Little Governments: The Homeowners Association
The phrase “Homeowners Association” may sound innocuous enough to some but it sends shivers down the spines of many. In books and movies this group of homeowners is typically portrayed as power hungry, meddling and suspicious. Think Big Brother meets Mussolini and you’ll have an idea of this group’s image.
Is this reputation deserved? It’s hard not to believe the rumors while being bombarded with news stories about Homeowners Associations (HOAs) that force residents to take down American flags, or those that seize homes when residents are late paying their dues.
HOAs are like “little governments,” according to Jackie Faye of NBC News. Like all governments, they exercise the power granted to them in one of two ways: with benevolence or dictatorially. Perhaps Abraham Lincoln foresaw the rise of the HOA when he claimed that “. . . if you want to test a man’s character, give him power.”
So, who are these people?
A HOA is actually a legal entity whose purpose is to manage a group of housing units, or a common interest development, as they are known in some regions of the country. These developments may be single-family dwellings or condominiums. The decision-making body of this entity is typically known as “the Board,” and there may be committees as well. The HOA board is composed of homeowners who act as volunteers, and are generally chosen in annual elections open to all homeowners within the community.
The reasons for volunteering to sit on a HOA board are varied. Some homeowners want more of a say in how the HOA money is spent, others are concerned with maintaining home values.
HOA duties and responsibilities
Although it seems as if HOA boards have unlimited power to do as the members wish, most states have laws that govern what they can and cannot do. Yes, they sometimes overstep these laws. While duties and responsibilities vary across the country, here are some that are common to most HOAs:
• Paying taxes on the common areas
• The enforcement of the association’s rules, such as the bylaws and the Covenants, Conditions and Restrictions (CC&Rs)
• Creating the association’s budget
• Creating rules for the use of the common areas
• Disciplining homeowners for violations of HOA rules
Buying a home in a HOA-governed community
The HOA must supply the homeowner with certain documents when there is an offer to purchase the property. The seller then gives these documents to the buyer. There is usually a charge for the copies and the seller typically pays this fee.
HOA doc packages are usually quite thick and may be extremely complex and boring. It is essential, though, that you read and understand everything in them. If you need help, contact an attorney. Once you own the home, you are obliged to follow the HOA’s rules.
Some items to pay close attention to in the CC&Rs include:
• Pet policies, if you have pets
• Parking rules, for yourself and guests
• The rules and restrictions for the use of onsite amenities
• Landscaping rules
• House color, exterior decorations allowed
• Restrictions on the construction of outbuildings, such as sheds and gazebos
• The rules regarding leasing your home
Look at the HOA’s budget:
• Does the income cover the costs? If not, why?
• How is the money spent?
• Does the reserve account hold enough money for emergencies?
Check out the board’s meeting minutes:
• What type of issues does the board typically face?
• What type of actions have they taken against homeowners?
• Have they talked about increasing fees or any upcoming special assessments?
Read over the governing documents, or bylaws, to determine how and when elections are held, how to sit on the board and the length of board member’s terms.
One of the most important aspects of purchasing a home governed by an HOA involves determining if there is pending litigation. Sometimes the HOA is suing the developer or a homeowner or the HOA is being sued. If there is litigation pending, you may not be able to get a loan, so make sure you get all the information you need about this.
Buying a home regulated by a homeowners association has advantages, such as security and the regulation of the area’s appearance and noise levels. The drawbacks, on the other hand, are numerous and include the additional monthly outlay for HOA fees and the sometimes-meddlesome members of the HOA. Do your homework when considering purchasing into a common interest development governed by a HOA. Investigate it thoroughly to make sure you don’t end up in a HOA horror story on the nightly news.