When buying a home, it can be stressful to consider all of the elements at play, the first of which is how much house you can afford. For example, you may begin with the house itself—its size, style, number of rooms, and facilities. Then there’s the location—closeness to employment, school system quality, neighborhood atmosphere.
Then you might want to think about whether the home you’re looking at requires you to be a member of a homeowners association. Let’s look at what an HOA is, how it works, fees, and the rules you need to know about living in an HOA-managed community to decide if it’s suitable for you.
What is HOA?
Homeowners associations, or HOAs for short, are private groups that administer certain residential neighborhoods. HOAs establish sets of rules and regulations that residents must follow. They are typically in charge of common-interest communities such as planned neighborhoods, townhouses, and multi-unit apartment buildings or condominiums.
As you might expect, there are advantages and disadvantages to living in an HOA-managed community. While the governance of the group may restrict you from doing exactly what you want with your property, the rules in place are intended to preserve the neighborhood and help all properties keep their property values. Furthermore, the fees that HOA community residents normally pay are utilized to maintain the common areas and keep the entire neighborhood pleasant.
How does an HOA Start?
Now that you understand what an HOA is, you should understand how one is founded. When a developer builds a community, he or she usually establishes a homeowners association that functions as a non-profit corporation. A leadership team, similar to that of other non-profit organizations or corporations, is required to administer the HOA, which in this case is known as the Board of Directors.
How do I Become a Member of an HOA?
Anyone who buys into the community, according to the HOA definition, becomes a member.
When a person or a family purchases a property in a residential community, they automatically become members of the homeowners association. As the community grows, the developer relinquishes the entire authority of the association to the residents.
The homeowners then pick a qualified Board of Directors to supervise the community and its activities.
HOA Management vs. HOA Board
If you live in an HOA community, it’s critical to understand who is in charge at each level. For example, you could think that an HOA board and HOA management are the same things, but there are a few crucial differences.
HOA Board of Directors
The HOA board of directors is made up of volunteers who live in the community and are chosen by the other homeowners. They are in charge of common area maintenance, shared services, and other perks. The board is also in charge of collecting HOA fees, managing the reserve money, and enforcing the community’s CC&Rs.
You might want to consider becoming one of these volunteers as you become more involved in your community. The majority of HOA boards hold regular meetings where people can raise questions and get updates. They may organize social gatherings, neighborhood watch committees, and other activities.
An HOA management company, on the other hand, is a professional third-party agency that assists an HOA board in carrying out its responsibilities. If your community has an HOA manager, the board is usually confined to making decisions. While having an HOA management company oversee your community might be beneficial, it does come at a fee.
What do Members of the HOA Board do?
After the homeowners are given an HOA, they elect a qualified Board of Directors. These are homeowners who volunteer to oversee the community and its activities.
Board members are given authority to manage the community’s day-to-day activities, such as handling funds, maintaining common spaces, enforcing rules and regulations, collecting HOA payments, and preparing annual budgets. Members may be assigned extra responsibilities dependent on their position on the board.
Can Board Members Be Held Personally Liable?
Members of the HOA board are given the authority to carry out their tasks and obligations. In exchange, they agree to act as fiduciaries on behalf of the homeowners. Board members have a legal obligation to promote the well-being of the association, make good and informed choices, and act exclusively within the boundaries of their authority as fiduciaries.
The Business Judgment Rule shields board members from being held personally accountable for actions taken in the best interests of the HOA. Directors and Officers (D&O) insurance is another important insurance coverage that protects board members from lawsuits brought by dissatisfied homeowners, vendors, or other third parties.
Read Also: Wholesaling Real Estate: How To Start Real Estate Wholesale (Beginners Guide)
Are HOAs Legal?
Every homeowner’s association has its own set of rules and regulations. CC&Rs, bylaws, rules and regulations, and ARCs are examples of these papers. The way the community runs is shaped by the governing texts.
For example, it describes the Board of Directors’ duties and responsibilities. It also outlines homeowners’ rights and duties. All of these things contribute to the preservation of the community’s property values.
HOA communities must still abide by municipal, state, and federal regulations. Communities, for example, cannot impose rules that violate the Fair Housing Act or the Americans with Disabilities Act.
What Are The HOA Rules And Regulations?
HOA rules and regulations vary amongst associations. The majority of the policies in the guidelines concern architectural delights such as fences, pools, porches, and other outside home modifications.
