Hoa dues что это

Обновлено: 06.07.2024

One of the major attractions to living in a planned development or gated community is the convenience and amenities it affords the home owner. Maintenance, repairs, and security are managed by the Homeowners Association (HOA); and members of the community have unfettered access to communal assets like swimming pools, clubhouses, spas, and fitness centers.

Of course, none of this is free. The cost of these services and amenities can be substantial, and each member of the housing development is required to pay their fair share to cover expenses. It's a trade off, and for many people it's one that is well worth the regular HOA fees.

Still, before you commit to the purchase of a condo or townhouse in a managed development it's important to understand how HOA fees are calculated, and what you should expect to get in return for your money. There are also some very definite pitfalls to be aware of, and that you should take steps to avoid.

Special Considerations

In some cases, HOAs can wield significant financial and legal power over the property owners in their zone. HOAs collect monthly or annual HOA fees. HOA fees are typically between $200 to $400 per month, but they can range anywhere from less than $100 to upwards of $10,000 in luxury neighborhoods or communities.

HOA fees also often contribute to the association's reserve fund, which is set aside for major renovation projects or emergency use. In addition to regular fees, HOAs can also impose special assessments on homeowners when the association lacks sufficient reserves to pay for unexpected repairs on common areas, such as sidewalks or parking lots.

The HOA's board, which is usually responsible for the organization's finances, oversees the collection and management of funds. Along with setting dues and assessments, the board can slap fines on homeowners who break the rules or damage the common areas. In addition to imposing penalties, HOAs can also place a lien on a property if a homeowner falls seriously behind on their dues. Existing HOA liens can make it difficult to sell the home unless they are cleared.

Example of a Homeowner Association (HOA)

Sometimes, conflicts related to HOAs make the national headlines. Beginning in 2014, an Indianapolis homeowner and his HOA entered into a dispute over the solar panels on the roof of his home. To fully capture the sun's energy, the solar panels needed to face south—a direction the HOA wouldn't allow, saying they are too visible to the street and other neighbors.

While the language in the HOA covenant permits solar panels, it is vague on the subject of their positioning. With the support of several state legislators, the homeowner tried to get a bill passed by the Indiana General Assembly that would prohibit HOAs from restricting solar panels or their placement in any way. Additional bills have been introduced in 2018, 2019, and 2020, but all have failed to pass or died in committee

1. Fees Range Widely

A Trulia study which used American Community Survey records, found monthly HOA fees averaged $331 a month in 2015. Averages ranged from a low of $218 month in Warren, Mich., to a high of $571 in New York City. Trulia found dues to be generally higher in older buildings and complexes with more units overall.

The number and size of the development’s amenities also affect rates, according to Nate Martinez, a real estate agent at RE/MAX Professionals in Glendale, Ariz. For example, a development that’s guarded by a gate, and has a clubhouse and golf course is likely to levy higher fees than one that offers minimal security and only a modest common area.

Fees can differ even within a development, due to variations in square footage, location, and orientation, all of which can affect how much upkeep the property will require.

You should also find out how often fees have increased over time, and by how much. If you can, obtain a printed history of HOA dues by year for the past 10 years. Martinez says that the fees for an HOA are typically increased no more than annually. In Martinez’s experience, HOA increases are customarily mapped out three to five years in advance, using estimates of the future costs of utilities, labor, maintenance, and more.

Alternatively, the opposite can also be the case—that is, HOA fees for new development may actually go down slightly over time as more homes are added to the development and more homeowners are available to share the HOA’s fixed costs.

What Is the Average Range for HOA Fees?

5. The Covenants Count

For example, some HOAs do not allow xeriscaping, an environmentally friendly form of landscaping for arid climates, and may limit the size and composition of any garden you plant. The rules may also dictate the use of particular fertilizers, pesticides, or sprinkler systems to maintain the yard and ban the likes of compost piles and solar panels.

