Buying Into a Homeowner's Association

A homeowner’s association (HOA) is an organization that governs and manages the common areas and common interests of the homeowners. Sometimes, the homeowners elect to have their neighborhood governed by a professional management company and sometimes it is more financially effective to elect their officers and staff from the homeowner population. Typical duties of a homeowner’s association would be to collect money and provide for snow removal, maintaining common areas such as playgrounds, pools, and entrance landscaping.

Authority - A HOA is incorporated within with the by-laws and covenants established by the developer prior to development and building of homes. When a homeowner purchases property governed by an HOA, he signs a rider on his deed which states he acknowledges the CC & R’s and will abide by its restrictions.
Power - Associations provide services, regulate activities, levy assessments, and impose fines. The US Bill of Rights guarantees its citizens certain protections against abusive or intrusive government -- however, these protections do not extend to private contracts which have been entered into voluntarily. HOA’s can function as governments, but structurally and operationally they are private corporations and governed by corporation law. Since HOA’s are considered private corporations, they are not subject to the Constitutional constraints that public government must abide by. Many state statutes now require HOA’s to provide certain basic protections to its members.
Membership - Boards appoint corporate officers, and may create subcommittees, such as "architectural control committees", pool committees or neighborhood –watch committees. Association boards are comprised of volunteers from the community who are elected by owners at the annual meeting to represent the association and make decisions on behalf of all homeowners. The neighborhood may also hire a professional management company to manage their needs.
Assessments – HOA’s can compel homeowners to pay a share, usually per-unit or based on square footage, of common expenses. As such,unpaid dues or assessments can become a lien on the homeowner’s property. These expenses generally arise from common property, which varies dramatically depending on the type of association. Some associations are virtually small towns -- complete with private roads, services, utilities, amenities, community buildings, pools, and even schools. Others have no common property, but may charge for services or other matters determined to be in the best interests of the membership such as collecting for snow or trash removal. Most HOA’s are considered to be non-profit entities.
Benefits - The purpose of an HOA is to maintain, enhance and protect the common areas and interests of an association (also called a subdivision or neighborhood). This can allow an individual homeowner access to an amenity (pond, pool, clubhouse, etc.) that he may not be able to afford on his own. Each member pays assessments which are levied to pay the community’s expenses, such as maintaining entrance monuments, common area landscaping, clubhouses, tennis courts, walking trails, mailing costs for newsletters or other correspondence, as well as for a management company or on-site manager, or other items delineated in the governing documents or agreed to by the board of directors.
Opinion and Participation - A study by Zogby International reported widespread satisfaction by residents of homeowners' associations: 71% overall were pleased with their experience of the homeowner's association. The majority (63%) said that the existence of a homeowner's association did not affect their choice when buying or renting; of the remainder, an HOA was a positive influence 3 times as often as it was a negative influence (28% to 9%). The same study reported that while less than one in four residents had ever brought a complaint to their HOA board, 3 in 4 of those who did were satisfied with the resolution. Just over 3 in 10 residents have served on an HOA board.
Severability - A board of directors can be sued if it breaches its duties, but board members risk nothing financially in these suits. Association insurance provides not only for a board member's legal expense, but any judgment attained against them. Homeowners must pay out-of-pocket for any case they bring to court and risk being personally liable for any judgment and/or Association's legal fees as well as their own. Unless statutory law or the corporation's governing documents reserve a particular issue or action for approval by the members, corporation laws provide that the activities and affairs of a corporation shall be conducted and all corporate powers shall be exercised by or under the direction of the board of directors. Thus, unless member approval is specifically required either by some statute or by the association's governing documents, members who are not directors or officers have little or no role to play in the day-to-day management of their development, except, however that members have the ultimate authority to elect and/or remove officers and directors, often with a simple majority vote.
After Thoughts - Critics argue that homeowner associations establish a new community as a municipal corporation without ensuring that the residents governed will have a voice in the decision-making process. Voting in a homeowner association is based on property ownership, as the by-laws and covenants of each association dictate. Only property owners are eligible to vote in elections, and voting by renters is prohibited, since the association has contractual agreements solely with owners. Additionally, only one vote per unit may be cast, rather than one vote per adult occupant, so that voting representation is equal to the proportion of ownership, and cannot be influenced unfairly by packing a unit to or beyond capacity with multiple residents. In the case of partially-built-out subdivisions in resort areas, the majority of property owners may not live in the community, but still bear the costs of running the association.

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