What Is an HOA? Homeowners Associations—Explained

If you’re buying a condo, townhouse, or freestanding home in a neighborhood with shared common areas—such as a swimming pool, parking garage, or even just the security gates and sidewalks in front of each residence—odds are these areas are maintained by a homeowners association, or HOA.

So what is an HOA, and how will it affect your life?

HOAs help ensure that your community looks its best and functions smoothly, says David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. For instance, if the pump in the community swimming pool stops working, someone has to take care of it before the water turns green and toxic, right? Rather than expect any one individual in the neighborhood to volunteer their time and money to fix the problem, HOAs are responsible for getting the job done. And the number of Americans living in HOAs is on the rise, growing from a mere 1% in 1970 to 1 in 4 today, according to the Foundation for Community Association Research. So, it’s wise to know exactly how they work.

How much are HOA fees?

To cover these maintenance expenses, HOAs collect fees (monthly or yearly) from all community members. For a typical single-family home, HOA fees will cost homeowners around the $200 to $300 per month, although they can be lower or much higher depending on the size of your unit and the services provided. The larger the home, the higher the HOA fee—which makes sense, because the family of four in a three-bedroom condo is probably going to be using the common facilities more than a single woman living in a studio.

In addition, most HOAs charge their members a little more than monthly expenses require, so that they can build up a reserve to pay for emergencies and big-ticket items like repairing the roof and water heaters, or acquiring new carpeting, paint, and lights for the hallways.

If the HOA doesn’t have enough money in reserve to cover necessary expenses, it can issue a special “assessment,” or an extra fee, in addition to your monthly dues, so that the repairs can be made. For example, if the elevator in your condo building goes out and it’s going to cost $15,000 to replace it—but the HOA reserve account holds only $12,000—you and the rest of the residents are going to have to pony up at least an additional $3,000, divided among you, to make up the difference.

And yes, you would still have to contribute your share even if you live on the first floor.

HOA rules: What to expect

All HOAs have boards, made up of homeowners in the complex who are typically elected by all homeowners. These board members will set up regular meetings where owners can gather and discuss major decisions and issues with their community. For major expenditures, all members of the HOA usually vote.

In addition to maintaining the common areas, HOAs are also responsible for seeing that its community members follow certain rules. Homeowners receive a copy of these rules, knowns as “covenants, conditions, and restrictions” (CC&Rs), when they move in, and they’re required to sign a contract saying that they’ll abide by them.

CC&Rs can cover everything from your type of mailbox to the size and breed of your dog. Some HOAs require you to purchase extra homeowners insurance if you own a pit bull, for example; others prohibit certain breeds entirely. An HOA may even regulate what color you paint your house, and what kind of curtains you can hang if your unit faces the street. Its goal is not to meddle—it’s merely to maintain a neighborhood aesthetic. However, if you don’t like being told what to do with your home, an HOA may not be for you.

What happens if you violate HOA rules?

That varies from place to place, but if you break the rules—or fall behind in paying your HOA dues—the consequences can be severe. You could be evicted, or worse. Some HOAs have the right to foreclose on your property, says Bob Tankel, a Florida attorney specializing in HOA law. So make sure you read your CC&Rs carefully so you know what to expect, and know the pros and cons of HOA living before you buy in.

Source: Realtor.com, Lisa Johnson Mandell
http://www.realtor.com/advice/what-is-an-hoa/?iid=rdc_news_hp_carousel_theLatest

Don’t Be Shocked by These Hidden Costs of Buying a Home

When you’re thinking about buying your first home, it might seem like it’s all about the down payment. You save for years to have it, and you base a good portion of your home-buying budget on it.

Next comes the mortgage. How much will you owe each month in principal, interest, taxes, and insurance? How does that compare with how much you currently pay as a renter?

If you’ve figured out how to tackle those two huge expenses, you might think you have it made in the shade. With lemonade! But the hard truth is that those are far from the only expenses you’ll incur when you buy a house.

