Home Owners Associations and picket fences – Courtesy © jStock – Fotolia.com

The vast majority of homeowners want neighborhood integrity, community harmony, and an investment in a home that continues to grow equity. Some find that Utopian existence in a non-HOA community while others embrace HOA subdivisions with the peace of mind knowing there are rules that you expect to be enforced. Only YOU can decide if an HOA is right for you and your family.

What is an HOA

An HOA is typically a non-profit organization established by the real estate developer and handed over to the community upon development completion or after a percentage of homes are built. The HOA provides rules regulating maintenance of common areas and enforcement of deed restrictions (filed with the property records) and has the goal of maintaining property values and enhancing the neighborhood’s appearance. A copy of the Covenants, Conditions & Restrictions (CC&R) is normally provided to buyers at closing.

Once the HOA is handed over to the community an HOA Board is established (by vote of the subdivision members) to handle disputes and enforce the CC&R rules. They also collect dues for common area upkeep (i.e. pools, play areas, entrances, etc.) and can impose special fees to pay for emergency repairs when the association lacks sufficient funds to fix the issue(s).

The majority of HOA problems stem from a handful of issues. Some of the more common “problems” are:

• Overzealous monitoring by board members
• CC&R interpretation
• Homeowners who willfully or unknowingly break the HOA rules
• Non-dues payment by residents

Community? – Courtesy © elfivetrov – Fotolia.com

Does this Subdivision have an HOA?

Drive through a Warner Robins subdivision or a condo community in Long Island where the landscaping is well maintained, litter is non-existent, and visible eyesores are nary to be found and you can bet homebuyers are going to be impressed. Conversely, travel through a community that looks messy and unattended and the opposite response is typically noted. While those conditions alone are not always an indication that an HOA exists (and is enforced), the inference is often made.

Here are several resources homebuyers can use to determine if a subdivision has an HOA:

• Your Realtor. If they closed a home in this subdivision, they have the information.
• The developer or on-site sales team. If homes are still being built, they will know.
• Local clerk of courts or the courthouse at the county seat. HOAs must record their CC&Rs.
• A Real Estate Attorney. They handle a lot of closings and will most likely know.
• Do a Google search. Many subdivisions have community websites and the HOA information is often available.
• Check with homeowners in the subdivision. This is less awkward if you know someone in the community in question.
• U.S. resources include AboutMyHOA, Community Associations Network , and Community Associations Institute

Features of an HOA

They can be very restrictive with the HOA Board ruling with an iron fist, lax and easy going, or someplace in-between the extremes. While there is no standard list of rules homeowners must adhere to, here are some common features that many HOAs have rules for (or against):

• Mandatory membership with dues (monthly, quarterly, or annually)
• Architectural changes
• Enforced exterior maintenance standards (community landscaping, security, etc.)
• Common area use (clubhouses, exercise facilities, pools, etc.)
• Commercial use of property
• Storage of boats, RVs, trailers, or work vehicles
• Erecting a tree house or basketball hoop
• Lawn care and shrub/tree trimming
• Out-building setbacks
• Fence, landscaping, and paint restrictions
• Street parking
• Number of pets
• Age restrictions
• Window covers
• Renting properties
• Yard signage (political, defamatory, etc.)
• building/roof materials
• Seasonal decorations (outdoor lights, yard ornaments, etc.)

What Happens to HOA Rule Breakers

That depends on how strictly enforced the CC&R rules are and how stringent/lenient the state laws governing HOA bylaw enforcement are in the state you live. In general, HOAs have the ability to generate fees, fines, establish liens, solve minor disputes, or take homeowners to court for serious (and often repetitive) infractions.

For the vast majority of homeowners living in an HOA subdivision or community, the experience is nearly transparent. Follow the rules if you live in an HOA subdivision and issues should not arise.

Potential buyers need to weigh their options on HOA living and determine if the guidelines and enforcement of those HOA rules are a good fit for their values and lifestyle. Remember, owning a home is an investment and doing your part to keep the subdivision looking nice will help keep property values UP.