Check for any language that might prevent you from, or even just complicate, renting out your property. What’s considered customary can depend on the jurisdiction. “In the Seattle area, it is common to find prohibitions on short-term [vacation] rentals. HOAs have an interest in limiting the percentage of non-owner-occupied units, as mortgage lenders may be reluctant to lend on buildings that have high rental occupancy,” says Manning.

Advantages and Disadvantages of Homeowner Associations (HOA)

The HOA provides regulations and guidelines for its members. These standards are upheld with the aim of preserving and enhancing the community's property values. Often, the guidelines are appearance-oriented, so they deal with regulations for the cleanliness of the property, the condition of the property, and any repairs done to the property. Usually, the guidelines for HOAs are designed to help ensure a uniform appearance for all the properties included in the association's zone.

Typically, the HOA management will provide additional services for its members in exchange for their HOA fees. These amenities may include landscaping, parking lots, and facilities like swimming pools, tennis courts, or party spaces available for all the HOA members. Some HOA fees also cover the cost of trash collection and snow removal.

Set and enforce community rules

Protect property values

Provide services, amenities, and facilities

Impose fees, dues, and assessments

Maintain restrictive regulations

May be run amateurishly or ineptly

One disadvantage of an HOA is the high cost of the association fees, which ultimately could be a deterrent for some prospective buyers. Also, the HOA rules and regulations can seem unreasonable, arbitrary, or too restrictive for some homeowners, who may want the freedom to customize their properties.

In addition, HOA board members are normally volunteers, and they may not be properly trained to manage real estate, deal with complex financial issues, or unite a disparate group of people for a common cause. Because the leadership of HOAs must reach a consensus when they are making decisions about maintenance and upgrades, it is also possible that there may be conflicts among HOA members who disagree.

8. Compliance with the HOA

Don’t rely on being properly alerted to any lingering issues between the association and the current owner of a house that interests you. Failure to ask about these problems in a timely way could result in you inheriting them when you take possession of the property.

Some potential issues may be obvious, such as dead or overgrown landscaping or flaking paint. Conversely, has the owner made exterior improvements or other changes to the property without getting HOA approval? If these changes are not in compliance with the rules, what could happen to you if you owned the property? You may be able to force the owner to fix the problems as part of the sale agreement or provide cash at closing.

Homeowners Association (HOA) Fee

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3. Additional Fees May Apply

An HOA may adopt one of several approaches to financial management. These choices especially affect how it funds unexpected expenses and such capital investments as replacing an HVAC system.

According to John Manning, managing broker at RE/MAX on Market in Seattle, "Some associations prefer a large cash reserve on hand to meet maintenance, legal, or management obligations as they arise. Others have lower fees and rely on special assessments—funds levied outside of HOA fees—for repairs and maintenance." These levies are similar to the tax assessments sometimes levied by local governments.

According to Manning, the size of the reserve fund will depend not only on the HOA’s approach but also on the building's age, condition, and amenities. Developments often draw up multiyear plans for repairs and capital investments, including their annual costs and the expected balance in the reserve fund at the time the outlays will be required.

Ask to see those documents, paying special attention to how well the needed expenditures line up with the balance of the reserve fund. Professional help can be valuable when poring over these spreadsheets. His company's, Manning says, is to "have the clients discuss the financial statements with a CPA [who is an] expert in analyzing [developments'] financials."

The HOA should be able to provide such a list. Ask, too, if any special assessments are planned in the future. Note that economies of scale may mean that special assessments for a certain capital expense may be smaller in HOAs that have many members and higher in smaller HOAs, where a similar expense will have fewer homeowners to fund it.

Planned Development HOAs

Statistically speaking, Americans have a one in five chance of living in a home that's part of an HOA, according to a data analysis by applied microeconomist Wyatt G. Clarke. Since Clarke's estimate was drawn up (in 2017), properties with HOAs have further surged.

Is life in a planned development a good option for you? And, if so, which ones have HOAs that may suit you best? The answers to those questions depend not only your finances but your enthusiasm for shared amenities, tolerance for rules and regulations, and comfort with self-government—since most HOAs are overseen by volunteers who live in the development.

