We break down the pros and cons of living in a planned development.
When you finally buy your own home after years of
renting, you might think you're done following someone else's rules
(bye-bye, landlord!). But if you're considering a house or condo within a
planned development, you may find yourself answering to a homeowners
association, or HOA. In fact, nearly a quarter of homeowners in the US
live under this type of community management. And while some of their
restrictions may seem unnecessary (Is grass height really that
important?), most HOA rules result in clean, orderly and well-maintained
communities—not to mention higher property values. But these perks come
with a price, from paying monthly dues to costly fines if you buck the
rules. Here's what you need to know to decide if living under an HOA is
right for you.
[post_ads_2]What exactly is an HOA?
When a land
developer builds a planned community, they can create a legal entity
known as a homeowners association, which essentially transfers the
ownership and governance of that neighborhood to the homeowners. The HOA
is usually run by a board of elected homeowners working alongside an
appointed management company. Together, they set the rules and
regulations of the community they govern, as well as oversee the
maintenance of common areas. “All HOAs own and maintain common real
estate and may own roads, parks and structures, which can vary from an
entry monument to a high-rise condominium building, golf courses and
marinas. The variations are endless," says Rich Thompson, owner of an
HOA management consulting company and author of Trade HOA Stress for Success.
The board holds regular meetings to determine the budget, deal with
community issues, and address homeowner questions and concerns. You can
request a copy of the meeting minutes to gain invaluable insight into
how well the association is run, as well as what conflicts commonly pop
up.
What are CC&Rs?
Every HOA comes with its own set
of covenants, conditions and restrictions, or CC&Rs. These rules can
dictate everything from whether you're allowed to rent out your
property to what color you can paint the exterior. Any renovations
you're considering might have to be approved as well. As an owner,
you're required to understand and adhere to these conditions, so
definitely ask your realtor if you can see this document before
you buy. “Every buyer should read and understand the rules,
regulations, governing documents and the approved budget, since they
have a profound impact on the buyer's rights," Thompson says. If you
need help deciphering what exactly you've read, it's worth talking to a
real estate attorney, since a misunderstanding on your part can result
in a hefty fine.
What do HOA fees pay for?
Every member of
the homeowners association is required to pay fees or dues that
contribute to the upkeep of common areas and may provide owners with
access to amenities, such as a clubhouse, pool, private beach access or
gated security. Depending on the community, these fees may also cover
exterior home maintenance like landscaping, roof replacement or
necessary repairs—especially in the case of apartments or townhomes
where exterior facades are shared. “HOA fees should change every year to
reflect the funds needed for both operations (utilities, maintenance,
insurance, etc.) and reserves (long-term renovations and repairs like
painting or replacing a fence). Inflation alone should adjust the budget
2 to 3 percent," Thompson says. In addition to these regular payments,
HOAs also often have the right to charge residents special
assessments—an additional one-time fee—for emergency situations, like in
the event of a natural disaster or an outbreak of termites.
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What happens if there's a dispute?
If you review all
the rules and regulations before signing on the dotted line, you
shouldn't run into any surprises. But changes to the CC&Rs do occur.
As a resident of the HOA, you can and should attend the board's regular
meetings to keep up with any revisions to the CC&Rs and have the
chance to voice your opinion. “The most common disputes concern
architectural design issues, where an owner wants to do something that
contradicts either approved standards or tradition," Thompson says. If,
for whatever reason, you do have an issue with one of the rules, another
homeowner or a fine, file an appeal with your HOA board before taking
legal action. Depending on the state, your HOA may be required to
arrange arbitration or mediation so you can come to a compromise
privately. If your dispute involves a more serious violation (say, the
HOA is trying to enforce rules not listed in the CC&Rs), then you
may need to file a lawsuit.
Is it right for you?
Everyone
has heard horror stories about nitpicky HOAs that charge residents for
planting the wrong type of flowers or putting up a fence that's one inch
too tall. All the more reason to do your research before you buy. But
most homeowners associations exist to benefit their residents, not
torture them. Because of the design and maintenance rules, “a properly
run HOA will protect owner property values," Thompson says. Before
deciding if living within an HOA is right for you, consider the pros and
cons. Is access to amenities like a pool, gym or gated security
important to you? Then an HOA might be worth the restrictions. But if
the freedom to landscape and maintain your home's exterior as you please
is a priority, you may want to look elsewhere. “HOAs are not for people
that want to do whatever they want to their property without control,"
Thompson says.