Most individuals place a high value on the house and its surroundings when purchasing a home in a homeowners association. They want to feel proud of the appearance of their towns. Neighbors who don’t care or don’t have the time must cut their lawn and ensure the exterior of their property is suitable and appealing.
How Can The HOA Enforce The Rules Properly?
“There will be no service if you don’t wear a shirt and wear shoes.” “You bought it, you broke it.” “Only handicap parking.” These are the fundamental rules that we face and follow in our daily lives. Breaking these rules can land you in hot water at times, but what about breaking the rules of your community?
A homeowner’s association-governed community will have its governing documents, such as the Declaration of Covenants, Conditions, and Restrictions (CC&Rs). Everyone who enters the community will receive the CC&Rs, as well as the HOA rules and regulations and bylaws, all of which are required to keep the community running smoothly. Prospective homeowners must read all of the rules and agree to abide by them.
Most buyers, however, do not read all of the HOA rules and regulations. They will only focus on common HOA rules or those that apply to them, such as having a pet or having a washing machine in their apartment. Other stipulations are forgotten until they receive a notice of violation one day. It may be too late to do anything else but deal with the HOA rule enforcement process of the association.
Read also: Bespoke Tranche Opportunities 2023: Definition and all you need to Know
Who is in Charge of Enforcing the Conventions and Rules?
The HOA board is responsible for enforcing homeowner association rules and covenants. All rules must be enforced fairly and consistently by the association. However, there have been reports of groups losing sight of HOA enforcement.
Over-enforcing and under-enforcing can both have serious effects on your community. In some situations, it may be necessary for non-board members to work together to clean the house.
If board members do not want to deal with rule enforcement and all of the headaches that come with it, hiring an HOA management business is a fantastic choice. In addition to other services, they can enforce HOA rules, send violation letters, collect fines, and pursue legal action if necessary.
Tips for Enforcing Homeowners Association Rules (HOA Rules)
Here are some pointers on how the HOA might enforce community rules:
#1. Send out a Warning
The infraction could have been caused by an honest error. The first step should be to issue a warning. This should be in writing and include specifics about the offense. Hopefully, the resident will apologize and correct the error.
Most of the time, a warning is sufficient to keep homeowners on their best behavior. After all, the vast majority of residents do not wish to violate any laws. At the end of the day, getting called out for a mistake is humiliating enough.
Some residents, however, refuse to follow the rules and incur a second infraction. Refer to the following guideline for violators who cause HOA nightmares.
#2. Levy Penalties
Consequences are unavoidable when it comes to enforcing HOA rules. A monetary penalty may be imposed on a homeowner who violates a rule. When money is involved, most individuals become discouraged, therefore fines work extremely well to deter violators.
The HOA must, however, ensure that the amount imposed is within a fair range. A $100 punishment seems excessive for such a minor crime as failing to remove Halloween decorations on time. An excessively low fine, on the other hand, may not make a substantial effect.
The most typical punishment for noncompliance with HOA rules and regulations is the imposition of penalties. However, it is not without challenges. Some homeowners believe they should not be required to pay a fine. However, the longer the fines remain unpaid, the greater the penalties. If violators do not exercise caution, the HOA may elect to pursue legal action against them.
#3. Restrict Rights and Privileges
Another option for the HOA is to suspend the violator’s rights and privileges. Residents of an HOA have access to several services and amenities, such as pools and clubhouses.
Homeowners have the right to vote as well. Removing these privileges frequently serves as a wake-up call for violators. Just make sure your association is functioning within its legal jurisdiction — double-check your state laws and governing documents to prevent legal issues.
#4. Add a Lien
The HOA may be obliged to issue a lien on the homeowner’s property in severe circumstances of HOA regulation infringement. This could then result in lawsuits or legal action. Placing a lien does not ensure that the HOA will be paid. If the homeowner decides to sell the property, the new owner may be required to pay the lien settlement as part of the transaction.
#5. Implement a Standard Procedure
Enforcing rules is not an easy undertaking, but it can be simplified and streamlined by following a consistent procedure. Your governing documents (CC&Rs and bylaws) should provide specifics on how to handle violators.
If you don’t already have such protocols in place, it’s time to start. However, before implementing your plan, consult with your association’s counsel. In this manner, you may ensure that you are legally protected as well.
