Homeowners' associations (HOAs) are common in many new, single-family housing developments, as well as in condominium and townhouse complexes. An HOA is the governing body of the development or complex, usually comprising homeowners who have volunteered to serve on the HOA board.
Membership in the HOA Is Mandatory
When you buy a property in a community governed by a homeowners' association, you automatically become a member of the association. You don't have the choice of not joining. The purchase of your home becomes a contract with the HOA.
In addition, you agree that you'll obey all the HOA rules and pay regular dues and any special assessments that the board requires (in line with its bylaws and procedures).
Rules for Homeowners
HOA rules are typically called covenants, conditions, and restrictions (CC&Rs). CC&Rs usually apply to both you, the homeowner, and to your home.
The CC&Rs might, for example, cover what color you can paint your home, what you can plant in your yard, how many cars you can own and park, whether you can own a cat, dog, or other pet, and whether you can rent the property to someone else. There are usually noise restrictions, as well.
Rules differ between different HOA-governed communities, so you'll want carefully study the CC&Rs before you buy. Receiving a copy at closing is too late. Better to add a contingency to your purchase contract requiring that you receive, and have a chance to review the relevant governing documents (and perhaps have you attorney review them, too), well in advance of the closing.
Penalties May Be Imposed for Breaking HOA Rules
When a homeowner breaks a rule—for example, paints a house the wrong color (purple instead of a neutral tan), or brings in a dog that exceeds the weight restrictions—the HOA may take action. Legally speaking, many HOAs are corporations; that is, legal entities that can enforce contracts with their homeowners.
The action might simply be to require the homeowner to reverse the violation; perhaps repaint the house, or put the dog on an exercise and weight loss regimen.
However, another common penalty is requiring the homeowner to pay a fine. If the homeowner refuses to pay, the HOA can take more punitive steps, up to and including forcing the sale of the home.
You Must Pay Dues and Special Assessments
Homeowners in a covenant-controlled development usually pay association fees or dues, either monthly or yearly, as part of their membership. How high the fees are depends on factors such as the amenities offered by the community and whether the HOA is adequately planning for the future; the typical range is from a couple hundred dollars a month to over $1,000 a month.
HOAs primarily use the dues money to maintain the common areas used by all the homeowners, such as walking paths, swimming pools, gyms, or recreation/community centers. Other expenses that HOA dues will cover include things like city utility services to the community and insurance premiums (though you'll still need to buy your own insurance, to fill in some gaps).
The HOA board may also decide to impose special assessments when needed, for example to deal with a needed improvement or emergency repair that's not covered by insurance.
Advantages of HOAs
Despite all the restrictions, living in an HOA has definite advantages. If all the homeowners follow the rules (or the HOA does its job and enforces the rules when homeowners break them), you avoid the problems that can plague some neighborhoods, such as trash piling up in someone's yard or poor maintenance of gardens and roads.
Your property value, based partly on neighborhood condition, should remain stable. (At the height of the foreclosure crisis, however, some developments turned into ghost towns when values dropped precipitously or developers were unable to finish building the community.)
You might have access to luxury amenities, like a pool, golf course, or recreation center. You will have a voice and a vote in a defined community.
A Real Estate Lawyer Can Help With HOA-Related Issues
This article provides a brief, general introduction to the topic of HOAs, but there is much more to know. If you are considering buying a home in an HOA-governed community, or already live in one and are running into disputes with the HOA or your neighbors, contact a real estate lawyer.