In fact, there are lots of hidden costs to anticipate. These fees might affect your overall budget, timeline for buying, and what kind of home you want to buy. It’s important to consider them early in the process, before you fall in love with a place you can’t afford.

Expenses you’ll learn about while home shopping
1. Closing costs and other fees

The house has to be appraised to find its fair market value, the property records must be checked to make sure the seller has full rights to sell you the home, the real estate agent has to be paid for her work, and so on.

The seller might pick up some of these costs, but you’ll have to shoulder some of the burden. We’re talking about fees that, all together, can add up to a few thousand dollars. And you can expect closing costs to run from 2% to 5% of your home’s value.

Your mortgage lender must explain all the fees to you, so if anything confuses you, ask for more information.

2. Home inspection

This is a must to make sure you’re not buying a home with major structural issues. A home inspection will take a few hours and cost up to $500, but it can save you a lot of grief in the future.

3. Home warranty

If you’re buying an older home with appliances that are no longer covered by manufacturer warranties, getting a home warranty could be a good call. They generally cost a few hundred dollars per year and protect things such as kitchen appliances, ceiling and exhaust fans, plumbing, the furnace, and the sump pump. Inevitably, you’ll face a major repair on your new home, so consider whether a home warranty will save you from that expense.

Expenses you’ll encounter after you move in
Owning a home is full of hidden costs. Some cost you actual money, while others cost you time, energy, and happiness (which, let’s face it, also have an equivalent in money!). So even though you might not have to deal with these expenses until after you move in, you should definitely factor them into your decision.

1. HOA and condo fees

If your new home is a condo, or part of a community with a homeowners association, you’ll pay a monthly fee toward maintenance of shared community features. The more amenities you get (e.g., a pool, doorman, roof deck, or community center), the more you’ll pay.

The upside: Your HOA might care for things that save you money and time, like maintaining the landscaping around your townhouse.

If you’re considering a condo, ask for information about the HOA’s budget and cash reserves. If it decides to make a repair to the building that’s not part of its annual budget, you and your neighbors could be slapped with a special assessment to raise money for the unanticipated project—and this could cost you a few thousand bucks!

2. Maintenance, repairs, renovations, and redecorating

Maintaining your home—e.g., cleaning windows and gutters, keeping up the landscaping, and making small updates—typically costs about 1% of your home’s value each year. And that’s not including large unexpected repairs, which can get pricey.

Plus, once you move into your new home, you’re going to want to put your stamp on it.

“People always buy new furniture when they move. The apartment furniture isn’t good enough for the new house,” says Sophia Bera, a financial planner and founder of Gen Y Planning. “This can be really expensive, and I’ve known a few people who’ve financed the furniture, but then they spend more than they were planning on.”

You might also opt to renovate part of the house right when you move in; if that’s the case, make sure to take that into account when considering what home you can afford.

3. Utilities

Those first few utility bills might shock you. For one thing, renters often don’t pay separately for water, trash pickup, and sewer. And if your new home is larger than your previous rental, you’ll pay considerably more for electricity and gas.

4. Commuting

If your daily commute changes, you might need to buy a new car, or pay more to maintain and fuel the car you have.

A longer commute also bleeds into your free time. Don’t underestimate how much you’ll be affected by “just” another 15 minutes each way.

5. Community

Sometimes finding a home that has the amenities you want for the price you can afford means moving to a totally different part of town—and leaving your neighborhood friends behind.

Bera, who opted to spend a bit more to live near friends when she recently moved to Austin, TX, counsels her financial planning clients who are buying their first homes. All too often, people don’t consider the effect of moving miles away for the perfect house.

“The big thing I see is how much it changes their lifestyle. It might not be as convenient to do the activities they love or see their close friends, so they miss out on a lot of these things.” she said. “They have to create a whole new community. One thing we often don’t ask ourselves is: What is the price of community?”

