Like many current or soon-to-be Homeowners Association (HOA) members, chances are you have had questions about the primary purpose of an HOA. There’s no question that HOAs do tend to get a bad rap from time-to-time, but just like any organization, there’s always pros and cons. As the number of HOAs steadily increases, it has been estimated that almost a quarter of Americans are currently part of an HOA community. HOAs can steer the seeking home owner in a number of ways when it comes to making their final financial decision. However, it doesn’t just end with the homeowner ‒ HOAs can put great influence on their board members, renters and even property management companies.
With the many assumptions and rules that come behind an HOA, you may find yourself asking a number of questions: How much does it cost? What are the laws? How will this benefit my home? For those that are current board members or work in property management, your purpose is to ensure the value of your community. Many times you may find yourself caught in a bed of weeds while trying to find better ways to improve your community. All things considered, these are all common questions. As a software company that puts the majority of its focus on solutions that are involved in HOAs, we would like to provide you with a thorough understanding of what an HOA has to offer from not only a soon-to-be homeowner’s perspective, but also those that may already be involved.
Why Do HOAs Exist?
In most cases, HOAs are typically formed by the real estate developer that was responsible for helping build the community. Being that it is important that the developer maintain a strong presence of their final development, HOAs are created so that not only the community flourishes, but that it adds value.
What Is an HOA Homeowners Association?
An HOA is an organization that oversees a subdivision, planned community or condominium. Their primary responsibility is to manage the business affairs of the corporation all while balancing the needs and wants of their neighborhood community. Those who purchase a property within an HOA jurisdiction automatically become members and are required to pay annual fees. HOAs also make and enforce rules to maintain communal areas that increase property values.
Who Are The People Involved In An HOA?
- The Board Members: In most cases, an HOA is typically started by the housing developer and acts as a non-profit organization with a Board of Directors made up of elected residents. The Board of Directors is then responsible for enforcing rules laid out in the Declaration of Covenants, Conditions, and Restrictions (CC&Rs). The Board of Directors may include officers such as the president, the vice-president, a secretary, treasurer and an auditor. If in the situation more focus is needed with specific community projects, these board members may also form management positions so that there is more attention given to the project.
- The HOA Members: HOA members generally consist, but are not limited to, single-family homes, condominiums, townhomes, and other groups of homes that are considered to be in a planned covenant community. These can often be confused for common-interest communities, which govern bodies over condominiums, retirement communities, vacation timeshares and co-ops. Both of which have different sets of rules and regulations.
What is a Declaration of Covenants, Conditions and Restrictions?
These Declaration of Covenants, CC&Rs typically include bylaws and regulations regarding the appearance of the exterior of the homes including fencing, landscaping, roofing and paint color. Noncompliant homeowners are also held accountable to keeping within CC&Rs standards through citations and fines.
Let’s Get the Facts
According to the Homeowners Association of America, there are“over 351,000 homeowner associations in the United States. Collectively, this represents over 40 million households or 53% of the owner occupied households in America.” Furthermore, over 70% of these homeowner associations consist of volunteer members that manage the organization by the Board of Directors. As rural new developments begin to arise, it has been estimated that as many as 8,000 new Homeowner Associations are created yearly.
What’s In It For You? The Benefits of An HOA
- Value and Shared Amenities: Having an HOA can increase the property value of the homes within their jurisdictions. Neighborhoods with HOAs typically have shared amenities that the HOA oversees in addition to enforcing standards of each individual home. Amenities may include pools, sports facilities, clubhouses, fishing ponds, gardens, and landscaping. In some cases, HOA fees can also cover the cost of waste management services and snow removal. Many HOAs have an event facility and maintain a robust calendar of events throughout the year including cookouts, 4th of July parades and fireworks, holiday gatherings, and much more.
- Physical Appearance: The physical appearance of an HOA neighborhood has often kept a high reputation of being cleaner, up-to-date, and more uniform. The rules and regulations outlined in the CC&Rs ensure these standards are upheld to the communities expectations.
- Friendly Neighbors: For those that are new to the neighborhood, an HOA community has been known to be quite welcoming to its neighbors. HOA neighborhoods often provide a great amount of support and local information to their new community members.
- Disputes: HOAs can help mediate disputes between neighbors to keep a peaceful community.
All HOA rules are established by their own community and are outlined in the CC&R rules and guidelines handbook. Regardless of community, region, or state, many of the rules have commonality amongst other homeowners associations.
HOA Rules | What Are They?
Although all HOAs have different rules that they may enforce, here are some general rules that most members have to oblige by. As a general rule of thumb, you can expect HOAs to implement the following regulations:
- Putting trash and recyclables in the proper bins
- Specifications for additional buildings
- Avoiding littering and vandalism
- Picking up after your pets
- Following association rules
- Permissible exterior paint colors
- Recreational vehicle parking
- Other outward appearances
- Lawn maintenance
- Roofing criteria
Are All The Rules The Same For All Types of Living?
In general, most homeowner associations contain different services and cost depending on the location.