#6. Refuse Selective Enforcement
The most crucial guideline, after all, is to maintain uniform enforcement throughout the community. Bias and favoritism are your worst enemies in this situation. As a member of the HOA board, it is your responsibility to enforce the rules consistently and fairly. Don’t simply choose which rules are worth enforcing and which aren’t. It’s also a poor idea to give your neighbor a pass simply because you owe them a favor or are friends with them. That’s a legal disaster waiting to happen.
Read Also: WHAT IS A TRUST FUND? How Does It Work?
What should you do if your HOA is not Enforcing the Rules?
How do you enforce HOA covenants and rules if the board members are not following them? Even though the board members are in positions of power, keep in mind that they are also homeowners. That is, they are not excused from adhering to HOA rules and regulations. Because of their fiduciary commitment to the HOA, they should be held to even higher standards.
Homeowners Association (HOA) Example
Conflicts involving HOAs occasionally generate national headlines. Beginning in 2014, an Indianapolis homeowner and his HOA had a disagreement over the solar panels on his roof. The solar panels were required to face south to fully catch the sun’s energy, which the HOA refused to allow since it would be too visible to the street and other neighbors.
While the HOA covenant allows for solar panels, it is unclear where they should be placed. The homeowner attempted to get a measure approved by the Indiana General Assembly that would bar HOAs from regulating or prohibiting the placement of solar panels in any way. He received backing from many state politicians. Additional legislation was introduced in 2018, 2019, and 2020, but all failed to pass or died in committee.
HOA Rules Examples
Before you decide to buy a house in a community with an HOA, you should review the rules to ensure that they are compatible with your lifestyle. Your community’s HOA board will contain its rules and regulations in a Declaration of Covenants, Conditions, and Restrictions, or CC&Rs.
An HOA community may have a wide range of rules that it may enforce. Here are some examples of typical HOA rules:
#1. Structural restrictions:
They may demand you to have a specific sort of fence or establish landscaping rules, such as no artificial turf. This may also include size and positioning restrictions for a garage or shed.
#2. Certain paint colors or other exterior design choices:
An HOA board may request that you submit your paint colors for approval. The idea is to ensure that no one chooses a color that is overly bright or does not mix in with the overall style of the area.
#3. Noise level Restrictions
Concerned about your neighbor mowing their lawn too early on a Saturday, or the teens next door congregating to play basketball till the wee hours of the morning? HOA rules are intended to ensure that everyone can coexist peacefully. For example, if residents become too noisy, it is frequently your HOA’s job to issue warnings or even fines to individuals who cannot keep the level down.
#4. Pet Rules
Backyard chicken coops may be popular in some metropolitan areas, but not everyone appreciates the farm-like environment. HOA rules may restrict the type and number of pets or animals you can have.
#5. Rules for common places in a neighborhood or building:
Some HOAs may feature pools, parks, community centers, tennis and basketball courts, or other meeting areas. The CC&Rs will specify who is allowed to use these amenities as well as any rules for reserving or sharing them.
#6. Home care and appearance regulations:
With HOA rules designed to keep any home from becoming an eyesore and driving down real estate property prices, weed-filled gardens and long grass can be a thing of the past. They may also force you to keep your automobiles in a garage.
#7. Paying your monthly HOA fees:
You’ll learn how much you have to pay and when you have to pay it. And there’s no getting around it: if you don’t pay your HOA fees, you may find up with a lien or encumbrance against your home, making it difficult to sell when the time comes.
While these rules and regulations may appear unduly detailed, they are necessary to help maintain the neighborhood’s or complex’s property value and livability. Also, if you can rent a home in the community, these will apply to you.
The Benefits and Drawbacks of HOAs
While some homeowners enjoy living in an HOA, others find the rules to be overly restrictive and time-consuming. Here’s a list of advantages and disadvantages to help you decide.
- Your property worth will benefit from greater stability as a result of rules governing home maintenance and aesthetics.
- You may be able to use private amenities such as a swimming pool, playground, clubhouse, gym, or on-site security.
- An HOA board will hear and arbitrate neighborly conflicts over property-related concerns that violate HOA rules (e.g., barking dogs, trashed yards or fence disputes).
- In some communities, HOA social activities may provide extra opportunity to socialize with neighbors.
- HOAs wield considerable authority over how you maintain and live in your house. You may be restricted to specific design schemes, paint colors, or even the amount of pets you can have.
