9 Things to Consider Before Buying and Renting in a HOA-Managed Property
Photo credit: Brian Cerveny
Explaining the love-hate relationship with home owner associations
If you were to ask two homeowners if they like living in a home owner association (HOA) governed community, you may get a frown from one and a smile from the other. The differing opinions are usually rooted in individual preferences and personalities and how they view the quality of the HOA.
If you are buying into a community governed by an active HOA, you are obligated to join. If you are leasing, you are not allowed to join, but your landlord should provide a copy of the rules and regulations, also called covenants, conditions and restrictions (CC&Rs) and they must be a condition of all rental agreements. The landlord is also obligated to pay HOA fees, but in most instances will pass along the fees to the renter. Owners and renters are equally expected to abide by association rules, but it’s up to the landlord to enforce them as the HOA has no direct legal authority over the renter.
HOA fees can vary, typically ranging from $200 to $600 a month. The fee depends on community amenities, common areas and which services are included. In addition to regular fees, residents of association-governed communities can also be charged an extra assessment to pay for a needed repair if there are not enough funds in the HOA’s reserves.
Here are nine things you should consider before purchasing a property in an association-governed community.
- Make sure the home is not presently out of compliance with HOA rules.
Find out what the rules are and ensure that your dream home is not out of compliance. If there’s a compliance issue, either the seller is required to pay the fine and make changes before the home is sold or you may agree to pay the fine and bring the home into compliance after closing.
- Find out if there’s any catastrophe insurance on the building.
If you are in an area that’s prone to floods, tornadoes, earthquakes, hurricanes or any other natural disasters, this is important.
- Try to get a copy of the minutes from the last HOA meeting or sit in a meeting before buying.
The meeting minutes will tell the real deal about HOA policies. Ask questions: are there any present conflicts or past ones? How does the HOA resolve conflicts? Has the HOA sued anyone and, if so, how was it resolved? If possible, speak with some of the current owners who have lived in the community for several years. Talk to the HOA president and keep in mind even if you like the current HOA board or management company, things can change after you move in.
- Look out for HOA under-management.
While HOAs are known for being over-managed, under-management can be an issue. Owners that are delinquent on their dues can leave an HOA unable to meet its budget and this can eventually affect building and common area maintenance and repair requirements. When there’s not enough owner participation, needed building and common area upgrades or repairs may not occur because there may not be enough board members to approve them. The community amenity quality can decline and affect neighborhood values.
- Assess any environmental considerations.
Be aware that some HOAs may require you to use pesticides, fertilizers and sprinklers and whatever else it takes to keep your lawn perfect. They may not allow the environmentally-friendly form of landscaping, xeriscaping and also may not allow composting and the installation of solar panels.
- What about fees?
Because fees can differ widely for each community, you should ask the HOA the following:
- How are fee increases determined, by how much have they’ve been raised and how often do they occur?
- Can you provide a printed history of HOA fees every year for the last 10 years?
- What’s the size of the reserve fund?
- Have there been any special assessments made in the past and if any are planned for the near future? Make a special note that special assessments are higher in smaller HOAs because of economies of scale.
- What do the monthly dues cover? Do I pay extra for cable or garbage pickup?
Compare community dues with the average dues in the surrounding area. Look into the operating hours of the amenities and if it they are good with your schedule. Find out about rules pertaining to guests using common areas and what is or not allowed. If you are not planning on using the recreational facilities or any other amenities at all, keep in mind this is all included in your dues.
- Determine if you can afford HOA fees in the short- and long-term.
Look out for COA fees that combined with your mortgage payment, may put your total monthly housing payments in a price range of a home you declined because it was deemed too expensive.
- Research the HOA rules.
You might be able to find the CC&Rs and information about the penalties for violating the rules online, making sure the information is current. You may ask your real estate agent to get a copy of the documents or you may contact the HOA directly. Pay particular attention to rules regarding fines and if the HOA has foreclosure powers for nonpayment of fees and CC&R violation fines. You’ll also want to find out about the process for adding or changing rules and how convenient the meeting times are.
- Consider your willingness to adhere to the rules.
If you want complete creative freedom, living in an association-governed community may be a very frustrating experience. One of the benefits of buying a home is the ability to make it your own, to alter it to fit your needs, HOA rules can put some limits on the possibilities.
Many homeowners agree and appreciate that HOAs often help maintain higher neighborhood standards for appearance and this can positively affect property values, the key is determining what you’re getting into before buying or renting.
Investopedia. 9 Things You Need to Know About Homeowners’ Associations
Realty Times. HOA Renter Rights
Written by: Ari Meier