Image courtesy of Fugue

It seems that my friend and his ex-wife owed the home owners association a couple of thousand dollars in unpaid association dues. My friend thought that since the home had been foreclosed on he had no further obligation where the homeowners association was concerned. Further, his ex-wife had gotten the home in the divorce, and it was she who had failed to pay the association dues in question.

My friend was inclined to ignore the relentless demand for payment from the association, until he received notice that they would take him to court and garnish his wages. Even that did not bother him much, because he had recently been laid off, so he figured they “could not get blood out of a turnip”. Oh, but my friend was wrong. Homeowners associations are one of the few, if not the only entity besides the IRS who indeed have the power to make a turnip bleed.

I informed my friend that not only can they come after him and his ex-wife for those unpaid association dues, but it did not even matter that the home had been foreclosed on. The by-laws in virtually all association agreements includes a personal lien for unpaid association dues or any special assessments deemed necessary by the board members of the association. In fact, if you don’t want to pay up because you died, the association may even have the right to go after your heirs for the money. Most buyers do not realize when they purchase their home or condominium, that they are giving the association a lien on the property and a personal lien as well, that can reach to your children or anyone assigned to be your personal representative, i.e. anyone who has a legal interest in the property.

And to boot, there is little to nothing you can do about it. When you sign your papers to purchase your property, you also sign documents giving these powers to the community association. This is a form of private residential government that has as much or more authority that virtually any other governing entity. They can foreclose if you don’t pay the dues you owe. They can go to court, get a judgement against you and garnish your wages, or they can sue your adult children if necessary to enforce their right to your money.

Association boards are made up of other members of your community, some of whom may have nothing better to do than patrol the community looking for potential violations. If the community says you can’t put a flower pot on your front porch, don’t assume that they don’t mean it. If they say you can’t leave a water hose laying out in the grass, don’t be surprised when you leave your hose out and someone comes along to take it away. These are actual events of which I have first hand knowledge.

And associations are supposed to keep adequate dues in reserves for maintenance of common areas, which all residents are responsible for. But most HOA’s and COA’s probably do not have enough dues in reserve to even keep up with regular maintenance without raising dues frequently. When an unexpected expense arises, such as a problem with a sewer line, all of the property owners may be hit with a special assessment. These assessments can run into the thousands of dollars for more serious problems, and they are like tax liens. You can’t get out of paying them no matter what, once they are assessed against you and your property.

Budgeting is a notorious area for home owners associations, and many of them are subject to misappropriation of funds. My own mother lives in condo community with an association that discovered some very questionable expenses for accounting fees, thousands of dollars for “pine straw” purchases, thousands in water bills to “water the grass” along with several thousand dollars in unpaid property taxes, after the builder sold out and turned the association over the the owners. The owners were forced to increase the association dues by 20% their first year, and managed to negotiate a waiver from the county for the unpaid property taxes, which helped them avoid a special assessment that would have been very expensive for a small community that has less than two dozen residents.

What most buyers do not realize is that the home owners association is the equivalent of a private residential government. As such it has powers over the property owners within it’s jurisdiction. These powers are spelled out in documents that are usually given to buyers when they place a property under contract to purchase. The documents contain quite a few pages, over 100 pages in most cases, and most home buyers do not want to spend time reading them, or may not understand fully what the document is saying.

But it’s important to know that you are abdicating some pretty significant powers to your local home owners association when you sign those documents. You may even want your attorney to review them prior to your purchase, to tell you exactly what you can and cannot do to your new property. It may be possible to lose your property over a fence or a flower bed that you decided to install, though it was against the rules. Flagpoles are another problem. Owners have on occasion lost a big legal battle with an association for erecting a flagpole without permission.

If you plan to buy a home or condo that comes with a community association, be sure you understand what the rules are, and that you are OK with following those rules. Once you’ve signed those documents, and are in your new home, you won’t have any choice in the matter. The association rules and what they say goes.

Here are some other articles, and this, with thoughts on living with a home owners association.

Donna S. Robinson is a real estate investor, author and investing coach located in Atlanta, GA. Follow her on twitter at donnaconsults. Her book, Basics Of Real Estate Investing” is now available on Amazon.com for Kindle readers.