9 Tips for Handling Homeowners’ Associations

What Does an HOA Cover?

A homeowner association (HOA) is an organization tasked with governing the affairs of a real estate development owned by multiple parties, such as an apartment building. HOAs are responsible for tasks such as ensuring the building is regularly maintained, deciding on whether to pursue larger renovation projects, and drafting and enforcing the building’s bylaws. In order to fund its operations, HOAs charge their members monthly HOA fees, typically in the range of $200 to $400 per month. HOAs also have the authority to enforce the community’s bylaws, such as by imposing fines on residents who refuse to comply.

Understanding a Homeowner Association (HOA)

Homeowner associations (HOAs) are usually formed within communities or neighborhoods of single-family homes or multiple-unit buildings (such as condominiums). An HOA is typically established to make and enforce rules regarding the properties within the jurisdiction. An HOA is comprised of — and run by — the community's residents. Membership is usually a requirement to buy a home within a community where an HOA has been established.

What Your Fees Pay For

Every homeowners association has it's own policies, which are established by the board of directors. Some HOAs provide more varied and extensive services than others, and as such will set their fees accordingly. As a general rule, most homeowners associations cover the following basic services and manages their costs:

Maintenance of Communal Areas – This includes lawn care and landscaping, snow removal and road repairs, as well as the general upkeep of all communal buildings.
City Services – This typically covers trash removal for the complex, as well as water and electric for communal areas. In some instances water and sewer services to the individual units may be covered by HOA fees, though this is not always the case.
Pest Control – HOA fees should cover the cost of regular inspections and treatments from a pest control company.
Insurance – Insurance for communal areas is paid for out of the HOA fees. In the case of condominiums this only covers damage to the building itself and surrounding property. Homeowners are still required to have their own insurance covering the interior of their home and all property within.

These are the bare minimum services provided by most homeowner' associations. More exclusive properties will provide a greater number of amenities, which will of course increase your annual fees. These typically include:

Operational costs for any on site amenities like clubhouses, spas, and gymnasiums.
The cost of hiring and maintaining security services.

The cost of maintaining these services makes up the larger portion of your regular fees. It is important to understand that an HOA's board of directors must also plan for the future, and to do that they need to build a reserve fund to cover emergencies and periodic large scale projects. On average, 2/3 of your annual fees will go towards regular maintenance, while the other 1/3 will be put towards building up an adequate reserve fund. While some associations charge yearly, monthly fees are quite common because it smooths out the expense profile for unit owners and allows the HOA to adjust fees more regulalry without requiring special assessments for minor issues.

Typical Fees

Typical fees depend in large part on a variety of factors, including: where your unit is located (some areas have more expensive labor or require more maintenance), the size of your unit (larger units with more bedrooms typically pay a proporionately higher rate than smaller units in the same building), how old the building is (older buildings require more maintenance), and the ammenities offered. Typical HOA fees can range anywhere from a couple hundred dollars per month up to nearly a thousand dollars a month.

While many housing related costs like property taxes and mortgage interest may be dedctible from your income tax, HOA fees typically are not deductible if you live in the unit because they are a third party assessment. If the unit is an investment rental property, then the costs associated with operating and managing the unit are deductible on your Schedule E form.

Special Assessments

One of the most important jobs an HOA has, beyond day to day maintenance, is to plan for the long term well being of the community. That includes looking ahead to larger scale repairs and improvements that will need to be made in years to come. The HOA reserve fund is meant to cover these long term projects, as well as any emergencies that may arise. However, if the reserve fund proves inadequate, the association may levy a special assessment against all of the development's occupants in order to raise the necessary funds. These can occur at any time, and while they may be hard to predict there are some steps you can take to reduce the risk of being faced with an unexpected extra fee.

Before you purchase a condo or townhouse in a managed community, ask to see a detailed financial status report from the homeowner's association. Review the HOA's current financial health, and compare it to the state of the property itself. If you are considering buying into an older development, and the common areas are beginning to show their age, major repairs may be in the pipeline.

