HOA Hurdles to be Aware of When Looking at New Properties

A Home Owner Association (HOA) can have a huge impact on your life when you buy a home in a PUD (Planned Unit Development) or Condominium Project.

According to Wikipedia:

A homeowners’ association (abbrev. HOA) is an organization created by a real estate developer for the purpose of developing, managing and selling a development of homes.

It allows the developer to exit financial and legal responsibility of the community, typically by transferring ownership of the association to the homeowners after selling off a predetermined number of lots.

It allows the municipality to increase its tax base, but reduce the amount of services it would ordinarily have to provide to non-homeowner association developments.

Most homeowner associations are incorporated, and are subject to state statutes that govern non-profit corporations and homeowner associations.

State oversight of homeowner associations is minimal, and mainly takes the form of laws, which are inconsistent from state to state.

The Pros and Cons of HOA’s:

A Home Owner Association may have the power to determine the color of your home, the number of pets you have and the type of grass you have to plant.

They also may have the power to levy assessments, dues and fines.

Or, they may be as simple as collecting a few dollars per year to make sure the grass is cut in the common areas.

HOAs are set up by CC&Rs (Covenants, Conditions & Restrictions) and become part of your deed.

The CC&Rs dictate how the HOA operates and what rules the owners, tenants and guests must obey.

You should take the time to review the CC&R for any prospective purchase to make sure that the home you are buying will be right for your lifestyle.

For instance, if you operate an Amway business from your home, it is possible the CC&Rs prohibit this type of activity. Or, if you have two dogs and three cats, the CC&Rs may limit you to one pet.

The CC&Rs are only a portion of the HOA.

Bylaws are another component of HOA’s that reflect the intention of the association.

Each HOA either has a managing Board of Directors, or a third-party property management company.

In some cases, the cost of the management is higher than the cost needed to perform the requirements of the association.

One issue to be sure you check on is potential assessments.

For instance, recently a Condo Association had a foundation problem and were assessing the members over $10,000 per unit.

Another PUD had a pool that required routine maintenance and certification.

How Is Deferred Maintenance Handled?

Subdivisions are commonly set up as PUDs with an additional HOA.

Until the subdivision is complete, the builder is generally in charge of the HOA.

When complete, the management of the PUD will be turned over to the homeowners at a special membership meeting.

It is a very good idea to attend this meeting because a board will be chosen at that time.

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Mark Madsen Online Communications Director

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