term repairs and improvements. A special assessment may also be charged for emergencies, such as storm, fire or flood damage not sufficiently covered by insurance.
The regulatory power of the HOA is what often provokes resentment. Critics say the HOA infringes on their rights as homeowners to do with their property as they please. Such critics cite the overzealous actions of some HOAs to bully homeowners over minor rule infractions.
Supporters of HOAs argue that the associations prevent homes from becoming run down, which, in turn, protects home values. Supporters also say association rules help keep home prices at their highest by requiring tidy yards and common spaces, and prohibiting unlicensed commercial activities. Association supporters also like the idea of residents self-regulating rather than having local governments do the job which could lead to even tougher restrictions and bureaucracy.
Setting aside their regulatory functions, HOAs oftentimes also provide the organizational muscle for neighborhood activities, such as holiday gatherings, food truck rodeos, sports tournaments and other fun events. The HOA is also likely to distribute neighborhood newsletters, which spread the news about local play groups, book clubs and other neighborhood-based organizations.
Love them or hate them, HOA’s are ubiquitous in modern life. Homeowners would do well to learn the rules for their neighborhood and get involved to play a role in guiding the direction of their organization.
Not intended to solicit buyers or sellers currently under contract.