Source: Realtor.com, Sara Rathner
http://www.realtor.com/advice/buy/hidden-costs-of-buying-a-home/?iid=rdc_news_hp_carousel_theLatest

How to Back Out of Buying That Home

Once home buyers find a place they adore, they tend to champ at the bit to seal the deal and move in. And yet every so often, they encounter a hitch that makes them think twice. Maybe more than twice, actually. It probably makes them lie awake in bed in a cold, sweaty panic and think: Oh my God, I’ve made the worst mistake of my miserable life. Is there any way I can wiggle out of this without losing my shirt?

The thing is, once a seller accepts your offer, odds are you’ve also ponied up an earnest money deposit—the cash you put upfront (typically 1% to 2% of the purchase price) to show the seller you’re serious (aka “earnest”) about the deal. You might be thinking that once that money leaves your hands, it’s gone for good if you decide not to follow through. That’s not necessarily the case.

Contingencies and legal protections abound that enable home buyers to back out of a deal. Some you’ll want to include in your initial purchase contract; others you don’t need to request outright and are just your legal right. So if you’d like to keep your options open, make sure to keep these “get out of jail free” cards up your sleeve.

Home inspection contingency

With professional staging, fresh paint, and gorgeous weather (“look at all that natural light, sweetie!”), a home can show beautifully—but that doesn’t mean everything’s kosher below the surface. “You can’t necessarily tell if there are issues with a home just by walking through it or going to see it at an open house,” says Peggy Yee, a supervising broker at Frankly Realtors in Vienna, VA.

If you’re concerned the basement may flood or faulty foundation may land you with expensive repairs, your best protection is to include a home inspection contingency in your contract, which will typically enable you to get out of the deal without forfeiting your earnest money deposit. However, “when you have a home inspection contingency, you’re on a deadline,” warns Danielle Zoller, a real estate attorney at Gordon Feinblatt LLC in Baltimore.

Home inspection contingencies are often set on a seven-day timetable—meaning you, the buyer, must complete the inspection and send a formal notice to the seller that you’re canceling the contract within seven days after signing the purchase agreement.

Be sure to cover your bases. “Some states require that the buyer also send a copy of the inspection report,” says Zoller. Also, some home inspection contingencies let the buyer walk for any reason, but depending on the contract, “you may have to give the seller an opportunity to make repairs before you can terminate the contract.” Zoller says.

Home sale contingency

If you already own a home, odds are you will want to sell it if you’re buying a new one. And luckily, there’s a contingency you can put in your sales contract for this as well. If the seller agrees to a home sale contingency, the purchase of the property can take place only if you sell your home by a specific date (e.g., within 30 days).

Because selling a home can take a while, make sure that the time frame you set is realistic. Look at how quickly similarly priced homes in your area are selling. If it’s a hot market, a month’s time may be fine; however, if places are on the market longer, you may want to widen that window. At the very worst, if your home gets no offers in that time period, you can simply back out.

HOA documents

When purchasing a condo or a property within a homeowners association, the seller must provide you with the subdivision’s Declaration of Covenants, Conditions, and Restrictions, or CC&Rs—legal language for the community’s rules and regulations.

These documents include the bylaws, board minutes, reserve funds, master insurance policy, annual budget, a history of special assessments, and what constitute finable infractions.

Depending on the age of the community, you might very well receive hundreds of pages. And some of those rules may not sit well with you: Some HOAs, for example, may have final say over the color you choose to paint your home’s exterior, or ban you from placing political signage in your lawn. (So what the heck are you going to do with all those “Chris Christie 2016: Telling It Like It Is” signs?)

You’re legally entitled to a specified number of days to review the documents, but review periods vary by state. In Maryland, for example, buyers are given seven calendar days; in Virginia it’s three days; and in Washington, DC, it’s three business days.

“Your real estate agent should know how many days you’re allowed,” but it’s always best to confirm the information on your own, says Zoller. (If your Realtor® is licensed in multiple states, the person may mistakenly confuse one jurisdiction’s review period for another.)

The best part: You don’t even need to cite a reason why you’re canceling the contract. As long as you give the seller notice during the review period, you’re allowed to withdraw your offer, keep your deposit, and move on.

