Homeowners’ Associations: Pros and Cons
Spring is the season during which the real estate market begins to boom. Apartment dwellers look for a way to escape annual rent increases and the neighbor with the affinity for late-night parties. Families with growing children seek homes in areas where the schools are top shelf, and older homeowners may want to downscale from home ownership to condo living. In addition to location and financial considerations, home buyers need to evaluate the merits and potential perils of buying a home in a covenanted community. Homeowners’ associations can be both a blessing and a curse.
The homeowners’ association is a group of neighbors that develops and implements property maintenance and management guidelines for the community. Homeowners’ associations are often found in planned neighborhoods and condominium and townhome communities. The association is directed by an elected board, and meetings are held monthly to go over and resolve issues facing the community. Each homeowner is obligated to pay association dues, which can range from $250.00 to over $12,000.00 per year in upscale communities. In addition, homeowners’ associations may levy additional assessments in order to fund special projects, such as infrastructure repair or necessary improvements to common areas.
There are several benefits of having and belonging to a homeowners’ association. The first is that common areas such as sidewalks, landscaped areas and amenities such as a community swimming pool or club house will be maintained. Some of the association’s dues are allocated for landscape maintenance, snow removal and pool maintenance services, all of which benefit the homeowners and improve community ambiance.
Another benefit of living in a covenanted community is that properties will be relatively uniform in appearance. Issues that can become problems in ungoverned areas such as overgrown lawns, yards filled with trash or buildings painted in garish colors or remodeled haphazardly are avoided. This helps to maintain stable property values throughout the community, making the area more desirable for the home buyer wishing to make a long-term investment or for the real estate investor seeking to mitigate risk.
However, these same attributes can become problems if the association board becomes either regimental or lax in its application of covenants. Stories of HOA regulatory extremes abound; one Indianapolis-area homeowner was fined for erecting a playhouse for his daughter. The miniature house was hidden in the back yard, behind both the home and a privacy fence. However, it violated the “outbuilding” restriction detailed in the HOA covenants, and had to be torn down. Many HOAs define what kinds of flowers are acceptable to plant in the garden; some have even used community funds to purchase flats of approved plants and allocate them to homeowners with garden areas. Flagpole heights and flag sizes, window decorations and whether or not the homeowner or visitors are allowed to park in the street are some of the details over which homeowners’ associations have wrangled with property owners. By contrast, a lax attitude on the part of the homeowners’ association board may translate into repair and maintenance work left undone or jobbed out to the lowest – and least qualified – bidder, or covenants not being enforced. This means that the protections provided by living in a covenanted community are no longer realized.
Before making an offer on a residence that is in a covenanted community, ask for a copy of the CC and R (covenants, conditions and restrictions). See if there are any deal-breakers in the document, and be sure that the home under consideration is not already outside of compliance. If it is, that could mean a hefty fine and expenditures to bring the property into compliance for the new owner.
Also, ask to see a copy of the HOA’s minutes from its last meeting. This provides some insight as to the current issues the HOA is working through and the kinds of conflicts that have arisen. Make a note of what fines have been imposed in the past, the reason for the fines, what conflict resolution strategies are in place and whether there are any lawsuits pending or in process. If possible, meet with the current president of the HOA and ask a few probing questions. Do the same with residents of the community who are established residents and who are not currently serving on the association board. Their answers may raise some yellow or red flags as to the extent of the HOA’s vigilance.
Finally, be realistic as to whether the benefits accrued through HOA membership offset the costs of losing the freedom to make independent decisions regarding the property in question. If the idea of having the property monitored for compliance is annoying or it rankles to have to ask permission to modify the home or yard, then membership in an HOA may not be a good fit.
Nearly 20 percent of homeowners In the United States live in covenanted communities, and in areas that are experiencing extensive development this percentage is likely to be larger. Be sure that the restrictions and requirements that come with HOA membership don’t turn a dream home into a nightmare experience.