What Is an HOA?

Article Courtesy of  YAHOO.COM

Published September 17, 2016


As you search for your next home, you'll hear the term "HOA" tossed around when talking about a specific house or neighborhood. It may appear trivial as you hunt for a home with the right number of bedrooms and enough outdoor space, but take heed because this seemingly small detail can have a significant impact on the neighborhood, the changes you can make to your home and the monthly cost of living.

The HOA you hear about is a homeowners association: a group made up of all the homeowners in a defined area, run by a board of neighbor volunteers that oversees services such as the maintenance of common areas and snow removal and establishes and enforces community rules. The Community Association Institute estimates about 68 million people in the U.S. live under a community association, which includes HOAs, condominium associations, townhomes, master-planned communities and cooperatives.

All HOAs are nonprofit corporations initially created by the developer who establishes the subdivision. To have his or her plan approved by the local municipality, a developer often agrees to form an HOA, which collects monthly dues from homeowners in the community for infrastructure costs -- such as street and sewer maintenance, trash pickup and street lights -- that would otherwise fall to the municipality. Depending on the size of your community and its amenities, monthly HOA fees can be as low as $50 per home and reach beyond $1,000.

As the creator of the HOA, the developer establishes a declaration, which "is sort of like the constitution for the community association," explains Andrew Fortin, senior vice president of external affairs at Associa, a homeowners association management company.

Following the declaration, the developer typically sets initial bylaws that all homeowners living under the association must abide by. These rules may include requirements for payment of dues, restrictions on lawn ornaments on a property or guidelines for the use of any neighborhood amenities, including a park or community pool. "They'll adopt rules and bylaws that govern [for example] how you can paint your house," Fortin says.

Once enough homeowners have entered the community, the developer leaves management of the HOA to a board of community volunteers who are elected to discuss and propose changes to bylaws, establish the annual HOA budget and hire outside assistance for a community manager to oversee maintenance, field feedback from residents and attend to other projects.

Tied to the Land

As a condition for the development of land, all homes built under the HOA are forever tied to the association. So if you purchase a home in a community with an HOA, you're tied to it as well.

"Prior to me buying in a community association, I get, or the seller is required to give me, a stack of documents related to that association. So I get a copy of the declaration and the bylaws and the budget, and all the things that are going to be relevant to me in assessing if this is going to be the right community for me," Fortin says.

Steven Tinnelly, managing partner of Tinnelly Law Group, a California law firm that represents community associations headquartered in Orange County, explains that purchasing a home under an HOA automatically requires you to pay dues and abide by both current and future bylaws established by the HOA board.

In California, for example, in the same way a bank can pursue foreclosure when a homeowner doesn't pay his or her mortgage, "the associations have that same power" when a homeowner hasn't paid dues or otherwise owes the HOA money, Tinnelly says.

If you find yourself owing money to the board for another reason -- because you damaged a fence or sign, for example -- you're liable for those costs.

"Let's say a homeowner does something to damage the common areas. The association has to fix it, and then go after the homeowner to recover those costs," Tinnelly says.

Defined HOA Power, Restrictions

Most states have laws clearly defining the role of an HOA, often adopted from recommendations in the Uniform Common Interest Owners Act, created by the Uniform Law Commission, a nonpartisan group of attorneys that established the general legislation for HOAs in the 1970s and have regularly maintained it since then. The uniform law includes guidelines for holding HOA board elections and what bylaws may or may not prohibit.

"It's very comprehensive," says Dawn Bauman, senior vice president of government and public affairs at Community Associations Institute. "Then some of the states adopt certain versions of that. They don't usually adopt it wholesale because it can be quite cumbersome."

Even with states defining an HOA's autonomy and restrictions, some homeowners naturally oppose their community association. And in some cases, if state law guarantees the HOA rights that an individual doesn't agree with -- like preventing you from parking on the street overnight or painting your house a bright color -- it becomes proposed state legislation rather than a fight between the homeowner and their association.

According to CAI, an average of 1,000 to 1,500 pieces of legislation regarding community associations are introduced each year in the U.S.

"What we often find is when someone is unhappy with their community association, working with that community association might not be their first choice of effort," Bauman says. "They may choose to go to their legislator and say, 'Oh my gosh, this is awful and ridiculous and crazy, and you should stop this.' And that can be very compelling for a legislator when they don't understand the entire story."

Involvement and Satisfaction Under HOAs

Even with the significant amount of legislation to change association law and the pitfalls of HOAs, dissatisfied residents make up a minority of the national HOA population. In a March 2016 survey by CAI, 65 percent of community association members reported their experience living in an association was positive.

You have to follow the rules and pay dues, but that doesn't mean you can't advocate to make changes to your HOA. All board members are neighborhood volunteers, so why not run for a seat in the next HOA election?

Regardless of whether you intend to be a leader in an HOA, it's important to learn about the association you'll be joining, as well as your rights and responsibilities as member before you close on the home. Take the time to read through the association's declaration and bylaws, and utilize resources provided by organizations like CAI that advise on the technical skills of running an HOA as well as working with other residents and resolving neighbor disputes.