Things to Think about with a Homeowners Association

When you purchase a condominium, townhouse, or another type of property in a planned development, you are obligated to join that community’s homeowners’ association (HOA) and pay monthly, quarterly, or annual HOA fees for the upkeep of common areas, and in some cases, the building and some of the utilities and services provided.  You should be aware of the following things about homeowners’ associations and how they work before you buy.

HOA Basics

First, let’s take a look at what HOAs are all about.  HOA fees vary greatly depending on what they cover and where they are located.  Typically, the more amenities a property has, the higher the homeowners’ association fees are likely to be.  In addition to monthly fees, if a major expense such as a new roof or a new boiler comes up and there aren’t enough funds in the HOA’s reserves to pay for it, the association may charge an extra assessment that can run into thousands of dollars.

Because multiple parties live in the same building or complex, all residents of condominiums and townhomes must be equally responsible for maintaining the common areas such as landscaping, swimming pools, clubhouses, fitness rooms, building exteriors, roofs, and in some cases boiler systems.  Many of these types of common areas, such as landscaping, trash removal, etc., also exist in subdivisions of single family homes. Regardless of whether the HOA governs a building, such as a condo or townhome structure, or a neighborhood of individual houses, HOA fees help maintain the quality of life for the community’s residents and protect property values for all owners.

In addition to maintaining common areas, HOAs also set out certain rules that all residents must follow called covenants, conditions, and restrictions (CC&Rs).  In a common building, rules may include what color front door you may have, whether you can have a satellite dish, number of pets permitted, and so on.  

In a subdivision with individual homes, regulations may include what color you can paint your home, the exterior landscaping you can do, the types of vehicles you can park on the street or in your driveway (no RVs, for example), and permissible type and height of fences.  If you want to do anything that differs from these rules, you will have to convince the HOA to grant you a variance, which is probably unlikely.  

What you Need to Know

While there are laws governing the behavior of HOAs, these associations can still have a powerful impact on your rights as a homeowner.  Before buying a property in a community that has an HOA, you should:

1. Learn the HOA’s rules.  Colorado’s contract is very buyer friendly, and you are given an opportunity during the contract period to review all HOA documents.  Colorado Real Estate Company – Nelson Group, typically writes a contract to receive HOA documents (or access to the documents through their website – which is usually the case) within 1 week of the contract date.  We then typically provide for another week to review these documents.  Pay particular attention to Rules & Regulations and fines associated with not abiding by these rules.  
2. We also recommend reading through AT LEAST the last two years of meeting minutes (including both board meeting minutes (which typically happen monthly) and membership meeting minutes (which typically happen annually).  Watch for any discussion of major projects and if an assessment will be needed to cover that project.  These meeting minutes should give you a good feel of the HOA, how well it is managed, how much regular maintenance is completed, and the general “mood” of the members.
3. We also encourage buyers to make a phone call to the HOA president (or one of the board members who regularly attends the board meetings (noted in board meeting minutes).  If there are things you want to do to the property, ask if it is likely to be approved or what regulations might surround those changes.  
4. In our market, many people want to rent their property on a short-term basis.  If this is important to you, make sure that the HOA you are interested in allows for short-term rentals.  Let us know that this is important to you right up front – because it is not worth looking at property in HOAs where short-term rentals are not allowed.
5.  Make sure the property you want to buy is not already out of compliance with HOA rules.  Buying into an existing problem can be a headache, so find out what the rules are and whether you would have to make changes to the home to comply.
6. Consider your temperament.  Are you the type of person who hates being told what to do?  If so, living in a community with an HOA may be a very frustrating experience for you.  One of the major benefits of homeownership is the ability to customize and alter the property to suit your needs, but HOA rules can really interfere with this.  However, an HOA may be exactly what you want and need in a second home environment, if you prefer to have someone else take care of the maintenance of the property.
7. Find out about fees.  Fees will differ for each community.  Because of this you should make sure to find out the answers to the following questions:
   1.  How are HOA fee increases set? (A good question for the president)
   2. How often do increases occur, and by how much have they historically been raised?
   3. How large is the HOA’s reserve fund?  Although – unless you know a lot about finances of HOAs this may not be very helpful.  Another good question for the president – do they feel that there is enough money in reserves to handle upcoming issues?
   4. Find out what the monthly dues cover.  When comparing condo/townhome projects in Summit County, no two HOAs are alike.  Many cover everything, like gas/heat, electric, cable tv, Internet/wifi, water/sewer, trash removal, snow removal.  While others only cover some of these items.  When comparing complexes and HOA dues, just make sure you are comparing apples to apples – dues for one may seem extremely high, but they cover everything, compared to one with low dues that only cover a couple of items.

Homeowners’ associations can be your best friend when the prevent your neighbor from painting her house neon pink.  However, their rules and regulations may not fit with your lifestyle.  Before you purchase a property subject to HOA rules and fees, make sure you know exactly what you are getting into.