What is an HOA?

Homeowner’s associations, also known as HOAs, are predetermined housing communities with a governing body that collects fees and maintains the local area. If you purchase property within a designated HOA community, you automatically gain membership to that association and must comply with its rules and regulations. An HOA can exist in a multi-family building, like a New York City co-op, or across a suburban neighborhood in a small town.

Over half of America’s homeowners own property within an HOA, and that number will likely increase. In 2021, over 80% of newly constructed homes reside in a homeowner’s association. Considering their rising popularity, prospective homeowners should ensure they have a general understanding of HOAs before they start their homebuying process.

How Do HOAs Work?

Any purchasable property may reside in a homeowner’s association. All property owners within the scope of their association are members of the HOA, and a few members serve on the Board of Directors. Typically, HOA members will vote for their board, meaning anyone in the association can become a leader who enforces the rules of the group. The Board of Directors will also write new rules if needed, collect monthly dues, and maintain the common areas. HOAs are non-profit organizations that exist to better the social welfare of their members and local communities.

The Board of Directors will amend and enforce the association’s covenants, conditions, and restrictions, also known as the CC&Rs. Some HOAs enforce more strict rules than others, requiring their members to maintain certain aesthetic standards and uphold a uniform appearance.

In new developments, developers will maintain control of the HOA until they sell a certain amount of housing units. Once the association has enough members to govern itself, the developers pass control of the HOA to its members.

HOA Fees

All members of the HOA must pay their dues, also known as the HOA fee. Depending on the structure of the association, members may pay their dues monthly or annually. HOA fees typically range from $200 to $300 monthly, depending on the property type, location, and scope of the common areas. For example, the HOA fees for a home in a development with a community pool may be higher than a comparable property without a local pool. In higher-end buildings with luxury finishes, homeowners may pay up to $1,000 in monthly dues. Monthly fees go directly toward maintaining the common areas.

When you find a property that you’re interested in, either by speaking with your real estate agent or searching for listings on RealtyHop, you can quickly learn if the property resides in an HOA. Sometimes, the listing description may explicitly discuss the monthly fee, or you can ask your agent to learn more about the dues. If you’re unsure whether or not you can afford that extra monthly payment, you can use a mortgage payment calculator and input additional costs, like maintenance and HOA fees.

Primary Goal of an HOA

The primary goal of the HOA is to preserve property value in a community. An HOAs board works to carefully craft and enforce rules that help raise property values for all homeowners in the association. Prospective homeowners take their location into consideration when deciding where to purchase property, and some people may not buy in a neighborhood with a gaudy home or next to a neighbor with an obscene decoration or lack of lawn care. Essentially, the HOAs rules protect members from acting in a way that would affect a member’s ability to effectively sell their property.

The History of Homeowners Associations

Despite the widespread nature of HOAs in today’s real estate market, homeowner’s associations predominately worked to highlight the exclusive nature of homes marketed towards upscale, white families. In the early 1900s, associations were able to limit property ownership and discriminate based on race, contributing to segregation. It wasn’t until the Fair Housing Act of 1968 that HOAs could no longer discriminate based on “race, religion, national origin, sex, (and as amended) handicap, and family status.” Section 3604 specifically outlines unlawful practices in the rental and sales industry.

HOAs have grown in popularity since the Fair Housing Act and now exist across all types of communities. Now, anyone can purchase property in any area of the country and can join that neighborhood’s respective HOA.

Where Do My HOA Fees Go?

HOA fees go towards maintaining the community and ensuring it remains enjoyable for members. Typically, your HOA dues go toward the following services:

• Municipal services such as trash removal,
• Association insurance for common areas (different than homeowners insurance),
• Maintenance and repairs of common areas like community swimming pools, sidewalks, neighborhood roads, snow removal,
• Amenities and services like shared gyms, entertainment, and transportation,
• Reserve funds for unexpected community expenses.

HOA fees can become expensive for areas with plenty of amenities, like neighborhood parks and dog runs. HOAs also reserve the right to increase their fees, but state legislature can limit the amount increase. Boards that wish to increase their fees past a certain threshold may have to bring the topic to a community vote. When determining whether or not to buy a property and join an HOA, prospective buyers should ensure they understand how their HOA fees may increase in the future.

What Happens if You Don’t Pay HOA Fees

An HOA fee may feel like a minor expense, but failing to pay your dues can have serious consequences. While your HOA can’t evict you for not paying your dues, they can enforce a series of disciplinary actions. Your association may start with issuing late fees and additional fines, working up to placing a lien on your home. A lien is a financial debt that you’ll have to pay before you sell your property.

CC&Rs and Rules & Regulations

HOA members must comply with their association’s CC&Rs, which vary by group. In most cases, the regulations determine a property’s appearance and determine how an owner can interact with their property. Some HOAs may include rules about the color they can paint their house, when someone needs to bring their trash to the curb, and the height of their fence. Certain associations will have more strict regulations than others, further limiting the creative freedom that owners have when it comes to maintaining their property.

The HOA Board of Directors will draft and amend the covenants, conditions, and restrictions, then enforce those rules and fine members who do not comply. A covenant differs from a zoning ordinance because it’s made between private parties, making it enforceable by the HOA or by a single homeowner against another homeowner.

When purchasing property in an HOA, make sure to receive a copy of the Rules & Regulations. This legally binding document discloses all the specific regulations you must adhere to once you’re an association member. You and your real estate agent can request this document anytime during the home buying process.

Common Covenants, Conditions, and Restrictions (CC&Rs)

CC&Rs typically regulate the following:

• The color of the paint you can use on your house (this could be the exterior of a house or the interior of a condo or co-op)
• Types and colors of window coverings you can use
• Type of mailbox you can have

Type of shingles or roof coverings you can use

• Exterior fixtures you can have (i.e.; basketball hoops, satellite dishes and antennas, lights, flags, etc.)
• Whether you can have a garden, plant a tree, etc.
• Whether you can have an above-ground pool or a swing set, etc.
• Keeping your lawn mowed or trash can rolled in
• What pets you can have (or not have)
• Type of fence you can have (or not have)
• Whether you can have overnight guests or not, where they can park, and for how long
• Whether you can park a boat, RV, or any other vehicles in your driveway or parking spot, or not

You may receive a fine for breaking any of the rules outlined in the CC&R. Similar to the consequences for not paying your dues, your HOA can place a lien on your property if you fail to pay the fine. You’re also responsible for remedying the problem immediately, or you could be fined additionally every day following your offense.

HOA Rules Vary in Extremity

HOA rules can range from standard neighborly expectations to more bizarre regulations. Future association members should carefully read through the CC&Rs to ensure they understand all rules. Some documents that contain loose verbiage may leave room for leeway where a board member can execute significant power over how you decorate or use your property.

In Florida, an HOA member received up to $1,000 in fines for displaying their Christmas decorations before Thanksgiving. Another property owner in Raleigh, North Carolina, ended up in court over a dog snack station he put out for local pets. The court has not settled on a verdict as of April 2023.

Conclusion

HOAs ensure that property owners maintain their homes and keep them up to community standards. When everyone in an association actively participates and follows the rules, all members benefit from increasing their property value and helping each member sell their home. Some HOAs may have more strict rules than others, which is why prospective homebuyers should take the time to carefully review the CC&R for any association they may join. Failure to pay HOA fees or fines for breaking the rules set by a Board of Directors can lead to a lien that impacts your ability to see your home in the future. You can always consult a real estate professional to fully understand the rules and fee structure for an HOA before becoming a member.