For millions of people, owning a home means living in a homeowners association (HOA).
Also known as community associations, condo associations, or common-interest developments, HOAs can consist of townhomes, condominiums, or single-family homes.
They can be a bit like private governments. They manage and maintain common areas, shared systems, and even shared roads. All through fees paid by the homeowners. They also make and enforce community rules.
Below you’ll find the basics on:
- Types of HOAs
- Community rules
- How they’re run
The 3 types of HOAs
Depending on the type of HOA, what’s all yours and what you own in common with your neighbors is different.
About half HOAs are planned communities, usually of single-family homes. Sometimes townhomes.
- You exclusively own your building or unit and the land under it
- The HOA owns common areas, such as grounds, pools, and roads
- With townhomes, the HOA might own shared walls and roofs
About 40% of HOAs are condo associations, usually apartment buildings.
- You usually own the space inside your unit and the interior surfaces of the walls, not the land under it
- You co-own common areas
- You co-own shared systems, such as the roof and heating/AC
- The HOA itself might own property too
Around 6% of HOAs are co-ops, structured as corporations. They’re usually a single building.
- The co-op owns the entire property and all units; owners are like shareholders
- You have the exclusive right to occupy or “rent” an apartment
- Common areas might include hallways, the roof, elevators, parking areas, and laundry rooms
- Common systems usually include heating/AC
Did you know? The number of homeowners associations (HOAs) has skyrocketed in the last 50 years. About 1 in 4 Americans now live in one, and 80% of new homes are built in one.
When you buy an HOA property, membership in the HOA is automatic. You can’t opt out.
That’s because an HOA is, in part, a way to share the responsibilities of homeownership. Including some of the maintenance. That can be nice when it’s time to pay for a new roof! Or if you’d rather go swimming than mow the lawn.
At the same time, you have the extra responsibilities of abiding by the HOA’s rules and keeping up with HOA business.
The best way to make sure your HOA works for you is to get involved. Get to know your neighbors, attend meetings, and vote.
Before you buy into an HOA, read the fine print. Can you live with its rules and regulations? Different HOAs often have very different rules, known as CC&Rs (covenants, conditions, and restrictions).
CC&Rs are meant to protect everyone’s property values and maintain harmony between neighbors. After all, a home’s value depends quite a bit on surrounding homes.
Things CC&Rs often dictate:
- Renting out your property
- The number of cars on your property
- Kind and number of pets
- Trash and recycling
- Holiday decorations
- Noise and quiet hours
- Exterior storage
- Exterior design and paint colors
If you ever want to change the rules, you can get together with your neighbors and try. Meanwhile, they’re legally binding. If you break them, the HOA can fine you and even take you to court.
Fees and finances
Fees are part of the deal. Everyone chips in on common expenses — and has a stake in the HOA’s overall financial health.
Monthly, quarterly, or annual fees
The average monthly HOA fee for a single-family home is about $250. The amount varies widely, though. It depends on the amenities and the age of the building or buildings. Older buildings need more maintenance.
Things HOA fees might cover:
- Landscaping of common areas
- Maintenance of common areas
- Snow removal
- Garbage collection
- Street lighting
- Recreational areas, like a gym or pool
- Social activities
- Staff, if any
- Private roads
- Sewer and water infrastructure
- Shared systems like heating/AC, roof
On top of the regular fees, most HOAs can charge “special assessments.” This happens if, for example, there’s a repair that the HOA hasn’t saved for.
You might pay the assessment all at once or over time, as a temporary increase to your regular fees.
Every homeowner needs to save for unexpected repairs and long-term maintenance. Likewise, every HOA needs to put part of the regular fees into a reserve fund.
Balancing the desire for low fees with the need for a healthy reserve fund can be a challenge. Some HOAs save the minimum. To protect homeowners from huge special assessments, some states regulate HOA reserve funds.
If you don’t pay
Like paying your property taxes, paying your HOA fees is critical.
If you get a little behind, most HOAs will work with you. You might be charged additional late fees.
If you don’t pay, your HOA has the right to file a lien against your home until you do. That means the HOA basically owns a piece of your home.
Tip for HOA buyers: Ask about transfer fees. Homeowners associations often charge buyers a one-time document “transfer fee.” It could be $150, or it could be thousands. Some states have outlawed these fees.
How HOAs are run
Each HOA’s bylaws, plus state laws, determine how it’s governed. The basics are consistent, though.
Board of directors
HOAs are run by a volunteer board of directors elected by you and your neighbors. Behind any great HOA is a dedicated board of directors.
- Keeps an eye on things overall, handling maintenance and other issues as they come up
- Creates and enforces the HOA’s rules
- Enforces payment of fees and fines
- Handles disputes as outlined in the bylaws
- Oversees committees formed to address specific issues
Homeowners can attend most board meetings to see what’s going on. Because they have work to do, boards often limit owners’ participation to a comment period.
If your HOA is big enough, the board hires and oversees a professional manager or management company.
Your board members still make the decisions. The manager carries them out, runs the day-to-day business, and is residents’ primary point of contact.
Once a year, most HOAs hold a general meeting for all owners. It’s your chance to have a say in HOA finances, upcoming projects, and issues that concern you.
Typically, you vote on:
- The annual budget
- Projects that need member approval
- New board members
- Any changes to the HOA rules (CC&Rs)