Source: Realtor.com, Daniel Bortz
http://www.realtor.com/advice/buy/back-out-of-buying-home/?iid=rdc_news_hp_carousel_theLatest

What Is Due Diligence? Find Out What to Do Before Buying a Home

Once you make an offer on a home and it’s accepted, there’s a period lasting a few weeks before you close the deal. During this window of time, buyers are often told to “do their due diligence” on the home they soon hope to own. But just what is due diligence, anyway?

In the world of real estate transactions, due diligence is a fancy term for “do your homework.” Before buying a property, you should fully investigate it for potential problems that could cost major money to fix after you’ve moved in.

“Due diligence in residential real estate means [making sure] you’re getting the asset you’re paying for,” says Larry Anweiler, an Arizona real estate broker who teaches real estate at Kaplan University.

Think of this as your last opportunity to kick the tires, turn on and off all the lights—and generally make sure you’re not getting a lemon. And if you do find flaws, you’ve got time to negotiate with the seller, who could help you fix them or lower the home price. Or, if the seller refuses, you are free to walk away from the deal—and as long as you’ve placed some contingencies in your contract, you won’t have to forfeit that hefty deposit.

Due diligence is definitely worth taking seriously, so here’s a checklist of what you’ll want to scrutinize before closing the deal.

A home inspection

Most home buyers hire a home inspector to scrutinize the house top to bottom, looking for problems that could cost the buyer major money to fix. The inspector is looking for a crumbling foundation, faulty HVAC systems, termites, leaking roof, and other potential big-ticket problems.

You should also hire a separate professional to test for biotoxins, including mold, radon, and asbestos. These hazards are typically not checked by a home inspector and are expensive to fix. You should also check for larger neighborhood issues that could have an impact, like whether your home lies in a flood zone or near some environmental hazard. These can all be reasons to reopen negotiations with the seller and, if you’re not satisfied, prompt you to walk.

A title search

Before you can “take title” to the home—a fancy way of saying you establish legal ownership of the property that’s entered into public record—you’ll want to do a title search to make sure you can indeed do that, free and clear.

For instance, what if the previous owner’s long-lost brother shows up claiming he owns the property, or a creditor has placed a lien on the home due to unpaid debts, or there are unresolved boundary disputes with a neighbor? Such problems can be costly to address, and a title search will bring them to light so you can broach these issues with the seller before you inherit a problem you don’t want to have.

Condo or HOA rules

If you’re buying a condo or property within a homeowners association, you’ll want to thoroughly review its declaration of covenants, conditions, and restrictions, or CC&Rs. Basically this is the list of rules and regulations, as well as fines for infractions. Some can be quite strict, reserving veto power over the color you paint your home or the number or type of vehicles you can have in front of your house (RVs are sometimes banned).

Given these are rules you’ll be living under for the foreseeable future, it’s wise to review them and make sure you’re on board—and if not, you can back out with your deposit in hand.

Source: Realtor.com, Lisa Kaplan Gordon
http://www.realtor.com/advice/buy/what-is-due-diligence/?iid=rdc_news_hp_carousel_theLatest

Homeowner Evicted for Not Paying HOA Dues: Can This Happen to You?

Who knew? Even if you pay your mortgage on time every month, your home can still be foreclosed on and sold from under your feet. That, at least, is what Triss McQuiston from Tomball, TX, learned recently when she was notified that she’d have to vacate her place. Why? It turns out she was evicted for not paying her HOA dues.

According to ABC13, McQuiston admits that she was guilty of procrastinating on paying her HOA fees to the Canyon Gate at Northpointe Owners Association in 2014 and 2015. Because she was opening a new business, her HOA bills slipped through the cracks, for a grand total of $1,800 in unpaid dues.

An attorney for the HOA claims that since March 2014, they’d sent McQuiston 12 notices by first-class certified mail to collect these assessments, warning her what would happen if she didn’t. When they received no response, they proceeded with the foreclosure, and sold the home at auction back in September.

Yet McQuiston argues that she’d received no warnings, and was made aware of her dire straits only when she received an eviction notice on her doorstep on May 20. She has since hired an attorney to help fight the case and remain in her home.

