What To Know About HOAs

What is a homeowners association? 

Ironically, this is one of the most common questions asked about HOAs.  

Approximately 74 million Americans live in one (which shakes out to about 26% of the American population), so it’s not a bad idea to gain familiarity if you don’t know much about HOAs. 

In this article, we’re going to cover 6 questions people often ask about HOAs. 

Question #1: What is an HOA? 

A homeowners association, or HOA, is an organized group of homeowners in a subdivision, condominium, or planned community. HOAs usually consist of a board of directors that local homeowners elect to maintain set rules and regulations (e.g., Articles of Incorporation, Covenants, Conditions and Restrictions, and by-laws). The board makes sure members pay dues and abide by the expectations of the community. The expectations, however, depend on the location of the property. 

The original developer of a neighborhood or housing area typically creates these communities and then turns them over to homeowners after selling a predetermined number of lots. Homeowners within the community must pay monthly or annual dues, which the board usually uses for community improvements. 

Another question that often bookends this one is: Why do homeowners associations exist? The main reasons are to enhance property value and the upkeep of a community. They require fees to live in, though. If someone buys into a community with an established HOA, they’re automatically a member and must pay dues that typically support community improvements.  

Furthermore, some HOAs are quite restrictive. These HOAs may be able to dictate what someone can and cannot do to their home. For instance, some HOAs only allow certain paint colors for your house.  

At the end of the day, though, HOAs usually improve the value of a neighborhood. The rules and requirements often lead to better upkeep and property values. 

Question #2: What are HOA Dues and Fees? 

Money is always a priority. It’s fair to want to know what something costs to understand if you’re getting a good deal. HOA dues and fees are monthly or annual costs to live in the community. Anyone who lives in the community must pay them. 

Average monthly dues depend on what kind of HOA someone lives in and where they live. Fees often fall into one of these two averages, though: 

• Single-family homeowners: $200-$300/month 
• Condo owners: $300-$400/month 

In places like New York, however, fees can be thousands of dollars. And, in some less populated areas, fees can be closer to $100. So, the range is somewhat varied. 

These fees typically fund four main categories: 

• General upkeep. HOAs typically take care of common areas like lawns in front of and in between homes and other common areas like parks and walking paths. HOAs will hire someone to plow driveways, parking lots and sometimes the street in the area after a snowfall. 
• Maintenance. HOAs often cover home exteriors, such as siding, roof and gutters, particularly in townhome communities with shared walls. And, because major projects can cost a significant amount of money, an HOA might save a percentage of fees over several years to pay for community-wide roof and gutter replacement. 
• Amenities. If the neighborhood has a pool, a fitness center or on-premises security, the cost will most likely be built into your fees. 
• Insurance. An HOA’s insurance policy will need to cover things that aren’t covered through individual homeowners’ insurance (I.e., common areas). 

Question #3: What are common HOA rules? 

The rules enforced by separate HOAs differ depending on the community. These rules (or CC&Rs) can cover anything from acceptable kinds of mailboxes to whether you’re allowed to have a dog (or if there are breed restrictions for dogs). Most often, however, common HOA rules will fall into one of the following categories: 

• Fees: All homeowners associations will coincide with fees, and those that wish to live in an area with an HOA are expected to pay said costs. The fees go towards bettering the community and amenities. 
• Pet Requirements: It is quite common for HOAs to enforce several pet rules, not the least of which include how many animals you can have, the type of animal and breeds, pet cleanup, leash laws, and noise levels.  
• Noise Restrictions: A lot of homeowners associations have some sort of noise level restrictions. Besides limiting the noise, you’re allowed to make (whether it’s a party or power tools), most HOAs will enact quiet hours, meaning you can’t make too much noise after a certain time of the day. 
• Appearance Rules: HOAs are primarily concerned with the overall appearance of a neighborhood, so it makes sense they will prioritize a home’s aesthetic appearance. They want your home to look good so that everyone else’s does, and to do so, they will most likely limit the clutter you are allowed to display. That means you need to be conscious about patio furniture, barbecues, and similar items that may be strewn about your yard. 
• Maintenance Responsibilities: Most homeowners associations will require their individual homeowners to maintain an inherent level of curb appeal, meaning each home should conform to a certain standard. HOA maintenance requirements usually include lawn, siding, driveways, and walkways to be maintained regularly. 
• Creating a Safe Space: HOAs typically emphasize the importance of a family-friendly environment. That means many of the rules will focus on safety and creating an environment that everyone feels comfortable living in. 

Question #4: Do HOA fees impact credit scores? 

Just like an unpaid rent payment, an outstanding collection account related to HOA fees can be harmful to one’s credit rating. The collection account is a negative mark on the report, and, even after the debt is paid, it doesn’t get removed from the credit report. Both paid and unpaid collections may remain on a report for up to seven years. 

Thus, it’s important to stay current on all payments. If you’re a tenant in an HOA, you need to treat fees and dues like rent payments. Make sure you pay them on time and in full. 

Question #5: What are HOA Insurance Responsibilities? 

This is probably the least common question on here, but it’s a critical one.  Many HOA’s will obtain insurance policies to protect against general liabilities, cover shared property, and cover weather damage. HOA insurance requirements are especially common in condo or co-op buildings and neighborhoods with shared community spaces. HOAs require tenants to cover their own spaces and belongings while the HOA’s policies protect community areas. 

HOA insurance coverage usually protects shared spaces like hallways, fitness centers, or elevators. Another common example is areas prone to weather damage like earthquakes or flooding. It’s typical for HOA’s to have catastrophe insurance to protect buildings against damage in these areas. The HOA budget usually covers the cost of these policies. 

In certain states like Florida, there are laws regulating the kind of insurance necessary for HOA’s. This isn’t true for most states, though. It’s more common for HOAs in other states to have the freedom to decide what kind of insurance HOA insurance to purchase.  

Conclusion 

HOAs can be a little complicated. Thus, it’s wise to conduct research and make sure you understand what you’re walking into if you’re considering joining a community.