Beautiful houses. Well-manicured lawns. Good schools. Involved neighbors. These are a few of the perks that come with living in a community that has a Homeowner’s Association (HOA). An HOA is designed to protect the value of your home and maintain order in your community. For example, an HOA makes it tough for a guy like a cousin Eddie to park his dilapidated RV in front of your house during Christmas vacation.
Sounds perfect, right? Well, it might be. But, it’s also not for everyone. The very regulations that protect you, can also limit you or cause legal trouble for you. It’s important to make sure you know exactly what you’re agreeing to before you buy a home in an HOA. Most HOAs manage the common areas and amenities as well as all covenants, conditions, and restrictions (CC&Rs). There are three important documents for you to review before buying in an HOA: the CC&Rs, the homeowners association bylaws, and the HOA budget and financial statements. These, along with any HOA meeting minutes, will help you get a feel for exactly what you are agreeing to by joining the HOA.
Here are some things to consider about your potential HOA:
- What are the membership dues? How likely are they to rise? When and how are they assessed? Do you need to factor a one-time capital contribution to your closing costs?
- What do your dues cover? These vary greatly from community to community.
- Does the HOA limit pet ownership? What about other animals like chickens?
- How clear are the stipulations about the appearance of your home? For example, can you fence your backyard? Do you have to follow rules about lawn care? Can you paint your front door red? Where should you park your motorcycle?
- Can you rent your residence to another party?
- If you don’t meet HOA requirements and try to sneak a chicken coop on your property, can the HOA levy a fine? What is your recourse?
- If you don’t (or can’t) pay your HOA dues or fines, what steps can the HOA take? Can they foreclose on your home?
CC&Rs and bylaws are extremely difficult to get around, so be sure to review these documents carefully before you buy a home. Be prepared for special assessments on community buildings, especially if they are older. If the roof needs to be replaced, the HOA might collect money from each homeowner to cover the cost.
Lastly, be aware that there have been charges of unscrupulous behavior against some HOAs. Check to see if there is any litigation pending against the HOA and take the time to check its financials as well as its recent assessments (for community fixes or upgrades).
Many people find the pros of an HOA outweigh the restrictions. Our recommendation is simply that you take the time to be sure you know exactly what you’re agreeing to BEFORE you buy your home. A little work on the front end can save you legal hassles down the road.