September 7, 2010 — You have moved into your dream active adult community and are enjoying retirement. Then one day a letter arrives from the Home Owners Association (HOA). But it’s not an invitation to a welcome aboard party, it’s a letter telling you that your 58 pound Australian Shepherd is a few pounds over the line…. of the community limit of 30 pounds. The letter’s bottom line: either Tonka goes, or you go.
Home Owners Associations, often called Community Associations or Condominium Associations, are one of the unanticipated features of living in an active community, development, or condo. Well run associations are indispensable to the peaceful enjoyment of your new community. They set the rules that make communal life possible. They manage the property and make sure that ongoing maintenance and daily operations are performed properly. Effective community associations look into the future and set aside money for long term maintenance projects like roadways, elevators, waterlines, sewage systems, roofs, and landscaping.
When poorly run, these associations can set unpopular rules, enforce rules capriciously or ineffectively, suffer poor management, invest in ill-advised projects, get involved in lawsuits, and fail to plan for long term maintenance. We have seen associations spend their reserve funds on cosmetic projects, only to discover that their 40 year old elevators all needed to be replaced. No one wants to get a special assessment because of poor planning – yet they happen all the time. Particularly in these days of bankruptcies, defaults, and failure to pay homeowners dues, an association that is not on top of its game can cause the downfall of a community.
Before You Move In
The strengths and weaknesses of your home owners association will be very obvious once you move in to your new community. But before you even purchase a home in a development with a home owners association, it is critically important for you to do your homework.
Our opening example is a good idea of the kind of due diligence you need to make while you are considering a home purchase. You must examine the association rules. That’s where you will find out if pets are allowed, and if so – what kind, weight, breed, and how many are permitted. There are plenty of other rules to be aware of – such as exterior decorations, boat or trailer storage, children (adult or young), parking, guests, etc. You also need to be aware of fees and other details relevant to your new community.
Proper due diligence, however, should go far beyond just examining the rules you must live by and the fees you must pay. Topics to be included in your research include the dues default situation, foreclosures, legal actions involving the HOA, financial records, the status and existence of sinking funds for major maintenance projects, etc. Examining the minutes or even attending a home owners association will provide great insight into the quality of the association management. What you want to find is a tightly run organization that has energetic, smart people participating. What you don’t want is an association controlled by small-minded, unprofessional folks who are not looking ahead to the future. Investing in a community with a poorly run HOA could prove to be a disastrous decision from both a financial and emotional standpoint.
For further reference:
Topretirements has previously published several articles about HOA’s, including the terrific 3-part series produced with the help of Joe West, CEO of the Community Associations Network:
“Meet the New Boss – Your HOA”
SF Gate article – “9 Things You Need to Know about Home Owner Associations”
“HOA’s Play Hardball with Delinquencies”
What has been your experience with HOA’s? Do you have suggestions on areas for new buyers to explore, or ideas on how to run a better association. Let all of us know in the Comments section below.