Home Owner Association or HOA FAQ

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Frequently asked questions about HOAs or Home Owner Associations. What exactly is an HOA? Is membership mandatory? Are dues mandatory? Who benefits?

What is an HOA?

An HOA or Homeowner Association is a legal entity created to manage and maintain the common areas of a community. Typically these "common areas" consist of things like pools, clubhouses, landscaping, parks, streets and roads.

HOAs can consist of single family homes, condominiums, or town homes and are typically setup by the original developer of the community with a set of rules called "Declaration of Covenants, Conditions, and Restrictions" otherwise known as "CC&Rs".

One of the primary functions of the HOA is enforce and ensure that these "CC&Rs" are adhered to by the individual homeowners. The guiding principals of these regulations are normally to help maintain property values and the quality of life within the community. For a detailed description, see this article: What is an HOA?

If I buy a home within an HOA, do I have to belong to the HOA?

Yes, the only way an HOA can work correctly is if everyone who lives within its boundaries belongs to the HOA and pays dues.

What is the difference between the HOA and the board of directors?

The HOA consists of all owners within the geographic boundaries of the HOA. Each and every owner is a member of the HOA. Membership is not optional. The Board of Directors consists of those owners who have been elected to conduct the day-to-day business of the HOA and make the decisions that affect all owners.

I would like to build a 6 foot fence in front of my house, but the HOA deed restrictions state that a fence can only be 4 feet high? Do I have any recourse?

Fair and uniform enforcement of an HOA's deed restrictions is critical to maintaining property values. Association deed restriction cases are typically overturned in the courts if there has been inconsistent application of an association's rules and regulations over the years. Thus, unless you can show that the rule has not been applied consistently, you won't have much recourse.

I have two dogs and a cat and the CC&Rs of my HOA only allow one pet? What can I do?

Unfortunately, unless you want to move, you will have to get rid of two of those animals. One of the most important things to do before buying a home in an HOA is to thoroughly read the CC&Rs. For more on this, see the list of items below on what to do before moving into an HOA.

What is the difference between a review and an audit?

A financial review consists of the auditor inquiring of association or management company personnel in order to verify the financial records of the association. Unless deemed necessary, the accountant is not required to obtain any independent corroboration to substantiate the personnel presentations. In contrast, as part of a certified audit, the auditor must obtain independent evidence to substantiate the assertions made by the association's employees and management.

In addition to a big difference in detail and thoroughness, a review can cost hundreds of dollars less than an audit. The board of directors makes the decision on what level of analysis will take place. Although many state laws governing associations and an association's governing documents may require an independent audit, some boards choose to save money and contract for a review.

What is a Reserve Study?

In order to maintain and preserve market values of both the residential and common area property, an HOA must develop funding plans for future repair or replacement of major common-area components, such as swimming pools, decks, asphalt surfaces, concrete areas, fencing, monument signs, and much more. Thus, a Reserve Study provides guidance on how much your HOA should be putting aside each month for reserves so it can meet the future obligations described above without requiring special assessments.

Our HOA has not obtained a reserve study for more than five years. We have had audits each year. Can the audit report be accurate if the reserve study is five years old?

No. Without a current reserve study, the balance sheet included in the audit report will not reflect your HOA’s current, actual liability for future replacements. Trying to save money by not performing a reserve study is very foolish. Each state has different requirements, so consult your state law.

What should I do before buying a home in an HOA?

  • Thoroughly read and examine the CC&Rs that govern the community and make sure you can live with and abide by them.
  • Get a copy of the financial statements of the HOA and have a person such as a lawyer or accountant examine them to make sure there is nothing irregular.
  • Find out what the monthly dues are and make sure you can afford them.
  • Find out if a reserve study has been done for long term replacement of major items such as heating, cooling, roads, buildings and roofs and how the reserve requirements are funded.
  • Find out if there is any litigation pending against the HOA.
  • Determine the last time ands how often dues have been raised.
  • Find out if there are any special assessments pending.

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Source: Neighborhood Link and Association Times
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