The ABCs of HOAs
/Love ‘em or hate ‘em, homeowners associations are part of daily life for many in greater Cincinnati and around the nation. While the earliest examples were often private agreements in wealthy areas to maintain property values and neighborhood aesthetics, beginning in the 1950s they also served to take over some responsibilities traditionally filled by local governments such as road maintenance, security, and parks or other communal areas. They have remained popular especially in areas with rapid suburban growth, and today over 73 million Americans live in communities governed by HOAs. Some municipalities even require HOAs for new construction neighborhoods.
HOA advocates usually prefer the consistent landscaping and housing style, which can keep property values consistent because there are many comparable homes nearby held to a similar standard and offering the same amenities, like pools, tennis courts, walking trails, or exercise facilities. But if you’re not a fan of paying dues, adhering to rules about the appearance and use of your property, or trusting a group of strangers to manage funds or apply rules consistently, an HOA is probably not for you.
HOAs can have different rules and powers, so it’s important to review the Covenants, Conditions & Restrictions (or CC&Rs) to understand, for example, whether there are rules about paint colors or fence types, screening in the deck of a condo, or the quantity and types of animals are allowed. Some smaller HOAs that include only single family homes might only charge a small annual fee to cover the maintenance of a sign at the entrance or street lighting, while a condominium HOA might charge higher monthly fees and regulate noise volumes, package delivery locations, and the number of guests that may park in the lot.
On the plus side, if you live in an HOA with a shared pool, playground, or park, you don’t have to worry about maintaining any of that yourself. Don’t want to garden or shovel your driveway? Find a neighborhood that includes landscaping and snow removal in the fees. HOAs with property types that share roofs (condominiums, townhomes, landominiums, some patio homes) often cover roof maintenance and replacement. You might also save on utility bills if you live in an HOA that includes water, sewer, trash, or even natural gas and electric.
Your quality of life in an HOA community may also be affected by the professional management company they use to handle payments, repairs, maintenance, landscaping, etc. It’s important to note that these companies vary in quality and services, and that HOAs can elect to switch companies by member vote.
In addition to the CC&Rs, you should review any recent financial statements, meeting minutes, special assessments, and insurance policies — mortgage lenders will require these as well. Here’s why:
During the subprime mortgage crisis, many HOAs suffered severe financial losses when foreclosed homeowners (and the banks who retained the properties) were no longer paying their dues. This brought about new standards for the amount HOAs hold in reserves, the amount of insurance coverage they have, etc.
HOA meeting minutes can be dry reading, but it’s often the only way to know whether there are any potential special assessments for large expenditures, or ongoing disputes between your potential neighbors and the HOA or its management company.
All HOAs should carry insurance coverage sufficient to cover any shared facilities, and in condominiums it needs to cover the replacement cost of the entire building. If these coverage amounts are not sufficient, homeowners can face serious financial burdens as seen in one local community this year.
Do you have more questions about HOAs? Let me know!