“I would never have thought in my wildest dreams that an HOA … would go to these lengths and they’d have this much power,” McQuiston told ABC13.

If this story has you viewing HOAs in a harsh (and terrifying) new light, we don’t blame you. And while the laws vary by state, it turns out that in most cases, HOAs really do have the power to foreclose on your home for unpaid dues, as do condo owners associations.

“Contrary to common perceptions, even if a person is current on a mortgage, the HOA or COA may foreclose,” says Bob Tankel, a Florida attorney specializing in HOA law. “What’s the moral of the story? Pay your assessments. These are not huge amounts. People apparently think that just because assessments are small there’s nothing bad that can happen. But that’s not true.”

To know specifically how your HOA or COA handles late payments, homeowners should “check the Declaration of Covenants, Conditions & Restrictions (CC&Rs),” says David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. You should check not only what constitutes a late payment, but also how you’ll be penalized; additional fees could include late charges, fines, interest, as well as attorneys’ fees.

It’s also smart to check what rights and recourse you have in your state if you end up unable to pay these assessments. “Some states have enacted some procedural protections for homeowners,” says Reiss. “It’s worth figuring those out if you are not able to pay off your HOA right away.”

The bright side? Given HOA fees are fairly small compared with a mortgage, they should be fairly easy to manage with some belt-tightening. In fact, Tankel suggests, “Move payment of assessments to the top of the list of things to pay. If you can’t, you can cancel your high-speed internet or cable TV or stop eating out. None of those services are worth keeping if you can’t pay assessments.”

Take it from McQuiston, who could still stand to lose her home for a mere $1,800. She admits, “I had the money the whole time. That’s the sad part about it. I would have gladly taken care of it.”

Source: Realtor.com, Judy Dutton
http://www.realtor.com/news/trends/evicted-for-not-paying-hoa-dues/?iid=rdc_news_hp_carousel_theLatest

HOA Fees Now May Affect Credit Scores

A major credit reporting agency says it will soon take into account homeowner association fees. Home owners who are late on payments may soon see the effect on their credit score.

Sperlonga, a credit data aggregator, is the first company to provide HOA payment and account status data to Equifax, which is one of the three major credit-reporting agencies. A full rollout of the new HOA reporting to Equifax will go live in October.

Homeowner associations and property management companies collect about $70 billion in HOA payments yearly among at least 333,000 community associations, according to the Community Association Institute.

“Until now, HOA payments have gone largely unreported to the national credit-reporting agencies,” says Matt Martin, chairman and founder of Sperlonga. “Our service will help elevate association payments to the same level of importance as the consumer’s other financial obligations like residential mortgages, auto loans, and credit card payments. Property owners that pay HOA fees on time should begin to see the similar impact [on] their credit reports as they would with other payment obligations traditionally found in a credit report.”

For property owners who are late or delinquent on their HOA payments, they will likely see a negative effect on their credit score, just as if they had missed a mortgage payment.

“Introducing new sources of data beyond what has traditionally been found on credit files can provide additional insight into a consumer’s financial behavior and help deliver expanded credit access,” says Mike Gardner, senior vice president at Equifax.

Source: RealtorMag Online > Sperlonga
http://realtormag.realtor.org/daily-news/2016/05/09/hoa-fees-now-may-affect-credit-scores?om_rid=AAFmZk&om_mid=_BXMMkfB9NaK2Yp&om_ntype=RMODaily

HOAs Behaving Badly—and How Homeowners Can Fight Back

I've had a few bad experiences with HOAs that I'll write about in a future blog post perhaps. Below is a great article from Realtor.com about some crappy HOAs and the shenanigans the play.



If you own your home, you may be king or queen of your domain. However, if it’s part of a planned community or complex, you’ll probably need to kowtow to a homeowners association. And you may wind up feeling a bit more like a serf.

The HOA, which enforces community rules and maintains common areas, can be quite useful—but sometimes it can come across more like Big Brother. Read about HOAs that put neighborliness aside all in the name of rules, and how you can cope if yours does the same.