If the board of directors has planned accordingly, all should be well. However, if the reserve fund is too small there may be a special assessment in your immediate future. As a general rule, associations managing newer developments rarely have to call for a special assessment, and will simply raise the annual fees to ensure that their reserve is well funded. That being said, in an emergency (such as a fire, tornado, or hurricane) a special assessment may be unavoidable, particularly if the HOA is under insured.

Comparing HOA Fees

Because association fees differ significantly between properties, it can be difficult to make a simple comparison. You must weigh the value of the amenities against what you are willing to pay per month, or per year, for the added conveniences. Having said that, there are some standard questions that you should ask the HOA before you decide to buy into a complex. These will give you a better idea of what exactly your regular dues cover, and how likely they are to rise in the future.

What services are covered by your HOA dues?
Are there any services for which you have to pay extra?
Does the association generate any income? (This could be anything from shared laundry facilities and parking garages to leased retail spaces. If the HOA generates any additional income from an outside source, this can significantly reduce your annual dues)
How are fee increases implemented, at regular intervals or as needed?
How often do increases occur, and by what percentage?
Can the HOA provide a history or rate increases for the last ten years? (This is an important tip, as it will give you the opportunity to track the average rate of fee hikes)
What is the current status of the HOA's reserve fund?
Are any special assessments planned for the immediate future?
What is the HOA's history of special assessments? (Again this is an important tip. If the HOA has a long history of special assessments it could indicate poor management on the part of the board of directors)
What is the association's policy when dealing with delinquent homeowners? (If they don't have a suitable policy in place that allows them to enforce the collection of dues, your fees will be increased to cover those losses)

The answers you get from these questions will give you some valuable data which can be used to make a comparison with similar managed communities in the area. What you're looking for here is an indication that the HOA's board of directors is managing the property responsibly, that regular dues are commensurate with the amenities provided, and that special assessments are kept to a minimum.

2. What You Get Varies, Too

When you buy a home in a managed community, you’re actually buying a bundle of legal obligations and entitlements in addition to physical living space, says John Manning, managing broker at RE/MAX on Market in Seattle. The precise rights, services, and amenities for which the HOA is responsible may range as widely as the fees being charged. “A gated community may have gate maintenance as the only agreement between homeowners, or there may be an HOA in place with a legal authority to manage much more,” he says.

Look at what is included (and not included) that will affect your household finances. Will you have to pay for garbage pickup, for example? Are utilities included? Which ones? What about cable and/or internet service?

Line up the fees—and their inclusions and exclusions—against those of other developments in the area, especially those that are already on your shortlist. “If you want to know about HOA ranges for your region, the best resource would be through a professional real estate broker who’s knowledgeable about homeowners associations,” says broker Manning.

Homeowner Associations vs. Community Associations vs. Property Owner Associations

Most HOAs are incorporated, and, thus, are subject to state laws. However, some states consider condominium-based HOAs, often called "condominium communities," and organizations governing cooperatives—called co-op boards—to be distinct entities from HOAs. This distinction is made on the basis of the assumption that the property interests of these organizations differ. As a result, the designation "community association" serves as a broader, umbrella term that encompasses HOAs, condominium communities, and co-op boards.

355,000

The number of HOAs in the U.S. as of 2020, according to the Foundation for Community Association Research. A trade organization/lobbying group, the foundation estimates that 74.1 million Americans—around 25-27% of the U.S. population—resides in a community association neighborhood or property.

What Is Homeowners Association (HOA) Fee?

The term homeowners association (HOA) fee refers to an amount of money that must be paid by certain types of residential property owners every month to their homeowners associations (HOAs). These fees are collected to assist the association with maintaining and improving properties. HOA fees are almost always levied on condominium owners, but they may also apply in some neighborhoods of single-family homes.

Key Takeaways

Homeowners association fees are monthly dues collected by homeowners associations from property owners.
These fees are standard for most purchased condominiums, apartments, and planned communities.
Some neighborhoods that consist of single-family homes also have HOA fees.
HOA fees are used to pay for amenities, property maintenance, and repairs.
Fees depend on the type of property and services provided, and generally range between $200 and $300.

