You’ve already considered a long list of things when buying a home. But have you researched your homeowners association (HOA)? Your dream home can quickly become a nightmare if your HOA encroaches on your lifestyle.
Learn how HOAs work so you know what to look out for.
HOAs are becoming more common
According to a 2022 iPropertyManagement report:
- 83% of homes sold in 2021 were part of HOA communities.
- 53% of all homeowners live in HOA communities.
- The average monthly fee for a single-family home in an HOA community is $250.
- HOAs collect $103.2 billion a year from homeowners.
HOA communities are on an upward trend. They are often lucrative for real estate developers who package them as common interest communities, like vacation attractions, retirement communities or planned housing developments.
The parts of an HOA community
An HOA consists of a few elements:
Covenants, conditions and restrictions
The covenants, conditions and restrictions (CCRs) set the HOA community’s rules and are usually enforceable in court. They describe the ownership requirements and restraints of what you can do with or on your property. CCRs intend to protect, preserve and enhance property values. They can also cause strife and anxiety if they impose strict limitations on your life.
Bylaws
The bylaws govern how the HOA operates, explaining how to run the HOA as a business. HOAs can be nonprofit or for profit. Bylaws include information ranging from board elections and responsibilities to operational procedures.
HOA
The HOA is a board tasked with representing the community’s interests and enforcing the community rules (the CCRs). Anyone can manage an HOA, but boards are usually made up of volunteer homeowners or third-party investment corporations. Who handles your HOA can make a big difference in management style and change processes.
HOA assessments
HOA assessments are monthly or annual fees homeowners must pay to the community. These are in addition to city and local taxes. Assessments go toward things like:
- Pools and spas
- Clubhouse use
- Recreation and leisure programs
- Parks and playgrounds
- Sidewalks and paths
- Yard waste and trash pickup
- Landscaping and environmental programs
- Long-term development projects
- School and college district access
- Staff retirement funds
- Management salaries
Assessments are budgeted annually. They may increase or decrease, but they usually rise every year. Budget for HOA fees with incremental increases in mind.
Assessments are not optional; your HOA can terminate services or foreclose on your property for failure to pay.
Additionally, special assessments can be issued if they are needed to fund large repairs or improvements (such as replacing a clubhouse roof or hurricane-damaged landscaping). These are in addition to regular monthly or annual assessments.
The power of HOAs
An HOA has the authority to enforce the rules and regulations of the community using the community rules, or “bylaws and covenants.” These rules are considered “agreed upon” since homeowners approve them through board-elected representatives.
CCRs exist apart from and in addition to local or city ordinances. CCRs and bylaws cannot discriminate against federally protected classes of people, but outside of that, they are typically self-regulated rules that can hold up in court.
CCRs provide the backdrop for a host of restrictions applied to your house and surrounding property, like:
- The color of your house and roof
- The type of building materials you can use (e.g., only cement board siding, shingle roofing or casement windows)
- Speed limits on community-owned roads
- Where you can park and for how long
- Whether you can rent out your home
- The number of people living in your home
- Whether you can build additions to your house, including rooms and decks
- Visitors and party restrictions
- Noise and nuisance regulations
- Moving reservations and oversized delivery notifications
- The types and number of vehicles you can park or store on your property
- Home business operations
- Specific insurance types and policy minimums
- The types of foliage, trees, edible gardens and flowers used in your landscaping
- The number and types of outbuildings and structures you can have on your property
- The colors of outward-facing window treatments (e.g., white only)
- The number and types of pets you can have
- The types of decorations and functional items you can have (e.g., mailboxes, clotheslines, outdoor lighting, seasonal decorations, satellite dishes or solar panels)
- Whether you can use a grill and what type (e.g., wood, electric, gas, coal or propane)
- Whether you can install hot tubs, playsets, basketball hoops or other leisure equipment
Your HOA can penalize you for not following the rules. For example, it can:
- Issue tickets and fines for rule infractions
- Deny or restrict your ability to appeal infractions
- Sue you for breaches of contract
- Foreclose on your property for failure to pay outstanding fines
- Prevent the sale of your home
HOAs cannot discriminate against protected classes of people
Some HOAs require board approval of prospective buyers or tenants (something to keep in mind if you intend to rent your property). The screening process must be objective, documentable and neutral. An HOA cannot discriminate against protected classes of people or make decisions or rules based on:
- Race
- Color
- National origin
- Religion
- Sex (including gender identity and sexual orientation)
- Familial status
- Disability
- Age (with the exception of some senior living communities)
If you have experienced discrimination during the buying process, report it to the U.S. Department of Housing and Urban Development.
If you’ve experienced an unfair housing appraisal, get help from the Interagency Task Force on Property Appraisal and Valuation Equity.
Scrutinize your HOA and its parts before you buy
Buyers often forget to vet their HOAs, resulting in unfortunate consequences. Even if you’re in love with your potential home, evaluate the HOA, including:
| Areas to evaluate | Questions to ask |
| Bylaws |
|
| Cash reserves | HOAs should have a minimum balance in their accounts to handle unexpected, sizeable maintenance issues. If not, special assessments are collected from homeowners in addition to regular fees:
|
| Covenants, conditions and restrictions |
|
| Financial statements and goals |
|
| HOA board |
|
| HOA management |
|
| Homeowners meetings |
|
| Insurance | Homeowners might end up footing the bill for a lawsuit if insurance coverage is lacking:
|
Stay informed
Review the laws and regulations before you buy. You might want to pass on the property if they seem overly restrictive or difficult to understand. If you’ve already purchased a home governed by an HOA, familiarize yourself with the various laws. Participate in homeowners meetings, stay informed about board elections and research ways to change regulations if you’re unhappy with them.