Changing its tune on a change of paint color

The color blue is supposed to be calming, but in October 2015 it got some neighbors seeing red. According to news site KHOU.com, newlyweds Keely and Peter Dubrova had decided to paint their home in Atascocita, TX, a vivid shade of teal—with permission from their HOA. A week and a half later, the same board demanded the Dubrovas repaint after an online photo of their so-called Smurf house sparked an uproar, and even threats to “to hang them.”

Expert advice: “The HOA cannot legally revoke approval after the homeowners have relied on the approval and spent money on it,” says Mike Hunter, an attorney with Horack Talley in Charlotte, NC, who focuses on community and condominium law. So, the Dubrovas should stand their ground; but if they’re open to repainting, the HOA should foot the bill.

Not making a concession for a disabled kid

Due to a disability that meant their daughter needed to use the bathroom frequently, Gary and Renee Kuhn of Keizer, OR, needed a fully-appointed RV to drive her to and from doctor appointments. Yet in January, KATU News reported that the McNary Estates Development’s HOA wouldn’t allow the Kuhns to park said RV in their own driveway, citing bylaws that ban the vehicles. Instead, the HOA suggested the parents park the RV in a lot a few miles away because, hey, why make things easier for parents of a disabled child?

Expert advice: “The federal Fair Housing Act guidelines require HOAs to make ‘reasonable accommodations’ to persons with disabilities to allow them full use of their home,” says Hunter. “So in this case, law in this area leans heavily in favor of the homeowner.” It’s no wonder, then, that the Kuhns are now suing their HOA.

Cooking the books, casino-style

HOA managers handle tons of cash without much oversight.  A cynic could ask: How hard could it be for some of those managers to skim a bit off the top for themselves? Well, that’s what Susan Marie Lambert decided to do as an officer of the Woodlake Homeowner Association in San Mateo, CA, bilking the group of almost $3 million over six years.

According to the Daily Journal, Lambert and a contractor billed phony invoices, then the two split the cash for work that was never performed. Homeowners finally noticed something was off in January when Lambert made an ATM withdrawal at a casino using an HOA card. Brilliant!

Expert advice: Hunter advises HOA members to set up security measures to protect HOA funds.

“Keep track of who has signature authority on accounts,” says Hunter. “Require two signatures on checks, including at least one board member. Avoid credit cards in the HOA’s name, and require a fidelity bond covering any person or company that’s handling the HOA’s finances.”

Retroactively banning roommates

In December, the Idaho-based Buffalo Junction HOA kicked out condo renter Collin Wheeler and his roommate when the organization charged that they did not meet the requirements of a “family.” The HOA board wrote a letter stating that the term “is defined to include parents (or single parent) and children and other dependents.” But according to news outlet TVN, this rule didn’t exist when Wheeler moved in—it was added, seemingly, to boot young renters like him.

Expert advice: In this case, Hunter questions whether the HOA can legally impose a new rule and make it retroactive. In any case, Wheeler has found a new place—one with no HOA, he hopes.

Charging a fee to keep the nearby golf course afloat

You buy a home next to a golf course managed by a separate company. But if that golf course threatens to close due to low membership, who pays? In Rancho Mirage, CA, the Morningside HOA thinks all the residents who live along the course need to start yelling, “fore!” According to the Desert Sun, the HOA added a mandatory club membership fee at $250 a month on top of the $1,050 HOA dues.

Expert advice: These residents can most likely lay down the clubs and refuse to pay up.

“The homeowners should examine their governing documents for increasing assessments and consult with an attorney,” Hunter advises.

Great place for the Grinch

Residents of Mesa, AZ, didn’t have a very merry Christmas in 2015, due to a letter sent from the HOA instructing them to take down holiday decorations outside their homes.

Expert advice: Sure it sounds mean-spirited, but in this case HOAs might determine that they have little choice in the matter, Hunter says.

“If the board allowed Christmas wreaths, they would stand accused of discrimination if they later denied other decorations like a pentagram, distasteful pictures, or political signs,” he points out.