6. Conflict Management

As in any community, disagreements arise within a planned development, sometimes over certain residents bending or breaking the rules. Before you buy, explore how rules are set and enforced and what penalties are imposed against rule-breakers.

Sanctions can be strict. In some HOAs, the outcomes may include being fined or sued or having the HOA place a lien on your home. Pay particular attention to whether the HOA can foreclose on your property for nonpayment of HOA dues or nonpayment of fines resulting from CC&R violations.

Ask about the process for resolving any conflicts, as well as how the HOA manages additions to or amending the rules.

Request a list or other accounting of conflicts and rule violations the association has had to resolve. If that information doesn’t detail lawsuits, ask about those. Be sure to check for any past, present, or pending lawsuits in which the HOA is involved. Also, review the outcome of any such cases.

Since the association essentially serves as a hyper-local government for the community, it pays to look into who runs it and how well those people function together.

Talk if you can to some of the building’s current owners—preferable ones who are not on the HOA board and have lived in the building for several years. How collegially does the board function? Are differences in opinion usually handled civilly and constructively? Be alert for indications of frequent, even perpetual, drama. As with some other governing bodies, HOAs can be hampered by egotism, power plays, and petty politics.

Schedule time to speak with the HOA president, to get a sense of whether you want this person making decisions on your behalf about the development. Ask the president, too, about interest among residents in serving on the board: Is there high motivation to do so, or relative indifference? This conversation may also motivate you (or not) to serve on the board yourself one day, a move that would require getting elected and giving up some free time for your new responsibilities.

The Bottom Line

How well you embrace those tradeoffs will contribute to how happy you'll be in a condominium or other “planned home.” If you decide to proceed with a purchase, be sure to engage professionals, including a real estate agent, who is familiar with planned developments and HOAs since there are a number of unusual aspects to these compared with buying a single-family home.

Homeowner Association (HOA)

Eric is currently a duly licensed Independent Insurance Broker licensed in Life, Health, Property, and Casualty insurance. He has worked more than 13 years in both public and private accounting jobs and more than four years licensed as an insurance producer. His background in tax accounting has served as a solid base supporting his current book of business.

What Are the Pros and Cons of Belonging to an HOA?

HOAs can benefit individual owners by providing necessary management services. For example, without an HOA the owners of an apartment building would need to coordinate among themselves to decide on common problems such as building-wide garbage removal, building repairs, and community policies. This could be very time-consuming for residents and could result in conflicts and disagreements between owners. On the other hand, HOAs can also create problems for owners to the extent that the owner disagrees with the HOA’s community bylaws or spending decisions.

Special Considerations

If a member fails to remit payment to the HOA, it affects the other members of the community. Common areas may suffer due to lack of funds, or other members may be assessed special fees to cover maintenance costs or other expenses.

The HOA has the authority to take action against delinquent homeowners. The actions depend on the contract between the HOA and the homeowner. Some contracts dictate that the HOA can charge late fees to the homeowner while others allow the HOA to initiate a lawsuit, place a lien on the property, or foreclose on the owner's property to collect the delinquent payments.

What Is a Homeowner Association (HOA)?

A homeowner's association (HOA) is an organization in a subdivision, planned community, or condominium building that makes and enforces rules for the properties and residents. Those who purchase property within an HOA's jurisdiction automatically become members and are required to pay dues, known as HOA fees. Some associations can be very restrictive about what members can do with their properties.

Key Takeaways

A homeowner association (HOA) is an organization that makes and enforces rules and guidelines for a subdivision, planned community, or condominium building.
The members of a homeowner association are the residents of the subdivision, community, or building; some communities require mandatory membership for individuals that purchase property in the zone.
Run by a board of directors, homeowner associations (HOAs) typically collect monthly or annual fees to pay for common area maintenance and the upkeep of facilities.
Homeowner associations (HOAs) may impose fines on non-compliant homeowners.

