A homeowners association (HOA), also known as a community management association, is a nonprofit organization that serves to:
- foster a sense of community
- govern rules in a particular community
- maintain common areas of the property
- provide services for the homeowners
You are expected to become a member of the homeowners association (HOA) and pay dues if you purchase a condo, townhouse, or single-family home in a community that is governed by an HOA. This membership is mandatory.
Types of Homeowners Associations
Homeowners associations typically fall into three categories:
Condominium: In a condominium, homeowners own their individual units, but not the property boundaries or land. In addition, each resident owns a small percentage of the common area.
Cooperative: In a cooperative, a corporation owns the entire property, including the individual units. Homeowners have a shared interest in the property and exclusive rights to “rent” their individual units. Cooperatives are rare, accounting for only 5 to 7 percent of all HOAs.
Planned community: Homeowners in a planned community own not only their individual unit but the lot on which their property lies. The homeowners association maintains ownership of the common areas, such as the grounds, roads, and facilities. Planned communities are the most common type of HOA.
What to Expect from Homeowners Associations
People who own property run by a homeowners association agree to a set of covenants, conditions, and restrictions (CC&R). The CC&R lays down the rules and establishes the monthly dues for all homeowners in the community. Some common restrictions in a CC&R include:
- limits on the number of residents allowed in a single unit
- noise ordinances
- operating times for common areas, pools, and fitness centers
- property improvements that are allowed (painting, gardening, etc.)
The CC&R is usually reasonable, and it exists to supply all owners in the community with a pleasurable living experience. Naturally, there are those that contain unreasonable expectations, which is why you should always read all documents from the HOA before agreeing to purchase a home in the community.
Homeowners Association Advantages
Homeowners associations help maintain a pleasant community for their residents. The CC&R help regulate the appearance of properties, the conduct of residents and their guests, and noise levels.
Many community management associations offer amenities such as playgrounds, pools, clubhouses, and gyms for their members to use. Others offer services such as landscaping and repairs.
Homeowners Association Drawbacks
An HOA exists to protect the rights of the residents in the community, but it can cause some inconveniences while doing so.
It also costs money. Homeowners association dues can be expensive. In Manhattan, NY, for instance, “Monthly maintenance fees … have soared to an average of $1.70 per square foot,” according to Robert Frank at msnbc.com.
We’ll do the math for you: “… a 1,200 square foot condo will cost you $2,000 a month in maintenance fees, on top of your mortgage, utilities, and (usually) property taxes,” Frank concludes.
One more disadvantage of HOAs is that some of them are intrusive, and some homeowners believe that they restrict too many of the freedoms afforded to them by living in their homes.
Homeowners who break the rules are subject to fines from the HOA, which adds insult to injury. In addition, if these fines are not paid in a timely manner, the Homeowners’ Association (HOA) has the authority to place a lien on the property and to threaten the owner with foreclosure.
These kinds of regulations are what gave rise to the term “Little Governments” in the first place.
Again, you should give each document provided by the HOA a careful read and, if necessary, seek the advice of an attorney to get clarification on anything that you are unsure of.