To avoid this “slippery slope,” Hunter allows that like-minded owners could “propose an amendment to the condo’s governing documents that would allow holiday decorations for a finite number of days.”

Source: realtor.com, Margaret Heidenry
http://www.realtor.com/advice/buy/hoas-behaving-badly/?iid=rdc_news_hp_carousel_theLatest

Q&A Manager of homeowner association treats renters unfairly

Question: The manager of our homeowner association does not like renters and goes out of her way to force them to move. She fines and penalizes renters for things they don't even know are violations. She tells renters asking for clarification on bogus charges and fines: "You did it. Get out of here or I'll call security."

Owners who ask management to correct invoices containing alleged renter-violations are told: "Tell your renters to move." Titleholders don't want problems with management, so they go back to their tenants and tell them: "Just pay the fines or they'll be evicted."

Renters don't want to make waves or be evicted, so they pay bogus fines. Management tells renters to go to the board to resolve their problems; the board says "go to management and pay the bill." Now what?

Answer: Ignoring renters' problems or complaints is a monumental mistake. Once a renter brings problems to the attention of management or the board, both are on notice, and the statute of limitations time clock for resolution is ticking away. If the association fails to implement an acceptable remedy, these time limitations could force renters to take legal action.

Aside from being unprofessional, threatening renters with calls to security and avoiding questions cast a cloud over association operations. Tenants who are mistreated, discriminated against or simply ignored may attempt to break their lease, sue their landlord or both.

A manager, management company or board director should not interfere with a landlord's rental business or income generated by rental property by imposing illicit fines or failing to make corrections on titleholder accounts. Such actions may result in the association and all those responsible for such acts being sued for interference with the titleholder's business.

If the association allows rentals, then management and the board need to treat renters the same as any other resident. Any type of discriminatory behavior by the board or one of its agents creates an unnecessary risk of liability against the association. Knowingly creating such liability is a breach of the board's duty of care to the association and its owners.

Titleholders, not their tenants, are responsible for violations and resulting fines. It is the titleholder's responsibility to resolve disputes regarding a tenant's violation; the time involved is part of the cost of doing business as a landlord. The board and the management owe these titleholders a duty of good faith and fair dealing.

Directors must act as responsible fiduciaries for owner assets and any lawful business owner conduct. It is not acceptable for management or directors to treat a rented property differently from an owner-occupied property. It is also not appropriate for a titleholder-landlord to require tenants to assume landlord obligations.

Management and directors must avoid creating liability and being the subject of litigation. They must act reasonably and not single out titleholder-landlords for disparate treatment.

Titleholders who are wronged may seek a claim against the association for damages, including lost profits if a tenant breaks a lease or moves out because of wrongful actions taken by the association.

Director duties include active supervision of managers, holding them accountable for their actions. Failure to do so may result in joint and several liability against all directors.

Source: La Times, Donie Vanizian
http://www.latimes.com/business/technology/la-fi-associations-20151101-story.html

Why You Shouldn't Hate Your Homeowners Association Dues

If you buy a house in a planned development, a subdivision or a gated community, you’ll likely have to join a homeowners association (HOA). Which means you’ll be faced with the prospect of paying annual dues, whether you like it or not. Condo owners often face these fees, too.

No one expects you to be happy about these payments, especially when they often come due right after the holidays. And it’s true that the dues can be spent for seemingly trivial events such as neighborhood parties, and that management fees for the associations can be steep.

The HOA can make and enforce rules such as what colors houses can be painted, what types and sizes of pets are approved, whether holiday decorations are allowed on properties — even what types of mailboxes are allowed. And it can enforce these rules with fines and threats of foreclosures.

These associations say their rules and methods are necessary to keep property values up and maintain or increase resale values of the homes in the community. You might question that. But the fact of the matter is that HOA dues also can benefit you greatly, in ways that you can see and in ways that you might never think about.

Visible benefits from your dues

In addition to enforcing some degree of uniformity in your housing or condo development, the best-known function of homeowners associations is taking care of the community’s common areas. That includes landscaping — mowing the grass, planting and pruning trees, and taking care of flowers, lakes and clubhouses.

