Private property is understood to be the foundation of prosperity and personal freedoms. But would you believe me if I told you there are places in America where privately owned property is subject to laws outside those of cities and states? Or that property owners can be deprived of fundamental rights by a non-governmental entity?
Homeowners Associations (HOAs) are the governing bodies of housing developments or complexes. They may exist in single-family housing developments and condo or townhouse complexes. Their stated purpose is to help maintain good relations among neighbors, keep property values stable and provide a mechanism for democratic decisions about expenditures for repairs and amenities like tennis courts, swimming pools and golf courses.
One in five homeowners will become part of an HOA when they purchase their home, and in most cases the benefits are worth any hassles. But HOAs can make decisions that have a negative impact on your enjoyment of your home. And, unfortunately, many people who choose to do battle with these powerful but often inexperienced or uneducated boards lose more than a good night’s sleep. They can lose their homes.
If you are thinking of buying a home governed by an HOA, here’s how to enter into the relationship with your eyes wide open:
Their development, their rules. You may be buying a house, but you are also becoming a member of the HOA. This is not optional. You will pay membership dues and be subject to all of its rules regarding your conduct outside your home but inside its gates.
But if the rules are meant to protect my property value, how bad can they be? HOA rules, called covenants, conditions and restrictions (CCR), can govern everything from appearance to behavior. Read them carefully to know how much of your life the HOA can control. Common rules may include what color you may paint your house, what kind of landscaping you install, how much noise you make, how many cars you can park or whether you can have a pet.
Violations of the rules carry consequences – sometimes serious consequences. Because most HOAs are corporations, their sanctions are legally enforceable. If you break a rule, you can be fined. If you refuse to pay your fines, the HOA can seize your property. I am not exaggerating when I say I’ve seen cases where homes worth hundreds of thousands of dollars were forced into foreclosure to settle hundreds of dollars in HOA fines or unpaid association dues. In fact, Nevada is one of about 20 states that allow HOA liens to get priority over first mortgages.
Is there any way to live happily ever after with an HOA? “Ever after” is a long time, so no promises. But if your dream house is part of an HOA, make sure to talk to other homeowners about their experiences, meet with the board of the HOA and determine whether there are plans for construction, installations or other changes that might affect the immediate area around your home. Be sure you love the house “as is” – in case you can’t make changes. And consider whether your lifestyle fits in with that of the neighborhood. Build the HOA dues into the overall cost of your monthly payments and be organized enough to pay fines promptly if you violate a rule. And remember: Rules are rules. When you bought your home, you agreed to play by those set by your HOA.