A homeowners association is a non-profit organization created under state law and is made up of all the owners of property within a specific common-interest real estate development. A buyer of a co-op or a home in a condominium development or a planned unit development automatically becomes a member of the HOA. The HOA board maintains common areas, establishes a budget and upholds the association’s regulations.
The homeowners association elects a board of directors from among owners in the development. The officers are generally a president, vice president, secretary and treasurer. The board is responsible for the overall management of the association, although it can delegate management of certain activities to attorneys and other professionals. Board meetings are generally open to all unit owners. The board creates an annual budget, including anticipated income and expenses, that is usually presented to homeowners at an annual meeting.
The HOA board enforces the provisions of the bylaws of the organization. It must develop a Declaration of Covenants, Conditions and Restrictions. The CC&Rs; set up rules limiting how the property can be used, restricting everything from what colors a house can be painted to the number and size of pets. The CC&Rs; should also establish how the rules will be enforced. Because their fiduciary duty is to all members of the HOA, board members must base their decisions on the interests of the members rather than their own interests.
The HOA board maintains clubhouses, tennis courts, swimming pools, roadways and other common areas in the development. In some developments, the HOA board could also be in charge of maintaining building exteriors. The board has the authority to contract with an outside vendor or management company for such services as landscaping, repairs, snow removal, road and parking lot maintenance, and pool maintenance.
Fees and Delinquencies
To pay all the costs of the HOA, including taxes, insurance and maintenance, the association assesses homeowners a regular fee, usually monthly, often based on their percentage of ownership. In addition, HOAs may be forced to levy special assessments for such unforeseen events as damage requiring repair or heavy snowfall that increase the expenses of the management company. When homeowners fall behind in their fees, it is up to the HOA board to collect the arrears. Otherwise, the board must raise fees on other homeowners or reduce services to cover expenses. If necessary, the board can pursue a lien on the debtor’s property. The HOA can then foreclose on the unit and sell it, deducting the delinquent amount from the sale proceeds.
- Thinkstock/Comstock/Getty Images