HOAs also operate swimming pools, gyms, and other amenities open to residents. Most also schedule regular pest control in common areas, and some set up garbage and other services.

Seems like these are pretty useful benefits, right? And there’s more to come.

Not-so-visible benefits

You can understand easily how you benefit from landscaping and swimming pools and gyms and the rest. But one of the real advantages of paying HOA dues comes when the association uses them for insurance for the condo or housing development. Why does a housing or condo development need insurance? We’re glad you asked.

Property insurance

This protection covers residents for any physical damage that happens to the common areas — particularly those clubhouses and other amenities mentioned earlier. Much like standard homeowners insurance, this coverage will help when there is damage from fire, wind, hail, and other covered perils.

This is particularly important in condo developments, because it also protects the buildings that house the units from the perils mentioned above. It’s up to the condo owner, however, to protect the contents of the condo.

What if the housing or condo development didn’t have any or adequate property insurance? Then the HOA would level special assessments against all the home or condo owners. Depending on the nature of the damage, that could result in you paying far more than your dues to make the development whole again.

Liability insurance

This is one of the most important parts of an HOA insurance policy, because it protects residents of a development if someone gets injured on common property. An injury could result in HOA members being sued, and legal costs and any award in the case could run into the hundreds of thousands of dollars, possibly more.

Why is this your concern? Because, again, the HOA could levy special assessments to raise the money to pay for the case. And remember, you’d have no alternative but to pay the assessment — otherwise, your home could be in danger.

Directors and officers insurance

Again, if someone — say, another resident — sues the leaders of the HOA, you would face the wrath of the courts just as much as the directors and officers. And again, you could be subject to a special assessment.

Employee dishonesty insurance

This would replace your — and other residents’ — HOA dues in case an employee steals money from the association.

Give your dues their due, but …

The almost-bottom line: Your dues, especially the part of them that goes toward HOA insurance, protect you from the prospect of paying larger amounts. So the dues do perform a useful function.

But here’s the real bottom line: You shouldn’t have to pay any more than is necessary. That means you should take the initiative. Make sure the HOA is spending your money wisely. Is it soliciting bids for the landscaping business? Does it seek several quotes for the insurance coverage before committing to a provider?

In other words, don’t hate the fact that you have to pay HOA dues. But don’t let your association get away with wasting that money, either. Your dues perform an important function that could save you money in the long run.

Source: Zillow Blog, Shannon Ireland
http://www.zillow.com/blog/dont-hate-hoa-dues-184748/

Condo Owners Must Read their Bylaws

I've sold quite a few condo and town home properties since I have been a Realtor here in the Silicon Valley. When it is my listing, I always make a point of it in ordering the homeowner association documents right away. Often times the docs I receive are hundreds of pages. Legally I have to make these documents available if the property is my listing for any potential buyers. If condo or town home is someone else's listing, I always make sure the listing agent sends me their most current copy, and I insist that my buyer takes the time to read them. For instance, many HOAs have restrictions on what size pet you can have, and if you have an upper floor unit, you can't have hard wood or laminate flooring.

"The Bylaws are perhaps the most important part of any condominium association documents. They are, in effect, the association's bible. These Bylaws should spell out, among many other items, what authority the Board has, what responsibilities unit owners have, and whether there are any limitations on spending power by the Board of Directors."

CONDO OWNERS MUST READ THEIR BYLAWS

Q&A: Unit owner's request for information about HOA is ignored

Anyhow who lives in a condo or town home (an more and more newer single family homes) is familiar with working with the home owner association. A number properties I have sold in the past year were properties with a HOA and generally speaking, at least from my perspective as a Realtor, they all have been fairly pleasant to work with. But sometimes when you live in property covered by a HOA there will sometimes be problems, which is why it pays to be familiar with what's in the HOA docs. I always tell my clients to read. Below is a great article about what to do if the HOA ignores your requests.

Unit owner's request for information about HOA is ignored