Homeowner’s Associations | Are They For You?

- Believe it or not, one of every six Americans lives within a homeowner’s association. Many homeowner’s are unaware of the actual rules and regulations that go along with living in a community that has a homeowner’s association (HOA) and corresponding Covenants, Conditions and Restrictions(CC&Rs).

Fifty-five million Americans are living within a development that is overseen by a community association. While the vast majority of community associations are doing ok, there are approximately 20 percent of associations that do have problems. Such problems can vary from mismanaged funds to overstepping authority.

What is a Homeowner’s Association?

The homeowner’s association, otherwise referred to as an HOA, is set up in order to govern private home developments. Typically the HOA is put together at the time of the initial development and the rules are made by the developer. While you are purchasing a home and have the freedom to make improvements and other things, there is a governing set of rules for what you can and cannot do. While some homeowner’s associations never enforce the rules, there are some that go by the book when it comes to homeowner’s following the rules that they agreed to at the time they signed on the dotted line to purchase their home.

Examples of homeowner’s association rules and CC&R’s include, but are not limited to the following:

• Specifications on what color a home can be painted
• Animal rules, varying from a limit on dogs and cats to banning farm animals
• Windchimes, flags, clotheslines, etc.
• Additional buildings on the property
• Remodels and expansions of the home
• Signs on the lawn
• Number of cars and parking spaces

Some rules can easily be changed or a homeowner can take certain issues to the governing board for approval. By not abiding the association rules, you can be fined. Perhaps what has made even bigger news over recent years is that if you don’t pay on a fine that is assessed then the HOA has the legal right to collect on the fine by selling your home!

Common Interest Developments

Shared amenities began decades ago. In 1965, only 500 common interest developments existed. That number had grown to 10,000 by 1970 and currently stands at an estimated 250,000 common-interest developments(CIDs). CIDs were put in place to provide shared amenities within the neighborhood. While the goal of the CID is to maintain and improve property values, it comes at a cost for what it has to do in order to protect each owner/member of the association and abide by set rules.

The Bottom Line on HOA’s

When purchasing a property that has covenants, it is important to thoroughly review everything before signing a contract as all covenants are legally binding. Meaning, you have to live by them. While it may be your home, you still have to abide by rules. Sure, there are some horror stories that go along with homeowner’s associations. But, there are also good stories that go along with having an HOA looking out for you and your property value. Many are attracted to a CID because of the rules that will help to enforce what a neighbor can and cannot do on their property.

If you are considering a property that is overseen by a homeowner’s association, then make sure to check the rules and regulations before getting too far into the purchase process. In addition, you should also check into the associations background with residents and how repairs within the community are made. It’s nice to have an HOA that will do it all, but some HOA’s have not managed money well and lack funds to do the necessary repairs needed within the neighborhood. In this example, the HOA can assess a special property tax assessment or, as another option, may increase the monthly HOA fees in order to create future reserves for needed maintenance and repairs.

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