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

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