HOA 101: What You Need to Know When Choosing a New Home Community

If you’re looking to buy or build a home in a master-planned community, chances are that community is governed by a homeowners association (HOA).

HOAs establish regulations geared to enhance the property values of the neighborhood and to promote a sense of community involvement and identity among residents.

In buying a home, residents agree to abide by those regulations. But, sometimes, owners can be at odds with their HOA over landscaping, architectural details or even parking regulations they consider too restrictive.

So, how do you know if a community’s HOA would be a good fit for you and your family’s lifestyle?

That’s where a little due diligence on your part — before you buy — can save you a lot of frustration after the fact.

What is an HOA?

First, let’s look at what a homeowners association is and what it does. An HOA is a community association, usually set up as a not-for-profit corporate entity, that operates and maintains the community’s common areas to preserve and enhance property values for the residents’ benefit.

“HOAs do things to make homeowners’ lives easier,” said Steven Y. Brumfield, national director of community associations for homebuilder Toll Brothers, Inc.

An HOA is typically governed by a board of directors consisting of volunteer residents, though new communities may initially be governed by developer or builder representatives with governance transitioning to residents as the community matures. Professional management companies may be hired to handle all or certain duties, such as the maintenance and landscaping of common areas, including pools and playgrounds; collecting assessments (fees); and enforcing HOA rule violations, such as poorly maintained front yards.

Assessments and Governing Documents

HOAs are not one-size-fits-all, however. To determine if an HOA is a good fit for you, there are two things you should know before buying, according to Frank Rathbun, vice president of communications at the Community Associations Institute:

1. The amount of the HOA fee
2. The basic rules and regulations stated in the association’s governing documents or Covenants, Conditions & Restrictions

Each resident pays his or her share of the HOA’s costs via a mandatory assessment. Rathbun recommended asking what the assessment covers, as well as what it does not cover. You should learn how and when the fee is assessed and determine if the amount and payment requirements will fit your personal budget.

As for the government documents, Brumfield said, “It’s important to get these documents and review them, so you can outline your rights and obligations.” Depending on your plans for your home, you should pay attention to regulations regarding remodeling, exterior changes, landscaping, parking, pets, etc.

“I encourage my clients to get in touch with the HOA’s management to get a copy of the CC&Rs and read through them or at least scan them,” said Paul H. Chunyk, a Realtor and founder of CA Realty Group, Inc. in Del Mar, Calif. “It happens a lot when people buy a home in an HOA area and then find out they can’t change certain things. But they would have known if they’d read the bylaws and CC&Rs.”

Budgets and Reserves

You should also ask for a copy of the HOA’s budget to better understand where your money is going, as well as whether an adequate reserve fund is in place. Without proper reserves, if the HOA runs into an unexpected expense, residents could be required to pay a special assessment. This could be costly, so you should inquire about any history of special assessments, as well as any litigation or pending litigation.

“At the end of the day, it’s your money and it’s your association,” Brumfield said. “Keeping tabs on what the association is doing is important.”

Another way you can learn more about an HOA is to visit the community and see how it is maintained. Chunyk recommended talking to current residents, as well. “Get your potential neighbors’ opinions about the HOA,” he said.

Once you know what to expect, you can buy into your chosen community with confidence and, perhaps one day, help educate your fellow and future residents as a member of your HOA board.