February 3, 2105 — If you have spent much time by now on Topretirements.com we would be surprised if you haven’t seen a lot of Member comments about Home Owners Associations (HOAs). To many, it would seem these mysterious entities are the devil incarnate. Usually without any actual experience with the demon, these folks want to avoid what they think are treacherous fees, political cabals, and mean-spirited rules at all costs. Only occasionally do we see someone sticking up in their defense. This article will try to dispel some of the misinformation about HOAs, and then let you draw your own conclusions – are they are something to be avoided or appreciated? We’ve also included links to our 3 part series on HOAs, which provides a lot more details and which we think you will find quite useful.
Based on the law
Home Owners Associations, often called Property Owners Associations (POAs), are governed by laws set up by the states. A condo association is the same idea. As might be expected, Florida and California, which have many private communities, are very advanced on the subject, with other states starting to catch up. There are many rules that HOAs are required to follow, along with other best practices. These laws are meant to protect the rights of their members. As an example, here are some common obligations that must be met in many states:
– Board members must be trained
– There have to be elections and bylaws
– Meetings have to properly announced in advance
– Annual budgets and rule changes have to be approved by the property owners
– Minutes must be published
– Financial statements must be available
– Owners have a right to be heard
The positive side
On the plus side HOAs provide a number of advantages to this form of communal property and government:
Protect owner property. The basic idea is that the Association bands together for the common protection of all of the residents. The object is to preserve the value of the homes and the community, along with enhance the enjoyment of the community, its property, and amenities.
Common sense rules. When people live together in close proximity they generally need rules. Those include rules about pets, smoking, quiet time, how many people can live in a unit, guests, what and where you can park on the property. A common example keeps people from keeping junk in their yards. Some communities go further, restricting the color of your home, what can be used for exterior decorations, and fencing. Most times these rules are reasonable and the residents agree that they make communal life less fractious.
Financial. Every property needs maintenance and security, along with other services. For example your association probably owns the roads and sidewalks, along with the elevators and exteriors of your home and common buildings. Swimming pools need to be taken care of, as do fitness centers and golf courses. There are operational, security, and maintenance staff that must be managed and paid. All of that takes money, so your association is charged with establishing a budget and collecting the money to take care of all of that. Plus it has to plan for the future, so when the roof finally gives out, the roads develop potholes, and the elevator is condemned, there is money on hand to pay for these major expenses.
The not so great sides of HOAs
Boards Gone Wild. It is usually the horror stories that get folks riled up about POAs. For example there are cases where the board is insular and self-appointed, and which makes petty rules that other people don’t agree with, or engage in selective enforcement. These can lead to many unpleasant situations.
Management failure. The board doesn’t meet its legal obligations – runs out of money, doesn’t order protective maintenance, or fails to pay employment or other taxes. The result is often very high assessments or even a bank takeover.
Collapse of the community. This is not usually the fault of the HOA, but it could be. During the real estate collapse that started in 2007 many communities neared financial disaster. Too many homes were foreclosed on, or their owners stopped paying common fees. The association ran out of money and had to cut services and/or staff. The result was often a rapid decline in the attractiveness of the community, less desirable neighbors, and the value of the homes sunk. Of course the same kind of problems can affect neighborhoods that don’t have HOAs, but they are less prone to a mass collapse.
What can you, or should you do about HOA
Just desserts. You get what you deserve is an old adage that is mostly true about Property Owner Associations. If you buy into a community before you checked out the POA, shame on you. You might have found rules you didn’t like, a non-functioning board, or a precarious financial situation – before you bought. If this does happen to you, it could be very unpleasant.
No one likes to volunteer. But if you don’t, who will. Everyone needs to take a turn, particularly if you have management, construction, financial, etc. skills needed by the group. You can’t complain if you don’t participate – at least by showing up for meetings having studied the materials provided. Board members are usually under-appreciated or often criticized, so goodness might have to be your only reward.
HOAs are meant to protect you in many ways. In the right hands they can be a reassuring defense against a lot of things going wrong. But when people in the community don’t work hard to make these boards effective, they can be a disaster. It is in your hands to control how that works out.
For further reading
Topretirements has a very informative 3 part series on HOAs and the issues around them.
Meet the New Boss – Your HOA (the first in the 3 part series, with links to the other 2)
CommunityAssociations.net (news about Community Associations)
Comments. Our previous HOA articles (see further reading above) all have long and interesting comment strings. You can comment there, or add your thoughts and experiences in the section below. It should be interesting!