A homeowners association (HOA) is an organization in a subdivision, planned community, or condominium building that makes and enforces rules for the properties and residents. Homeowners associations are run by a board of directors and typically collect monthly or annual fees to pay for common area maintenance and the upkeep of facilities.
Those who purchase property within an HOA’s jurisdiction automatically become members. Some associations can be very restrictive about what members can do with their properties. Others give residents more freedom.
How Homeowners Associations (HOAs) Work
Homeowners associations (HOAs) are usually formed within communities or neighborhoods of single-family homes or multiple-unit buildings such as townhomes or condominiums. An HOA is typically established to make and enforce rules regarding the properties within the jurisdiction. HOAs are composed of and run by the community’s residents. Membership is usually a requirement to buy a home within a community where an HOA has been established.
An HOA usually has a board of directors or governors. These groups are elected to enforce and oversee the HOA’s rules and regulations. An HOA typically describes its rules as restrictive covenants in a document called a Declaration of Covenants, Conditions, and Restrictions (CC&Rs).
CC&Rs set certain conditions for owners about the maintenance of their properties. These sometimes include structural restrictions such as the type of fences or landscape allowed. They may also include more minor aesthetic choices like the color of paint on a house.
A CC&R document may also outline the penalties for violating the guidelines in the agreement. These penalties can take the shape of fees or forced compliance. They can even be as drastic as litigation in some cases.
Homeowners Association (HOA) Fees
Some HOAs can wield significant financial and legal power over the property owners in their zone. HOAs collect monthly or annual HOA fees that depend on several factors:
- Type of property
- Number of properties in the group
- Location
- Amenities offered
- Operating expenses
The fees are typically $200 to $400 per month but they can range anywhere from less than $100 to upward of $10,000 in luxury neighborhoods or communities. HOA fees also often contribute to the association’s reserve fund which is set aside for major renovation projects or emergency use. In addition to regular fees, HOAs can also impose special assessments on homeowners when the association lacks sufficient reserves to pay for unexpected repairs on common areas such as sidewalks or parking lots.
The HOA’s board is usually responsible for the organization’s finances and it oversees the collection and management of funds. Along with setting dues and assessments, the board can slap fines on homeowners who break the rules or damage the common areas. HOAs can also place a lien on a property if a homeowner falls seriously behind on their dues.
Advantages and Disadvantages of Homeowners Associations (HOAs)
Advantages
The HOA provides regulations and guidelines for its members. These standards are upheld to preserve and enhance the community’s property values. The guidelines are often appearance-oriented so they deal with regulations for the cleanliness of the property, the condition of the property, and any repairs that are done to the property. The guidelines for HOAs are usually designed to help ensure a uniform appearance for all the properties included in the association’s zone.
The HOA management will typically provide additional services for its members in exchange for their HOA fees. These amenities are available to all HOA members and may include:
- Landscaping
- Parking lots
- Swimming pools
- Tennis courts
- Party spaces
- Snow removal
- Some HOA fees may also cover the cost of trash collection and certain utilities.
HOAs are symbolic of self-governance and democracy for certain individuals. This belief may stem from the idea that the best people to manage a community are those who live in it rather than a landlord who doesn’t reside on the premises.
Disadvantages
One disadvantage of an HOA is the high cost of the association fees. This can act as a deterrent for some prospective buyers. The HOA rules and regulations can also seem unreasonable, arbitrary, or too restrictive for some homeowners who may want the freedom to customize their properties.
HOA board members are normally volunteers and they may not be properly trained to manage real estate, deal with complex financial issues, or unite a disparate group of people for a common cause. The leadership of HOAs must reach a consensus when they're making decisions about maintenance and upgrades so it's also possible that there may be conflicts among HOA members who disagree. Source
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