What is a Homeowner Association (HOA)?
A Homeowner Association (HOA) is an organization in a subdivision, planned community, or condominium building that creates and enforces rules for properties and residents. Those who purchase property within an HOA’s jurisdiction automatically become members and are required to pay dues, known as HOA fees. Depending on the association, the rules can be highly restrictive or provide more freedom to residents.
Key Takeaways
- A homeowner association makes and enforces guidelines for a subdivision, community, or condominium building.
- HOA members consist of residents of the respective community.
- Membership is typically mandatory for property owners within the HOA’s jurisdiction.
- Run by a board of directors, HOAs collect monthly or annual fees for maintenance and facility upkeep.
- Non-compliance with HOA rules may result in fines.
How Homeowner Associations (HOAs) Work
HOAs are generally formed within communities or neighborhoods of single-family homes or multiple-unit buildings, such as townhomes or condominiums. Established to enforce rules regarding the properties within the jurisdiction, HOAs are comprised of and run by residents elected to a board of directors. The board oversees the creation and enforcement of what are typically called restrictive covenants, detailed in documents like the Declaration of Covenants, Conditions, and Restrictions (CC&Rs).
These rules can cover structural restrictions, aesthetic choices like paint colors, and penalties for rule violations. Penalties might include fees, forced compliance, or litigation in severe cases.
Understanding HOA Fees
HOAs can wield significant financial and legal power, often funding their operations by collecting monthly or annual fees. These fees cover common area maintenance, facility upkeep, and contributions to a reserve fund for major renovations or emergencies. The amount is influenced by factors such as the type of property, number of properties, location, amenities, and overall operating expenses.
Typical fees range from $200 to $400 per month but can vary widely. HOAs can also impose special assessments for unexpected repairs and place liens on properties for unpaid dues, complicating property sales.
Homeowner Associations vs. Community Associations vs. Property Owner Associations
Most HOAs are incorporated and subject to state laws. However, they differ from condominium communities and co-op boards, which are treated as distinct entities due to their different property interests. The term ‘community association’ broadly includes HOAs, condominium communities, and co-op boards.
Furthermore, property owners’ associations (POAs) often aim to better community real estate values, including members who aren’t necessarily homeowners, making them a broader term compared to HOAs.
Advantages and Disadvantages of Homeowner Associations
Advantages
- Enforce standards aiming to preserve and enhance property values.
- Provide various services and amenities like landscaping, parking, swimming pools, tennis courts, and more.
- Personify self-governance, granting residents control over community management.
Disadvantages
- High association fees that may deter potential buyers.
- Potential for restrictive or arbitrary regulations.
- Leadership comprised of volunteers who may lack proper management skills, leading to inefficiencies or conflicts.
Pros
- Set and enforce community rules
- Protect property values
- Provide amenities and facilities
- Enable self-governance
Cons
- Impose fees and assessments
- Maintain restrictive regulations
- Possibly inefficient operation
- May suffer from amateur management
Real-World Example of an HOA
Homeowners sometimes clash with their HOAs over various issues. A common point of contention is the installation of solar panels, which some HOAs oppose for aesthetic reasons. In Blaine, Minnesota, a resident’s request to install solar panels was denied by the HOA due to aesthetic concerns and a lack of established guidelines for rooftop solar installations.
The resident joined a group advocating for a bill in the Minnesota legislature to permit but regulate such installations. This highlights the sometimes tense relationship between property owners and their HOAs.
Key Coverage Areas of an HOA
HOAs govern the affairs of real estate developments, often tasked with ensuring building maintenance, deciding on renovation projects, and enforcing bylaws. Funded through monthly fees, they hold the authority to impose fines and ensure compliance with community standards.
The Pros and Cons of Belonging to an HOA
An HOA can streamline management tasks for property owners, reducing conflicts and simplifying maintenance issues. However, disagreements with community bylaws or spending decisions can create tension.
Legal Authority of HOAs
The legal powers of HOAs vary but generally include the ability to implement and enforce community policies, manage budgets, and collect fees. Failure to comply can result in fines, restricted privileges, or even litigation.
The Bottom Line
Owning a property in an HOA-governed community means embracing the benefits and responsibilities that come with it. While HOAs can provide valuable services and maintain property values, they can also impose limitations and additional costs.
Related Terms: Property Management, Condominium, Restrictive Covenants, HOA Fees.
References
- Foundation for Community Association Research. “The Community Association Fact Book for 2020”, Page 14.
- Foundation for Community Association Research. “Statistical Review: Summary of Key Association Data and Information”.
- Energy News Network. “Homeowners Associations Still a Barrier For Some Would-Be Solar Customers”.
- Minnesota Legislature. “HF 257”.