9 Tips for Handling Homeowners’ Associations

4. Fees and Your Mortgage Approval

As they do with property taxes (which, by the way, are not included in HOA fees at most developments), banks will consider your monthly HOA fees when deciding how large a mortgage you’ll be able to afford. As a result, you may wrestle with vexing tradeoffs as you decide among properties. Higher HOA fees could leave you with a smaller approved amount to spend on your house compared with choosing an alternative property with low or no fees.

Your prospective lender can provide the mortgage-payment figure, and you should already have the property-tax and HOA-fee numbers. If you’re just starting on your home search—and don’t yet have relationships with any lenders—use an online mortgage calculator to estimate the likely mortgage payment for the principal you’re seeking, and to enter other relevant information, including your planned downpayment.

Again, any lender you’re talking with can provide this. Alternatively, many online mortgage calculators, including the one we linked to above, also allow you to request quotes from mortgage lenders on rates and maximum approved amounts.

Criticism of Homeowners Association (HOA) Fees

The main problem people have with HOA fees is the cost. As mentioned above, they can range from a few hundred to a few thousand dollars each month. This is, of course, based on the type of property and the amenities involved. Paying monthly fees on top of mortgage payments and other costs, such as utilities, can put financial pressure on property owners.

Owners may even face higher fees if the reserve fund isn't properly managed. Remember, these are funds that are set aside for unexpected and/or major repairs to the property. And the HOA's board and/or management have a fiduciary duty to make sure that their reserve funds are maintained and managed properly.

HOAs also create rules related to parking or the use of common areas. In neighborhoods with single-family homes, the HOA may create rules on how often members can paint their houses, which types of fences they may have, how they must maintain their landscaping, as well as any other related issues. This can often ruffle feathers and create legal hurdles for both the associations and homeowners.

Restrictive rules and high fees are just some things to watch out for.

Amy Fontinelle has more than 15 years of experience covering personal finance—insurance, home ownership, retirement planning, financial aid, budgeting, and credit cards—as well corporate finance and accounting, economics, and investing. In addition to Investopedia, she has written for Forbes Advisor, The Motley Fool, Credible, and Insider and is the managing editor of an economics journal. She is a graduate of Washington University in St. Louis.

Chip Stapleton is a Series 7 and Series 66 license holder, CFA Level 1 exam holder, and currently holds a Life, Accident, and Health License in Indiana. He has 8 years experience in finance, from financial planning and wealth management to corporate finance and FP&A.

Many residential communities have a homeowner's association (HOA) structure to help maintain a clean and cohesive atmosphere in the neighborhood. Also, when you buy a condominium, townhouse, or single-family home within "a planned development" you may also encounter the HOA structure.

Key Takeaways

Understanding Homeowners Association (HOA) Fees

Homeowners associations are organizations that are designed to set up and enforce rules for certain properties and the residents that live in them. These groups are typically created in planned communities, subdivisions, or condo buildings. People who purchase these properties automatically become members of the association. As such, they are required to pay their dues through monthly fees, which are called homeowners association fees.

lobbies
patios
landscaping
swimming pools
elevators

Fees may also cover some common utilities, such as water/sewer fees and garbage disposal. The association may also levy special assessments from time to time if its reserve funds (funds set aside for major and/or emergency repairs) are not sufficient to cover a major repair, such as a new elevator or roof.

These fees can also apply to single-family houses—especially townhouses—in certain neighborhoods, particularly if there are common amenities such as tennis courts, a community clubhouse, or neighborhood parks to maintain.

HOA fees tend to vary drastically, depending on the property or community. The fees range anywhere between $100 and $1,000 per month. The average, though, tends to be between $200 and $300 per month. The general rule that applies is that the more services and amenities, the higher the fees.

More to Consider

When buying a condo or townhouse you need to look beyond the monthly HOA dues. While those fees are definitely an important consideration, concentrating only on them can distract you from larger issues that demand your attention. What looks like a good deal may actually cost you more in the long run. Before you commit to any purchase, consider a few key points.

