What Is an HOA?

What Is an HOA?
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The houses in your neighborhood all have lawns that are neatly cut and trimmed alongside manicured beds of flowering plants. The yards are surrounded by freshly painted, white wooden fences.

But there's one house in the middle of the block that stands out. The lawn hasn't been cut in weeks, the house is painted a garish purple and the chain-link fence is leaning to one side. It's an eyesore that's bringing down the property values of everyone’s homes.

This is the reason that homeowners associations (HOAs) exist: to prevent just this type of situation by enforcing bylaws that protect the common interest.

But what are homeowners associations? What authority do they have? What management services do they provide to property owners and how much do they cost? Here's what you need to know.

What Is an HOA?

An HOA is an organization that creates and enforces rules and regulations included in governing documents for multiple-unit communities, such as condominiums, townhouses and single-family homes. The rules of an HOA are published in a document called the Declaration of Covenants, Conditions and Restrictions (CC&Rs) that apply to the properties and its residents.

If you buy a property in an HOA community, you are automatically a member. It’s mandatory and your realtor will supply a copy of the CC&Rs that you will sign. When you purchase your home, you also enter into a contract with the HOA management company.

In addition to agreeing to abide by the HOA’s rules and regulations, you will pay dues that are known as HOA fees.

An HOA is made up and run by the residents of the community. It usually has a board of directors who are volunteers elected to serve on the HOA board and oversee and enforce the rules and regulations of the community association.

What Does an HOA Do?

An HOA creates rules and regulations that enhance and benefit the community. For example, an HOA’s CC&Rs might specify the paint colors you can use on your house, how many dogs or cats you can own, where you park your cars and whether you can have renters.

One of the main responsibilities of an HOA is to take care of the common areas. This would include a clubhouse, if there is one, the swimming pool, fitness center and the tennis courts. In some communities, an HOA might also be responsible for providing such perks as garbage pickup and cable/internet service.

Every HOA has its own unique set of rules and regulations. Here are some typical applications:

Condominium HOAs

Condominium HOA tend to have the most restrictions. With a condominium you own the interior, but the HOA owns the exterior and common areas. The HOA can dictate the color of your window treatments and whether you can display holiday decorations in your front windows or doorways. The condo association will decide what is best for a uniform appearance.

Townhouse HOAs

Townhouses are single-family residences with at least two floors and one shared wall. They are not as restrictive as condominiums. With a townhouse, you own the interior, and you have more control over the exterior. The HOA may cover the types of landscaping you plant and the color of your mailbox, but you can typically put up holiday lights and decorations.

Single-family home HOAs

HOAs for single-family homes are less restrictive than condos or townhouses. Single-family home developments could be gated communities or built around a golf course. HOAs for single-family homes will be in charge of the common areas, but they may regulate the types of trees you can plant or even something more trivial like whether you can leave your garage door open during the day.

The residents of any of these types of neighborhoods with HOAs could have other requirements, such as being over age 55 or being retirees.

What Are the Types of HOA Regulations?

HOA regulations generally fall into the following categories:

  • Maintenance:​ For single-family homes and townhouses, HOAs regulate the curb appeal of each home. This would include regular maintenance for lawns, driveways and walkways. For condominiums, regulations would cover anything on the exterior, such as balconies.
  • Noise restrictions:​ Most HOAs have some kind of restrictions on noise level. It may be related to parties or even the use of power tools. The regulations usually specify quiet hours during certain times of the day.
  • Clutter control:​ Since HOAs are concerned with the overall appearance of their neighborhoods, many regulations focus on a home’s aesthetic appearance. The objective is to reduce anything that creates clutter. These typically include windows, patios, balconies and yards.
  • Pets:​ Pets are a particular focus for HOA board members. Pets are regulated by their number, breed, size and type. HOAs will have regulations for pet clean-up, leash laws and noise disturbances.
  • Respect for the neighborhood:​ HOAs aim to create a family-friendly environment. Many rules focus on safety and respect for your neighbors.

A prospective homebuyer should review the CC&Rs to be fully aware of the HOA’s responsibilities and especially any restrictions on homeowners.

How Much Does an HOA Cost?

HOAs collect annual or monthly fees to pay for regular maintenance of common areas and upkeep of facilities, such as gyms and swimming pools. In special situations, HOAs also have the authority to impose special assessments for large projects, such as paving for parking lots and construction of new sidewalks. This situation can happen if the HOA does not have sufficient money in its reserve fund to cover large and unexpected expenses.

Many monthly HOA fees are in the range of ​$100 to $300​. However, the fees for properties in luxury communities can run into several thousand dollars per month. Someone considering a property in an HOA community should also consider the monthly cost of HOA fees when calculating the affordability of a mortgage payment. Lenders also consider HOA fees when qualifying you for a loan.

HOAs also have the authority to impose fines on residents who do not comply with its CC&Rs. While HOAs do not have the authority to kick a homeowner out of its community, an HOA can place a lien on a homeowner's property for unpaid fees, assessments, interest charges and attorney fees. These unpaid charges would have to be settled before the homeowner could sell their property.

Advantages of an HOA

HOAs have advantages in that they:

  • Set and enforce rules that benefit the community and its residents;
  • Protect property values;
  • Provide amenities, facilities and services for the community.

Disadvantages of an HOA

HOAs also have disadvantages in that:

  • They can be poorly or ineptly managed;
  • HOA management and board members may not be adequately trained or have the experience to manage real estate or handle financial issues;
  • They could impose regulations that are too restrictive or discriminatory;
  • They could have high association fees that discourage prospective buyers.

In general, HOAs exist for the benefit of the community. Their rules and regulations may seem petty and too restrictive at times, but overall, HOAs add to the property value of the neighborhood.