Almost one in six people in America live in a community regulated by some kind of homeowners association, according to the Community Association Institute, a national non-profit group that provides resources to such organizations. They may live in the city or the suburbs, in a common interest development, privately owned community, planned unit development, subdivision, condominium, co-op apartment building, or mobile home subdivision.
These types of communities have grown over the past 20 to 30 years as a way to provide affordable housing choices and lifestyles by sharing amenities such as privately owned streets, pools, parking and utilities that do not demand the oversight of local authorities.
Depending on where you live, your local organization may be called a homeowners association, property owners association, community association, civic association, property board, property committee, or some other similar term. But in each case, the primary purpose of the group is to manage the neighborhood’s common areas. The secondary purpose, however, is to maintain certain neighborhood standards by means of regulations.
When these associations first emerged in the 1970s, they were voluntary. But since the 1980s, membership has become a mandatory condition of ownership in some communities. An estimated four out of five houses built since the late 1990s are governed by a homeowners association, according to the Community Association Institute. Yet few people really understand the risks versus the benefits.
The Fine Print
Before you buy a home regulated by an association, consider the following:
- Maintenance: Once a developer’s responsibility has expired, the owners have to pay for repairs when things start to break down. Having an adequate reserve and a planned maintenance program is essential to preserving the community and your property’s value.
- Fees and assessments: Generally, homeowners associations levy mandatory monthly fees to maintain common property, such as lawns, swimming pools, hiking trails, golf courses, tennis courts, or lakeside docks. Fees may increase as expenses rise and special assessments may also be imposed for major costs such as a new roof for a community sports center or private street repair.
- Liens and foreclosures: If you fail to pay your association dues, or run afoul of its regulations, you can be charged a fine. A lien can even be imposed on your property resulting in potential foreclosure, sometimes over trivial amounts. If you dispute the charges in court and lose, you may also have to pay the association’s legal fees.
- Governance: Most homeowners association board members are volunteers elected by the property owners. Sometimes inexperience can cause mistakes, resulting in additional expenses. Often, more than 50 percent of the dues collected by an association are used to pay for the management companies and attorneys it employs.
- Regulations: Together with their management partners, homeowners associations function very much as private governments. Once property owners sign a contract agreeing to comply with an association’s laws, that often supersedes their individual property rights. It’s not easy to change community regulations imposed by a homeowners association. To do so generally requires the approval of the majority of members.
- Membership: Membership in a homeowners association may be voluntary or mandatory. Some voluntary associations attempt to become mandatory by implying new deed restrictions have been adopted. However, deeds cannot be amended without the express agreement of owners.
If you’re considering buying a property regulated by a homeowners association, ask to see the covenants, conditions and restrictions before you make your offer. Read them carefully to see if you will be comfortable complying with those rules. Find out how much and how often the board can raise fees and levy assessments. Ask to see the association’s financial records and review them with your lawyer. Talk to local residents about any problems there may be. Ask to meet with a board member to learn about the association and, if you become an owner, attend public meetings to keep up with the issues.
To learn what rights you have, check the declaration, certificate of incorporation, and bylaws of your association, which should be available from the board of directors or developer. Look at the laws governing homeowners associations in your area (not-for-profit corporation laws) and the decisions made by the courts in any cases involving your particular association.
Industry groups such as the Community Associations Institute (CAI) are trying to help community leaders balance the rights of the individual versus the rights of the community. The CAI is encouraging members to adopt a formal statement of Rights and Responsibilities for Better Communities that outlines principles for homeowners and community leaders. Ask if your association subscribes to those or similar principles.
In the market for a new home?
Request a mortgage now and get Lenders to compete for your business.