Homeowners’ associations (HOAs) were a rarity 50 years ago, but now they are very common. They are legal entities, typically not-for-profit corporations, established in connection with the development of a subdivision, condominium, or cooperative property, or a planned unit development. HOAs serve important functions in preserving property values by imposing restrictions on how property can be used and in allowing owners to share the cost of amenities. Some people, however, find it difficult to live with the restrictions.

Get the Details

When you buy property that has an HOA, you automatically become a member along with all other owners in the development. Although your deed and title opinion will indicate the existence of an HOA, find out before you make an offer to purchase. Your real estate agent, the office for the development, or the seller can provide the necessary information. Read the covenants, conditions, and restrictions (CCRs) to make sure you can live with the limitations. CCRs often limit your options with respect to landscaping, the color of your home and even your curtains or blinds, renting the property, additions, parking, pets, and much more. If you do not understand a restriction, get clarification. Once you own the property, you have to live with those limitations. While some HOAs have a procedure for obtaining a variance, that process may be very difficult and costly and does not guarantee the result you want.

Check the HOA’s financial situation and insurance coverage. Many HOAs require members to pay fees for common property maintenance. The fees can be high if the development has a pool, golf course, or other recreational facility. In addition to making sure that you can afford the current fee, determine whether the unit you are considering for purchase is delinquent in paying fees. Also consider the likelihood that the fee will increase. The HOA’s bylaws will state any limitations on raising the assessment. Its financial statements will reveal whether there are adequate reserves and whether there are significant delinquencies in the development.

The HOA can also levy additional special assessments for capital improvements, like a new roof for a condominium building or a subdivision’s clubhouse. Ask about the age and condition of common facilities and the likelihood of a special assessment. If the development is new construction, you may not be concerned with the condition of improvements. In that case, find out whether the developer is still in charge of the HOA, how many units the developer still owns, and what the developer is paying as a monthly fee for those units.

Avoid buying into an already-divided community. To get a feeling for how decisions are made and whether board members are antagonistic to each other or the other owners, ask to see minutes from meetings of the board of directors.

HOA Governance

The HOA is typically controlled by a board of directors, consisting of property owners elected by other owners or appointed by the developer. The duties and powers of the HOA board are described in its bylaws and in state law. Although board members are volunteers, they make important decisions and have legal obligations to act in the best interest of the association, rather than in their own best interests.

Since disgruntled owners sometimes sue the board and its members, some HOAs provide liability insurance for board members. Depending on the size of the development and the nature of the facilities, the board may contract with a management company for day-to-day functions, such as collecting assessments, hiring service providers for maintenance and repair, paying bills, and generating financial reports.

In addition to enforcing the CCRs, sometimes by imposing fines, almost all HOAs have the power to place a lien on an owner’s property if the owner becomes delinquent in paying monthly fees or special assessments. Delinquency can be expensive. Many HOAs add late charges, fines, interest, and costs of collecting fees, such as attorneys’ fees. Such liens cloud the title to the property and can impair the owner’s ability to sell or refinance. The HOA can also foreclose on the lien by filing a lawsuit against the homeowner and can obtain a court order to sell the unit to satisfy the lien. Many states allow non-judicial foreclosure, so a unit could be sold very quickly to satisfy a relatively small debt. Do not withhold fees simply because you are angry with the association. If you have a serious dispute with the HOA or are unable to pay your fees, and are unable to negotiate a settlement, consult a real estate attorney.

Your best protection is good communication before problems arise. Attend the annual meeting of the association as a whole, at which board members are elected. Consider becoming a board member. Attend other public meetings to get to know your neighbors and board members. Learn what is going on and voice your opinion in appropriate meetings. If you are considering any action that might disturb other members, even if it is not expressly prohibited by the CCRs, get board approval in advance. For example, the CCRs might prohibit parking “commercial” vehicles in driveways. Talk to the board before you buy a cargo van, even if you only plan personal use.