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What is a homeowners association (HOA)?

A homeowners association is a self-governed organization that oversees residences in a subdivision, planned community, condominium or apartment building. Its purpose is to keep property values high by means of regular community upkeep.

To achieve all this, HOAs can enforce rules and guidelines in their communities and will typically collect monthly or annual fees to help with the overall maintenance.

More: Condo vs. apartment: What's the difference?

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How does an HOA work?

The HOA is headed by a board of directors, typically resident homeowners, who offer services, and implement rules and bylaws for the community. Guidelines vary by community, ranging anywhere from the care of communal space and amenities, to restrictions against certain aesthetic choices, such as curtain colors.

When you buy a property that’s part of an HOA, you usually have to become a member.

If the HOA is “voluntary” you have the option to forgo membership. In return, you may be denied access to events or services that members pay for.

If the HOA is mandatory you must be a member to live in the community. Membership then allows you to get access to all the services other members get, and allows you to vote for board directors. Leadership transitions typically happen after elections at an annual association meeting.

For any decision to be made in the community, or for HOA bylaws or rules to be changed, the HOA board must reach a voting consensus.

As a member, you are required to pay regular HOA fees in order to fund management and maintenance work. A good HOA will have a reserve fund set aside for major renovations projects or emergency repairs.

What are HOA fees?

HOAs collect monthly, quarterly or annual fees from residents in order to finance their work, including any amenities and services offered. According to IProperty Management, $250 is the average monthly HOA membership fee for a single-family home. In many situations, it covers basic services like water and sewer fees, as well as garbage disposal.

Other services can include landscaping and sidewalk maintenance, painting and roof repairs, pest control and private security.

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What are HOA rules?

The rules and bylaws established by an HOA are either guidelines or restrictions. In either sense, these regulations are often appearance-oriented because their larger aim is to keep property values high. They are most concerned with the cleanliness and condition of facilities and a uniform appearance in the community.

Guidelines may include specific measurements for property additions like fencing, and structures like decks or pools.

There are often decorative specifications as well, concerning which plants/trees are permitted, or guidelines for holiday lighting or lawn equipment. Some HOAs even require that your exterior property maintain specific colors and overall appearance.

These restrictions can also extend to street parking, bicycle storage, occupancy limits, renting or subletting bans, noise levels, and even pet breeds (some HOAs have specific rules about the weight, breed and number of pets you can have).

Before joining an HOA, you should make sure you understand exactly what kind of regulations are in place. To do this, you can request to see your HOA’s covenants, conditions and restrictions (CC&R) before purchasing the property. Some homeowner associations impose fines on non-compliant residents.

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What legal powers does an HOA have?

An HOA is a legal entity that enforces rules in a community, as well as penalties for violations.

If you don’t pay your HOA fees on time, for example, the board can subject you to late fees and interest. If multiple payments are missed, or if you don’t adhere to HOA rules, the board can restrict or eliminate your access to common areas or amenities.

If an HOA lacks sufficient funds for regular property maintenance, they can impose special assessments on homeowners. These are extra fees that are levied to pay for unforeseen repairs (often only in the case of an emergency event that requires immediate action).

HOAs can also place a lien on a property if a homeowner falls seriously behind on their dues. A lien is a legal claim against a property that allows the lienholder to collect what they’re owed, or foreclose the property if the homeowner doesn’t settle their debt within a specific timeframe.

Determining if an HOA community is for you

Depending on what your dream living situation looks like, an HOA can be either a positive or a negative experience. Before you can know for sure, you’ll have to conduct preliminary research.

Start by making sure you understand all of the rules and regulations that will affect your living situation. If you’re a big fan of decorating outdoors during the holidays or you love a specific breed of dog, for instance,understand that HOA rules might limit your choices. Do your due diligence by asking the following questions:

  • Does the HOA have a sufficient reserve fund and insurance for emergencies?
  • How does the HOA handle late fees?
  • Are fees paid online or via mail?
  • How often are annual assessments raised, and by how much?
  • Has the HOA ever accrued any debt?
  • Are there any legal judgments against it?
  • How new is the HOA? When were new board members last elected?
  • How many HOA meetings are held annually?
  • How receptive are these board members when issues arise? (attend a meeting if you can)
  • Are there any significant projects currently in the works that may affect the community or require you to pay additional fees?
  • Are the common areas well maintained?

You can further confirm the overall experience by checking online community groups, or reading online reviews, about a specific HOA.

More: How much house can you afford on your income?

