Homeowners Associations (HOAs) are not a new idea. They were first formed in nineteenth century America, as the Industrial Revolution spurred migration from rural to urban living. Owning real estate has always been considered a big deal, so it’s right to think of Homeowners Associations as exclusive clubs. Sort of.
Homeowners Associations are open to membership only for those who own a home in a local HOA development—definitely an exclusive group! (The reason for the ‘sort of’ is because of the other qualification: homeowners are required to join).
Exclusive membership has its advantages, to be sure, and also some disadvantages. For instance, members have to pay fees and dues for the privilege of belonging. And, like membership in any legendarily snooty club, members have to behave themselves. Unlike most of those, the rules of an HOA are legally binding for all residents in the development. Homeowners Association covenants can specify things like exterior paint colors and what kinds, if any, of fences and/or hedges an owner can install. They also may specify whether things like swing sets or basketball hoops are allowed. There will almost certainly be vague language in any area Homeowners Association covenant to require things like “reasonable” standards of repair for a property.
In general, the whole idea can be a good thing, because when working as intended, it protects everybody’s property values. Indeed, a March study by the Association Management Group showed that 70% of HOA residents are happy with their HOA experience. However, if you are ever in the mood for some HOA horror stories, the web is where you’ll find some really juicy ones.
For example, there’s the one about the 77-year-old Arizona condo owner who was fined repeatedly for allowing her dog to walk through the lobby. The HOA rules specified that dogs must be carried through the lobby. Then there was the case of a California widower whose home was seized by the HOA because he owed $600 in dues and fees. It was sold at auction to a third party for a mere $2,000 (okay—even the Internet admits that he eventually did reclaim his house).
So, on balance, what’s a buyer to do? Below are a few ways to approach the decision before you buy a house in an HOA development (if I’m your Realtor®, I’ll be able to help with these):
- The easy part: get a copy of the covenants and bylaws. The hard part: read them. Make note of the restrictions, and pay close attention to the sanctions the HOA can invoke.
- Review the details of recent actions and pending changes to the rules (they’re probably posted on the HOA website). Request copies of any past and present actions or notices filed by the HOA against the selling homeowner.
- See if you can talk to Homeowners Association board members to get a feel for whether the rules are strictly enforced or a more laissez faire regime is in place. There aren’t any guarantees, though—board membership and attitudes can change.
If you do decide to buy into a HOA development, remember the best defense is a good offense. Get involved in the HOA by attending meetings and keeping up-to-date with proposed changes to the covenants.