What is a homeowners association – HOA?
A homeowners association (HOA) is an organization in a subdivision, planned community or condominium that establishes and enforces rules for properties and their residents. Those who purchase property within the jurisdiction of an HOA automatically become members and are required to pay dues, called HOA fees. Some associations can be very restrictive on what members can do with their properties.
Understanding a HOA
Homeowner associations (HOA) are made up of communities with single-family homes or multi-unit buildings, such as condos. As the name suggests, HOA is composed and managed by residents of the community. Membership in an HOA is usually a condition for buying a home in the community. A HOA is generally established to establish and apply rules regarding properties in the jurisdiction.
An HOA has a board of directors or governors, elected to apply and supervise the rules and regulations of the HOA. An HOA will usually describe its rules in a document called the Declaration of Commitments, Conditions and Restrictions (CC&R), which sets out certain conditions on owners and their properties. Conditions may include structural restrictions such as the type of fencing or landscape allowed, or minor selections such as the color of the paint on a house. This document also generally describes the penalties for violating the CC & Rs, which may include fees, enforced compliance or, in some cases, litigation.
Key points to remember
- A Homeowners Association (HOA) is an organization that establishes and applies rules and guidelines for a subdivision, planned community or condominium.
- Residents of the community are members of HOA and some require compulsory membership.
- Managed by a board of directors, HOAs collect monthly or annual fees to pay for the maintenance of common areas and facilities.
- HOAs can impose fines and even liens on non-compliant owners.
9 tips for managing homeowner associations
HOA vs community associations
Most HOAs are incorporated and therefore subject to state law. Some states consider HOA condominiums, often referred to as “co-ownership communities”, and organizations governing cooperatives – cooperative councils – to be separated from HOA because land interests differ. “Community association” is a broader generic term that encompasses all of these organizations.
Note that an HOA is not a POA. A landowner association, or POA, is usually a broader category that includes people who want to improve their communities and property values. HOAs tend to have strict outlines for properties within their jurisdiction and there are usually many rules, while POAs are built not only by owners – which is HOA – but by everyone in the community who has an interest in real estate in their area.
The Community Associations Institute, a trade organization that lobbies state legislatures on behalf of HOAs, estimates that in 2020, there were between 346,000 and 348,000 community associations in the United States with more than 70 million residents. .
Benefits of an HOA
HOA provides regulations and guidelines for the community. These standards are actions that must or should be taken in order to preserve and improve the community’s land values. Often, they are geared towards appearance, dealing with cleanliness, condition and repair. Sometimes they are designed to maintain a uniform appearance to the properties included or to the community as a whole.
HOA management services can provide amenities such as landscaping, parking lots and facilities like swimming pools, tennis courts or party spaces available to all HOA members. Some HOA fees cover the costs of waste collection and snow removal.
On a more theoretical level, HOAs are symbols of self-government and democracy. Who better to run a community than the people who live there – as opposed to an absent owner?
Define and apply community rules
Protect property values
Provide services, equipment and facilities
Set fees, contributions and assessments
Impose restrictive regulations
Amateur or clumsy management
Disadvantages of an HOA
The negative side of an HOA begins with the high cost of association fees, which could deter potential buyers. In addition, HOA rules and regulations may seem unreasonable, arbitrary or too restrictive for some homeowners, who may want the freedom to customize their properties.
Although self-governance is a good concept, in theory, it may not work well in practice. HOA board members, who are normally volunteers, may not be up to the task of managing real estate, dealing with complex financial issues, or working to bring together dispersed groups of people in a common cause. In many ways, a community association is like a small business or a non-profit institution. Because HOAs need to reach consensus on common ownership decisions such as maintenance and upgrades, conflicts between HOA members can be common.
Real example of an HOA
Sometimes homeowners association fights make the headlines – and a trip to the state legislature.
For three years – in April 2019 – an Indianapolis home owner and his HOA have locked horns on the solar panels on his roof. To fully harness the sun’s energy, the $ 28,000 signs must face south – a direction HOA will not allow, saying they are too visible to the street and other neighbors.
The wording of the HOA convention authorizes panels but is vague on the subject of their positioning. Thus, the owner is trying, with the support of several state legislators, to pass a bill by the Indiana General Assembly which would prohibit HOAs from restricting solar panels or their placement in any way. is.
Special consideration: fees
Homeowners’ associations have significant financial and legal power over landowners in their jurisdiction. HOAs collect monthly association fees or annual fees to pay for the maintenance of common areas such as parks, laundries, elevators and swimming pools. Typical HOA fees range from $ 200 to $ 400 per month, but could range from less than $ 100 to more than $ 10,000 for high-end communities.
HOA costs also often contribute to the association’s reserve fund, which is reserved for major renovation projects or for emergency use. In addition to regular fees or contributions, HOAs may also impose special assessments on owners when the association lacks sufficient reserves to pay for unexpected repairs in common areas such as sidewalks or parking lots.
The HOA Board of Directors, which is generally responsible for the finances of the organization, oversees the collection and management of funds. In addition to fixing fees and assessments, the board of directors can impose fines on owners who break the rules or damage common areas. In addition to imposing penalties, HOAs can also place a lien on a property if an owner is significantly behind on their contributions. HOA’s existing liens can make it difficult to sell the home unless they are erased.