What is a Homeowners Association?

A homeowners association (HOA), also known as a property owners association (POA) is an organization or a corporation that is typically formed by a real estate development body in a residential plan. The HOA is responsible for formulating and enforcing guidelines for the properties within its control. Membership to an HOA automatically commences with the purchase of a property within its authority.

How Does a HOA Work?

Homeowners associations (HOAs) are typically instituted within community residential plans such as detached homes, apartments and condominiums. In the case of certain HOAs, it is mandatory for homeowners to obtain membership in the respective homeowners association before they are deemed eligible to purchase homes. While all HOAs possess their own individual sets of guidelines, a vast majority of them are incorporated, necessitating their members compliance to state laws. A few U.S. states make a distinction between condominium HOAs and other HOAs because of dissimilarity in interest rates between the residential plans. However, the term Community Association is broadly used to refer to any type of HOA. According to the Community Associations Institute, a trade body that represents state HOAs, the United States had nearly 350,000 community associations representing about 70 million citizens. Often, HOAs wield substantial legal authority over the homeowners in their jurisdiction. An elected board of directors typically governs these associations via an accepted set of regulations documented in the Declaration of Covenants, Conditions and Restrictions (CC&Rs). The CC&R document indoctrinates the board to place restrictions on homeowners with respect to customizing their properties, and authorizes it to impose penalties on non-compliant property owners.

Expenses associated with an HOA

Homeowners associations also collect maintenance fees on monthly or annual basis as payment for upkeep of communal areas such as pools and playgrounds. Additionally, maintenance fees also forms a major part of the HOAs reserve fund, which is utilized for renovation work or during crises. All responsibilities pertaining to collection of fees and utilizations of funds lie on the shoulders of the associations governing body. During emergencies such as natural calamities or unforeseen damages, the HOA is authorized to collect funds on an ad hoc basis to carry on repair work of communal areas. The association can also impose penalties and consecutively, liens on defaulting homeowners.

Benefits of an HOA

The HOA is not only responsible for formulating guidelines for its community of members, but is also answerable for developing and maintaining amenities such as parks and recreational facilities, swimming pools and sports facilities within its dominion. The association strives to maintain uniformity in appearance of homes and other structures within the property. The HOA collects a fee from its members for essential services like garbage collection and disposal, and snow removal, which it provides to its residents.

Disadvantages of an HOA

Registering as a member with a Homeowners Association brings with it fiscal liabilities such as high membership fees and recurring maintenance costs of the property. Additionally, HOAs usually enforce set rules regarding changing appearances of properties, which comes across as a deterrent to some homeowners. Also since most decisions pertaining to ascertaining fee amounts, collecting fees and installing upgrades are taken based on consensus, it may lead to conflicts among the members of the association.