- Condominium HOAs: As the owner of a condominium, you may have full ownership to the interior of your property, but your HOA may own the exterior and any common areas. As a perk to being an HOA member, you are given the option to vote on who serves on the condo’s main board. Yet, condo HOAs have been known to have more restrictive rules. For example, approvals from your condo’s board may be as small as receiving permission on where your guest can park, to whether or not you may use holiday decor outside your home. Condo HOAs are also known to manage facilities such as the swimming pools, parking garages and fitness centers.
- Townhouse HOAs: By definition, a townhouse is a single-family residence with at least two floors, which include one shared wall with another townhouse. These can be found mainly in urban areas where housing prices are high. Townhouse HOAs typically fall alongside the same rules as a condominium HOA, but are known to be less strict. Being that you do own the exterior area of the townhouse, you may have more control over what you can do with it.
- Single-Family Home HOAs: These planned communities are known to be extremely popular in the West and South with as high as 67% being new-home constructions. Some single-family homes may provide a sense of safety as their community is often gated and can consist of security guards to keep families safe. They also may include pools, community centers, gyms, golf courses, and playgrounds. In general, suburban HOAs are known to cost less per month than those of condos or townhouses because they cover less space. You may also have the freedom to control your yard and insurance, but the rules can still be demanding ‒ particularly if one lives in a more upscale neighborhood. For example, some upscale neighborhoods may implement stricter rules such as giving permission on what type of trees you can plant, to how long you can leave a car parked in front of your home.
HOA Fees | How Much Do Fees Cost?
HOA fees vary by the neighborhood and the value of the homes. On average, HOA fees can range from $200 to as high as $400 per month, which are collected either monthly or annually. Assessment fees may also be collected if the neighborhood experiences an extreme maintenance expense like a natural disaster, flood, or other unexpected cost. While there may be a reserve fund to pull from, any cost over the reserve fund will be assessed and split between all HOA members.
Are HOA Fees Mandatory?
HOA fees are mandatory. HOA fees may be considered when a lending institution assesses your application. For example, they may evaluate your income versus property expenses. In some situations, your loan could even be denied unless you can safely cover everything including HOA fees. In conclusion, the HOA enforcement can be strict; failing to pay HOA fees can result in late fees, restrictions on use of community spaces, and in some cases eviction.
Do Renters Pay HOA Fees?
It could be possible that a renter may encounter an HOA fee from either the organization itself or their landlord. A renter that moves into an HOA area could be required to follow the rules set by the HOA organization and in some cases, pay certain HOA fees. In other situations, the landlord may be the one to be given the responsibility for paying these fees and should be carefully addressed in your lease agreement when signing. It is also the sole responsibility of the landlord to communicate and provide their tenants with a copy of the CC&Rs rules, along with any other neighborhood guidelines that may impact them throughout the duration of their lease.
Can HOAs Raise Dues?
Depending on the area, HOAs can raise dues periodically given specific guidelines within the CC&R rules and regulations. In some situations, HOA fees can increase to cover inflation, rising operating costs, funding a new neighborhood or covering extra maintenance costs. Other factors may include additional cost to cover emergencies and community projects. All rules in regard to fee increases can be found in your communities CC&Rs handbook.
What Do HOAs Actually Pay For?
The primary purpose of an HOA fee is to bring betterment for the community that it may govern. It is important that all community members have a full understanding of what their fees will go towards, which can be found in the By-Laws and CC&Rs. According to the HOA bylaws, fees are typically distributed to communal amenities. It is also common for HOA fees to cover maintenance on local parks, pools and many other communal amenities. It is important HOAs take in consideration the value that all HOA fees will bring to the communities and those involved in it.
- There are federal and state-level laws that govern HOAs
- Link to all states HOA laws here: https://www.hopb.co/hoa-state-laws
- State laws govern HOAs within each state, but there are federal statutes that have an impact and directly affect HOA functions including:
- Americans with Disabilities Act of 1990 – prohibits discrimination against disabled persons in public accommodations – this includes accommodations operated and overseen by HOAs
- Fair Housing Act – an HOA cannot take an adverse action affecting a person’s right to buy, rent, or enjoy the use of real estate based upon that individual’s membership in a protected class.
- Fair Debt Collection Practices Act – This law requires HOAs to provide certain notices to debtors, prohibits certain forms of communication, and bans harassment or abusive conduct by debt collectors.
- Freedom to Display the American Flag Act – HOAs cannot, by law, restrict or prevent displaying the American flag on residential property.
- Over-the-Air Reception Devices Rule – HOAs cannot implement restrictions that impair the installation, maintenance, or use of antennas used to receive video programming.
- The United States Bankruptcy Code – If an HOA member files bankruptcy, the HOA cannot take any actions to collect assessments subject to the bankruptcy case.
- The Servicemembers Civil Relief Act – Protects members of the armed forces from collections actions and foreclosures during their time of service. This applies to all creditors, not just debt collectors.
How Does an HOA Management Work?
- What Is An HOA Management Company? An HOA management company is a third-party firm that helps cover a larger scope of responsibilities, when it becomes overwhelming for the elected volunteers of a HOA Board of Directors. HOA management companies oversee many HOAs at a time and act in as a primary consultative role to aid in a long-term success of HOA organizations.