- HOA fees can eat into your monthly housing budget, especially if home prices in your neighborhood are already high.
- Some HOAs might be proactive in sending out violation notices for minor offenses.
- Failure to follow HOA rules or pay dues can result in a fine or a lien being placed on your home.
What are HOA Fees?
In exchange for becoming a part of a community, homeowners must pay monthly HOA fees. These fees are used by the association to pay for the upkeep and maintenance of shared common areas. It also uses the funds to pay for common facilities including garbage collection, water, and sewage treatment, and power. Other expenses, such as insurance, HOA administration fees, and reserve payments, are also covered by the fees.
HOW much do HOA Fees Cost?
HOA fees will vary depending on the association. It is typically between $200 and $300 every month, however, this amount might vary depending on a variety of conditions. A community with a lot of amenities, for example, will have more upkeep expenditures, which will result in higher fees.
The sum may also be increased if communities have large-scale projects in the works or if the association is attempting to replenish its reserve money. The Board develops an annual budget to decide how much money will be collected in association fees.
What Happens if you do not pay your HOA Fees?
If homeowners fail to pay their dues on time, the HOA Board or management company has the authority to levy late fees or penalties.
These are required to keep the community’s budget on track. Depending on the community’s bylaws, homeowners who do not pay fees may be barred from using shared spaces until they clear their debt.
A homeowner who fails to pay HOA fees regularly may be considered delinquent. To settle overdue dues, the HOA might place a lien on the delinquent homeowner’s property or file for foreclosure.
Are HOA Fees Worth It?
Homeowners must consider the benefits and drawbacks of HOA living to decide whether paying monthly fees is worthwhile. However, if homeowners notice that their community is not being effectively maintained, they may believe that the association fees are not worthwhile.
In such cases, homeowners must take action. They can complain to the board about poor-quality service providers, or even run for a spot on the board if they believe the current members are ineffective. HOA fees can be justified if you receive a close-knit community in return.
What is AN HOA Manager?
Not every member of the board has the necessary knowledge or expertise to operate a community. As a result, many organizations prefer to hire an HOA management business.
The HOA manager is in charge of the community’s day-to-day operations, which include accounting and bookkeeping, maintenance, collections, and budgeting. With critical but time-consuming responsibilities completed, the board will have more time to focus on more pressing and important community issues.
Do Homeowners Pay a Special Assessment ?
A special assessment is a one-time fee assessed against homeowners. When the HOA does not have enough money in its reserves to pay major and unexpected expenses, the HOA normally collects special assessments.
A roof, for example, needs to be replaced every 20 years. If it is damaged by a storm before then, the association may not have saved enough. Because a roof is a required feature, the HOA will impose a special charge to cover the costs of replacing the roof.
Special assessments are determined by state legislation and community regulations, although homeowners are normally required to pay them. If homeowners refuse to pay the special assessment, there may be fines and sanctions, similar to association fees.
When Things Go Wrong With a HOA
Most board members may lack experience with this form of association and are thus more likely to make mistakes and make poor decisions. Failure to collect fees consistently is a typical issue that can lead to more serious problems within groups.
Some members of the community may try to avoid paying fees when they are due. If the board does not follow through on this, the association will have less money to fund its expenses. This may lead to other members believing they may avoid paying their fees as well, gradually deteriorating the association’s services.
Poor HOA administration can lower a home’s appeal in the community, and thus its value. Another example of an HOA gone awry is when persons join the board who have nothing better to do but make their life miserable.
You’ve probably encountered people like these in your daily life. They are mean-spirited, have poor attitudes, and live for causing sorrow in the lives of others. If a couple of these personalities make it onto the boards, you might discover that living in the HOA you once liked has turned into a daily nightmare.
There are several things you can do to deal with an unruly homeowners association, but they are not always helpful. Regrettably, you may find yourself in a situation where you must move on.
What Legal Authority Does a HOA Have?
Individual HOAs will have varying degrees of legal authority depending on how they were designed. However, in general, HOAs will have the legal ability to establish and enforce community bylaws, such as whether smoking, pets, or rentals are permitted in the building. In addition, HOAs will set building budgets and have the right to collect monthly or one-time fees to their members. If a member refuses to pay these fees or follows the community policies, the HOA can levy a variety of penalties. In many circumstances, these consequences might involve monetary fines, community privilege restrictions, and even lawsuits.
