Each year, millions of people move into communities governed by Homeowner’s Associations (HOAs), and every day, I hear from folks who love them. I also hear from many others who find themselves trapped in nightmarish battles with their HOA management.
There is no place for apathy in regards to your HOA. Many homeowners just assume things are being run well. Sadly, sometimes that is not the case. Homeowners need to take care, and pay attention.
For help with this topic, we turned to HOA expert Jill Schweitzer, a realtor who for years had been helping people navigate the often tricky and frustrating world of HOAs.
Tragically, not long after I spoke with Jill, she suffered a medical emergency and passed away. But before she died, Jill created “HOA Savers”, a program to help homeowners navigate the often tricky world of HOAs. I know that her extremely helpful advice about HOAs will continue to help many more people, long after her untimely death.
Jill’s biggest point of advice: Check the rules before it’s too late, because you must live by their rules!
Look carefully at the Covenants, Conditions, and Restrictions (CC&Rs). Those are the rules that you will be required to live by — often with little recourse.
Are pets allowed? Can you park a car outside? Can you park in the street? What are the landscaping rules? What are the rules for garbage cans? Are there rental restrictions? These are all things that will basically dictate the way you live.
One of the things that I hear complaints from homeowners about all the time is the “architectural committee." These are the folks that will be deciding whether you can paint a certain color, add an addition — even what you can have out on your porch or front lawn.
If you break those rules, you commit violations. You could be fined, and believe it or not, the HOA has the right to put a lien on your property, and foreclose if you don’t pay the lien.
As Jill said, ignore these penalties and you could suddenly have a $600 bill turn into $3,000 — with penalties and attorney fees tacked on.
Some important tips:
#1. Look carefully at the collection and violation policies. You need to know how you will be treated if you are late on dues or break a rule. When you sign on with an HOA, in many cases you are literally signing away many of your constitutional rights.
#2. Ask for a copy of the insurance declaration page. Look at what the HOA is paying for. Ask your own insurance agent for their opinion on what the HOA is responsible for and what you are responsible for.
#3. If possible add into your purchase offer that the owner warrants that the property does not have any HOA violations and that this condition survives closing. This is not an easy thing to negotiate by the way, but it will protect you from paying for someone else’s mistakes.
The condition of the community is your first sign of potential issues with mismanagement, and the possibility of a future costs, so look closely at the condition of the community before you purchase. Have they been skimping on maintenance and not making capital improvements? Those things are not likely to suddenly get better. Really examine how the community looks and feels by visiting at different times of the day, and talking to the neighbors.
When you make your maintenance payments, you might assume that they are saving enough to handle repairs and improvements. Check into that … before it’s too late. Be sure to look for a “reserve study." That should show how much money is being held for future problems that may pop up within community. Does the HOA have a big enough reserve set aside for big expenses? (If not, guess who will be paying for them.) What percent of the reserve fund is actually funded? (100 percent is ideal, 30-70 percent brings a medium risk of a special assessment, and 0-30 percent means you are at high risk).
Rebecca Grossman of the Scottsdale Area Association of Realtors says “you want to make sure that you read all of those documents very carefully, and understand those assessments. Make sure that there is not something down the road that is a problem in that owners’ association that’s going to have to be remedied by a special assessment.”
Ask the HOA if they are responsible for the roofs and exterior of the buildings — or if that falls to the homeowner. While you’re at it, ask how old the roofs are, if they had excessive water leaks or if there have been issues with any flooding of any units.
Have they had any insurance claims or personal injury claims? Don't wait until your dues are continually raised, or until you are hit with a special assessment. Look at the records. Ask the questions early.
Find out what the expenditures have been in the last couple years for common areas — landscaping costs, exterior painting costs, and repairs. It’s possible that they won’t tell you, but you need to ask.
Ask for copy of the violation policy and the collection policy and the last 6 or even 12 months of meeting minutes.
If at all possible try to attend an HOA meeting before your purchase, and talk to some of the neighbors.
Don’t just look at the maintenance fees or monthly dues before deciding to sign on; look to see if they've been skimping on maintenance, or not making capital improvements. Those things are not likely to suddenly get better.
Look to see if there’s been any problems or any lawsuits filed and see if there is any history of complaints or problems on the county’s website.
Get an idea of how is the board is perceived by those who live there. Are they cooperative? Do they actively try to help the homeowners, or are there a lot of politics involved? We all know that can happen.
Don’t only look at the maintenance fees or the monthly dues before deciding to sign on.
Go ahead and ask for a copy of the insurance declaration page. This might drive them crazy, but you want to see what the HOA is paying for.
There are many very good HOA boards — men and women that work very hard and act in the best interest for the members of the community — but buyers need to do their homework before signing on the dotted line.
As always, it all comes down to my most-repeated piece of advice: Do your homework. Analyze the reserve study and financials and —I’ll say it again — read ALL of the HOA documents and rules.
This is a place where you will most likely live for years. Some due diligence up front will pay off in the end, I promise you.