Newer developments and complexes typically offer lower HOA fees as an incentive to sell properties, but they inevitably go up within the first two years. Often by as much as 15% during the first fee hike. Another round of major fee hikes may happen 5 or 10 years later. In many cases poor construction work gets put back on the developer in a lawsuit about 5 to 10 years after the property development is complete. Beyond that, if the construction quality is poor the HOA fees can skyrocket as doors, windows, and walls which leaked into the units require months of repairs to restore rotting walls and floors & improve the construction quality to prevent issues from happening again.
HOA dues always increase, and what you are quoted now is only temporary. To keep up with inflation, the board of directors will have to raise the annual fees.
Older buildings and developments are prone to more frequent rate increases, as well as special assessments. Even if the properties have been well maintained, sooner or later major repairs or improvements will have to be made, if only to bring them in line with updated city codes and regulations. This necessitates a raise in annual fees and may lead to a succession of special assessments.
The size of the community has a direct impact on your HOA fees. The greater the number of homeowners, the lower your HOA dues. Also, be especially leery of condos and planned communities with a disproportionate number of vacancies. This will not only increase individual HOA fees, but could be a sign that the community association is poorly managed. There is a reason those tenants left for greener pastures.
Consider the owner-occupancy rate. Renters rarely feel as much of a vested interest in the community as homeowners, and are much more likely to avoid paying their dues on time and in full. That can lead to higher fees for the resident homeowners who have to pick up the slack.

Moving into a development with a homeowners association, whether it's a condominium or a gated community, has much to offer. Beyond the convenience of being able to leave mundane tasks like lawn care and general maintenance to others, there is the undeniable attraction of the added services, security, and amenities that can bring so much to the home owning experience. That being said, a well managed HOA should do much more than simply keep up appearances and entertain the residents.

The board of directors should also be mindful of property values within the community, and should be taking the necessary steps to maintain and/or improve them. They should also be planning for the future, to protect the investments of you and your neighbors.

If you are considering buying into a managed development, take the time to review the homeowners association's records to see if the fees they collect are being put to their proper use. If not, it's a sign of poor management and your money will only be going to waste. However, if you like what you see weigh the cost of the annual dues against the services and amenities offered. If the equation balances out, and the future looks sound for the community at large, it may be time to sign the mortgage on your new home.

9 Things to Know About Homeowners Associations

What Legal Powers Does an HOA Have?

Individual HOAs will have different levels of legal powers, depending on how they were designed. However, generally speaking, HOAs will have the legal authority to create and enforce community policies, such as whether smoking, pets, or rentals are allowed in the building. Also, HOAs will decide on budgets for the building and will have the authority to charge monthly or one-time fees to their members. If a member refuses to pay these fees or to comply with the community policies, HOAs can impose a range of penalties. In many cases, these penalties can include monetary fines, the restriction of community privileges, and even litigation.

What Do HOA Fees Normally Cover?

HOA fees typically cover the costs of maintaining common areas, such as lobbies, patios, landscaping, swimming pools, tennis courts, a community clubhouse, and elevators. In many cases, the fees cover some common utilities, such as water/sewer fees and garbage disposal. The association may also levy special assessments from time to time if its reserve funds are not sufficient to cover a major repair, such as a new elevator or new roof.

9. Insurance Responsibilities

As with the ownership of property, insurance provisions within a planned development can be divided, too, with the HOA covering some perils or areas and the homeowner responsible for others.

Catastrophe insurance is particularly important if you’re considering a condo or townhouse purchase in an area prone to major natural disasters, such as floods, earthquakes, blizzards, wildfires, tornadoes, or hurricanes. “In the Pacific Northwest, earthquake insurance is very common [in planned developments], though not required,” says Manning.

Check whether the HOA provides additional coverage as a perk for owning within the development. “[A] forward-thinking HOA can make a condo building more attractive” in this way, says Manning. They might add “earthquake and other types of hazard insurance, [which] will be reflected in the homeowner’s HOA dues.” You should, of course, confirm if such additional coverage also extends to the areas that are the homeowner’s legal responsibility, or only to those under the HOA’s purview.

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