Can an HOA Force you to Leave?
An HOA cannot evict its homeowners. If homeowners do not pay their assessment fees, the association may issue a lien on their property. Before they may sell their property, delinquent homeowners must satisfy overdue assessments, interest costs, and even legal fees. Some associations also have the authority to foreclose on liens on properties. This will be determined by your governing documents as well as state and local legislation.
How to Dissolve an HOA
If your homeowner’s association has gone awry and the community isn’t being taken care of as intended, you can dissolve the association. HOAs are not permanent organizations, and they can be terminated if specific events occur.
Again, if you are considering the dissolution of the association, you should consult the official papers. Information on dissolving the organization should be included in the covenants, conditions, and restrictions.
State laws may also require homeowners organizations to be disbanded if they are not renewed. If your state has this statute and your association is badly managed, the critical process of officially reviving the association may have been overlooked. If this is the case, you will be fortunate because it will make breaking the association much easier.
It will be easier to settle the matter if other residents of the community voice their concerns to the homeowners association. Because it normally takes 80 percent of the members to vote for the dissolution of an association, you will need to ensure that many members share your sentiments.
To get rid of the organization, you will also need the assistance of a lawyer, which is never inexpensive. If you know that many other individuals in the community support the change, the fees of forming the association will not be as onerous legally. If you decide to take on this process on your own, you must have the finances to afford the cost of engaging a lawyer on your own.
Dissolving the association should be the last choice, and you may discover that you can help the community by becoming a member of the board yourself. Greater organizational leadership may eliminate the challenges and make the homeowners association more effective and reliable.
Property Owner Associations vs. Homeowner Associations vs. Community Associations
The majority of HOAs are incorporated and so subject to state legislation. However, some jurisdictions consider condominium-based HOAs, also known as “condominium communities,” and organizations that control cooperatives, known as co-op boards, to be separate entities from HOAs. This distinction is predicated on the idea that these organizations’ property interests differ. As a result, the phrase “community association” has come to function as a broader, umbrella term for HOAs, condominium complexes, and co-op boards.
An HOA, on the other hand, is distinct from a property owners association (POA). A POA is a broader word that usually refers to a collection of people that desire to improve their community and the property values in their community. The fundamental distinction between POAs and HOAs is that POAs can include anyone in the community who has an interest in the value of the community’s real estate; hence, unlike HOAs, POAs can include people who are not homeowners.
Can an HOA change rules and regulations?
Yes, an HOA can change rules and regulations, but they must follow a specific process and obtain approval from a majority of homeowners.
What is the process for resolving disputes with an HOA?
The process for resolving disputes with an HOA typically involves contacting the HOA board, participating in mediation or arbitration, or taking legal action.
Can an HOA fine a homeowner?
Yes, an HOA can fine a homeowner for violating HOA rules and regulations.
How can a homeowner participate in HOA meetings and elections?
A homeowner can participate in HOA meetings and elections by attending meetings, voting in elections, and running for a position on the HOA board of directors.
What are the HOA’s governing documents?
The HOA’s governing documents include the community’s bylaws, articles of incorporation, covenants, conditions, and restrictions, and any amendments to these documents.
In the end, should you live in a HOA?
Living in an HOA community has several drawbacks. On the one side, you receive the benefit of a well-kept neighborhood with possibly more amenities than a community without an HOA. On the other hand, you may not have as much freedom to decorate your home as you would want. You’ll also have to factor in the additional monthly expenditure of HOA fees.
Why are HOA bad?
HOAs might feel oppressive at times due to the numerous rules and regulations they impose.
Can HOA take your house?
Even if you’re current on your mortgage payments, once an HOA has a claim on your property, it may foreclose. As a result, even if you’re only a few hundred or thousand dollars behind on HOA assessments, you could lose your property.
Why is HOA so high?
Contracts for maintenance and repair are either too expensive, unneeded or out of date. Excessive financial reserves are amassed. Some owners are behind on their payments, while others pay extra to make up the difference.
Can I opt out of HOA?
You do not have the choice to opt-out if you live in an HOA community. However, if you want to get rid of the HOA, there is usually a way to do so; however, be aware that the process is tough, time-consuming, and expensive. In most cases, an association must be abolished by an affirmative vote of 80 percent of homeowners.