Living in a Community with a Homeowners Association
A homeowners association (HOA) is an organization established by a development that maintains common property and may set certain rules on what homeowners can do. Most condominium and townhouse complexes have a HOA (which may be called a condominium or townhouse association), but it can also be found in developments containing detached residences. The HOA is governed by a board of directors, which consists of homeowners elected by the community. Routine maintenance and other everyday tasks are typically handled by a property management company. Whether the home you are buying is part of a HOA should have been disclosed by the seller (the title search should also reveal this). If it is, you should request the HOA’s financial statements and minutes from meetings from the past two years, bylaws, and covenants, conditions, and restrictions (CC&Rs).
Bylaws
Bylaws generally establish what the responsibilities and operating procedures of the HOA are. It is helpful to know what the HOA is responsible for maintaining so that you do not spend money unnecessarily. For example, if you live on the top floor of a condo complex and the roof starts to leak, if the roof is considered common property, the HOA is responsible for the cost and securing a resource to fix it.
CC&Rs
The CC&Rs typically consist of rules that guide what you can do to and in your home. They may limit the color you can paint the exterior, how many pets you can own, what flooring you can have, or whether you can rent out your unit. The HOA cannot evict you from the property for failing to follow the rules, but they can fine you. If you would like to do something that is prohibited (e.g., get a second cat even though the CC&Rs say you can only have one pet), you can petition the board to make an exception.
Dues
In order to be able to maintain common areas, HOAs charge homeowners association dues. They typically must be paid on a monthly basis, although in some communities they are collected yearly. Your HOA dues should not be neglected – the HOA can foreclose on your home if you fail to pay dues. If the HOA needs to pay for an expense that is greater than the funds that they have on hand, it is possible that they will levy a special assessment – a fee the homeowners must pay on top of their regular dues. (Doing this usually requires approval by the majority of the whole community, not just the board.)
What If I Can’t Pay?
If you are faced with a special assessment that you cannot pay right away, you should contact the HOA to see if it is possible to set up a payment plan. (You can also do this if you cannot pay your regular dues.) As with lenders, HOAs generally would rather work with you to find a way for you to pay what you owe than foreclose on your property.
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