Advantages of an HOA

Have you heard the adage that the best people to manage a community are the people living in it? This type of self-governance is beneficial for residents who want to help make decisions about how the community functions and looks. The communal measures also help protect property values.

If you’ve had experiences with difficult neighbors in the past, you’ll likely appreciate having the HOA board on hand to mediate any disputes for property-related issues.

Other advantages include opportunities to meet and socialize with neighbors through HOA-sponsored events and access to exclusive amenities.

Disadvantages of an HOA

That being said, too many rules and regulations can seem unreasonable or too restrictive for some homeowners. If you’re unable to comply, there may be penalties, such as late fees or limitations on access to public amenities. That’s on top of the HOAs fees you’re already paying to finance these services in the first place.

These fees can be rather expensive, and the additional cost might affect your mortgage eligibility. According to IPropertyManagement, on average, HOA homes are priced 4% higher than observably similar homes outside of HOAs.

Another downside is that the services you’re paying for may not actually be worth it in the long run. Sometimes, HOAs are inefficiently managed. Since HOA board members are typically volunteers, they may lack the expertise needed to deal with complex issues and it could end up costing you.

Are HOA fees included in your mortgage?

While scoping out an HOA-governed property, you’ll notice that the fees are disclosed as part of the general property information and will also be included on your Closing Disclosure (the multi-page form that details the mortgage loan you’ve selected). However, they are not actually a part of your mortgage.

You’ll pay HOA fees directly to the board, but your mortgage lender will consider the cost in your overall debt to income ratio. This is to ensure you’ll be able to make your monthly payments.

How do you join an HOA?

If you’ve decided that you’d like to purchase a property under the governance of an HOA, you need to submit documentation to file for the HOA board’s approval in order to become a member.

At this time, you’ll also receive the HOA’s governing documents. You’ll need to provide a background check, a buyer approval application and income verification.

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Are HOAs good or bad?

The answer ultimately depends on you and what your perfect living situation looks like. A homeowners association is great for property owners who are interested in paying for someone to set a high-quality living standard and protect property values by performing services and offering amenities.

HOAs are not so great for property owners who are trying to save on costs, or who want the freedom to make decisions about their property without the influence of neighbors and members of the association.

HOAs often sound great on paper, but don’t always effectively service the community. This is why it’s important to look into your prospective HOA beforehand and make sure you know exactly what you’ll be paying for.

What’s the difference between community and housing associations?

A homeowners association requires all residents to become members and contribute to the maintenance and preservation of the community through regular fees. The association is governed by a group of volunteer residents who are responsible for overseeing these services, and all residents are required to comply with community guidelines.

Comparatively, a community association does not require mandatory membership or fees. It’s a non-profit organization, also with a board of volunteers, which supports the social, educational and recreational needs of the community. A community association organizes events and programs, maintains communal spaces and acts as a liaison between the community and the local government in civic matters, such as planning and development.

How are HOA bylaws, covenants and rules changed?

Every HOA has a hierarchy of documents that support the rules and regulations in place for the community. Board-determined rules can be changed by a vote of the board directors, but any declarations and changes to the CC&R’s require a vote from the homeowners as well. In some instances, these documents are superseded by federal and state laws.

Although this can vary from state to state, in order to change a rule, a homeowner needs to submit a drafted amendment to the board. Once received, the board will propose the amendment with sufficient notice before the next board meeting. The proposal will be stated on the meeting agenda, and the floor will open for homeowners to discuss and ask questions before a vote.

If the board approves the rule proposal, it must send notice to the whole community with the details.

Are HOAs legal?

HOA’s are legal entities. When you sign your HOA membership form the agreement is legally binding. You are then subject to the enforcement of rules and penalties if those rules are not followed.

Are HOA fees worth it?

If you know what you’re paying for, and those services and amenities are valuable to you, HOA fees are worth it. In most cases, these fees are intended to cover maintenance costs in order to maintain a high-quality standard of living for the community. This is beneficial for your property value, and can ultimately save you money.

However, membership in an HOA comes with restrictions and responsibilities. If the freedom to make decisions about your housing is important to you, the fees and higher property value may not be worth it.

What happens if you don’t pay HOA fees?

Missed HOA payments can result in penalties such as late fees, with interest. However, if multiple payments are missed, a homeowner may be subject to suspension of HOA amenities.

In more severe cases, the HOA can place a lien on your home, involve a collection agency or even force foreclosure of the property.


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Emma Johnston-Wheeler is Staff Writer for Moneywise. She is a 2021 graduate of Toronto Metropolitan University, holding a Bachelor of Journalism.


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