- HOA Board of Directors: The Board of Directors consists of primarily all volunteer HOA members that perform their duties on a volunteer basis. These members are mainly responsible for overseeing functions such as maintaining common areas and amenities within their community. They may also provide a shared service such as organizing a trash collection or recycling drive. HOAs also make community decisions, create and adopt policies, along with hiring vendors when needed.
- HOA Management: An HOA management company guides and consults with the Board of Directors to fulfill their duties with areas such as helping make executive decisions, documenting transactions and keeping accounting records when needed. They may also work as a point of contact for members when having to work with larger projects and responsibilities.
- For example: The HOA Board of Directors may be in charge of making decisions while the HOA management company will be responsible for fulfilling dues, maintenance and vendor payments based on those decisions.
What Roles Come With An HOA Management Company?
- Accounts Receivable: Here is where the management company will be in charge of billing, reporting delinquent accounts, sending delinquent notices, collecting funds and working with the association’s attorney when coordinating legal actions.
- Administrative Services: Main responsibilities include scheduling board meetings, providing monthly reports, enforcing rules and regulations, guiding the board through preparing an annual budget and responding to homeowner inquiries.
- Accounting Services: Main responsibilities include managing bank accounts for the community, estimating maintenance costs, record keeping on all accounts payable and accounts receivable, creating monthly financial statements and providing guidance for long-term funding.
- Site Management: Main responsibilities include inspecting rule violations, coordinating various board-approved actions, checking maintenance issues and checking for all lawn care, pool cleaning and other vendor tasks are completed and kept up to all standards according to the guidelines outlined by the HOA Board of Directors.
With the many tasks and responsibilities that come with managing an HOA, some communities may consider finding easier ways to help function their day-to-day routines and responsibilities. As a solution, incorporating an HOA software can be a great substitute to an HOA managers toolbox; providing an easy-to-use system to help streamline administrative work such as CC&Rs, policies, accounting, communicating and much more.
What Are The Benefits of An HOA Software?
Investing in an HOA software can not only ease difficult-to-manage tasks, but it can also be an added amenity for the community – making the HOA experience digital and seamless.
- Utilizing an HOA software provides a professional touch to any HOA organization. Acting in a consultative role, HOA software features include support lines to help connect, collaborate, advise, and manage their communities.
- HOA software features solve major pain points for neighborhoods.
- Administration: HOA software can help manage routine and requested maintenance. They may also provide easy access to documents and integrate with accounting systems that allow HOA members to make online payments, check balances, and make communal space reservations.
- Communication: Other responsibilities related to communication may include managing package deliveries and notifications for their members, maintaining safety procedures, creating and maintaining an approved list of authorized visitors, maintaining the HOAs website with current updates, and sending push notifications to neighbors and residents with any new HOA news.
- Community: HOA software can help to easily connect the community through event calendars and reminders, polling to help make decisions without hosting a formal meeting, keeping a private network of listings and classifieds, hosting forum threads, along with direct messaging capabilities between the Board of Directors and residents.
The More HOAs Rise In Numbers, The More Demand For Effective HOAs Will Rise.
As HOA communities continue to rise in number by almost 8,000 a year, the likelihood of a seeking homeowner being affiliated with an HOA is fairly high. Homeowners seek security, a good place to raise their families and most importantly a good quality of living. In conclusion, the better an HOA is run and organized, the more quality of service and value a community brings to its members. According to a study conducted by Wyatt Clarke and Matthew Freedman it was concluded that “that single-family houses with an HOA generally sell at a premium, but with substantial local variation. On average, buyers pay at least 4 percent, or $13,500, extra for a house that is subject to an HOA.” Like many home buyers, it is important to feel secure with the decision to invest extra dollars into their home. With that comes one primary benefit ‒ to have an effective HOA community.
Why Invest Into An HOA Software?
Most commonly many HOA organizations can run into issues due to the lack of communication and involvement that their members may encounter. As a result, this can lead to poor member expectations and engagement. HOA members may miss out on the benefits of a tight-knit community and are known to be less likely to speak up about their concerns. By allowing an HOA software to help relieve the stress of issues like these, will not only bring a stronger quality of living, but more value to the community.
- Effective communication: An HOA software allows its members to communicate more effectively to one another. For example, using polls and forums enables communities to engage in virtual discussions of day-to-day matters, along with events and other important gatherings.
- Reduces Costs: HOA softwares can help reduce costs from mailing or printing expenses that can easily be posted and updated through a virtual discussion or direct message. Another major perk that some HOA softwares can bring is by allowing its members to customize their own website through their own chosen application. This alone can save thousands of dollars on the organization and allow the HOA to put more personalization into their view as a community.
- Reduce Time: Time is money. An HOA software can also help reduce the time it may take for a volunteer to manually implement. For example, an HOA board member that volunteers their time to help manage dues may end up taking more than 20 hours of their week, plus having to work a full-time job. HOA softwares can easily manage and process its members dues by a few simple clicks. As a result, payments are properly processed, less time is spent on processing and most importantly, members have a sense of security knowing that their HOA fees will be properly processed and recorded without errors.