Homeowner’s Association (HOA) – Definition

Cite this article as:"Homeowner’s Association (HOA) – Definition," in The Business Professor, updated September 17, 2019, last accessed September 26, 2020, https://thebusinessprofessor.com/lesson/homeowners-association-hoa-definition/.

Back To: Real Estate, Personal, & Intellectual Property

Homeowners Association (HOA) – Definition

A homeowners association (HOA) is a private organization that is in charge of the enforcement of rules for properties and residents in a planned community, condominium or a subdivision. HOA seeks to maintain a good structure and cohesive environment in communities through the enforcement of rules. Aside from that, members of HOA are in charge of managing and selling lots or homes in a planned community or residential subdivision. HOA have jurisdictions in which they operate, individuals who purchase properties, homes or lots in their jurisdiction become members of HOA and are expected to pay HOA fees.

A Little More on What is an HOA

An HOA is an organization that enforce rules on properties and residents in a subdivision, condominium or jurisdiction. Condominiums refer to buildings, single house units, housing units owned by individuals, or complex buildings in a given community. Members of HOA are residents of a community, to become a member of the HOA in a particular community, you are required to purchase a home or lot within that community.

Every member of HOA is expected to abide by the rules and regulations of HOA contained in a document called CC&Rs (Covenants, Conditions and Restrictions). Also, there is a body that oversees the rules and regulations of HOA, this is the board of directors otherwise called governors of HOA.

Here are some key things you should know about the Homeowners Association (HOA):

  • An HOA is an association that enforces rules of properties and residents in a subdivision, planned community or condominiums.
  • The rules and regulations of HOA are contained in a document called Covenants, Conditions and Restrictions.
  • Some HOA associations restrict what members can do to their properties, such as the kind of structures that is allowed, landscape and fences permissible and others.
  • Violation of the rules and regulations contained in the CC&Rs can attract a penalty.
  • The membership of HOA is made of residents and homeowners in the community. They are required to pay certain fees or dues to the association.
  • HOA is run by governors or board of directors.

HOAs vs. Community Associations

Homeowners Association can be distinguished from community associations. While HOAs are organizations that enforce laws on properties and residents of a community and condominium, a community association is an umbrella body for all organizations in a community. For instance, the community associations institute (CAI) can lobby certain legislatures for the benefit of homeowners associations. Hence, a homeowner association is one of the many organizations under the umbrella of a community association. Also, most HOAs are subject to the laws of the states in which they operate, although they have governing bodies or board of directors that run their affairs.  In the United States, an estimate of 346,000 community associations was recorded in 2018.

Homeowners Association Fees

HOAs exhibit a high level of control over properties and homeowners in the satest of their jurisdiction. Restrictions are placed on the structure, landscape, fences and buildings that homeowners can have in a subdivision or condominium. People that purchase lots or homes in HOAs’ jurisdictions become members of the organization. Depending on their homes, members of HOA are required to pay upkeep fees, otherwise called annual dues or association fees. Each member pay between $200 to $400 every month depending on their communities, high-ends communities can pay up to $10,000.

Annual dues contributed by members of HOAs are used for the renovation of the community or for emergency needs of the association. The fees make up the reserve of the association. The HOA’s board of directors is responsible for managing the finances of the organization. Members who violate the rules of HOAs are asked to pay fines by the HOA;s board.

Benefits of an HOA

There are many benefits that homeowners associations contributes to the communities or subdivisions in which they operate. One of the major benefits of HOAs is that they enhance a  good structure and cohesive environment in communities.

HOAs are often concerned with how the community looks like, so they restrict structures, landscape or fences that members can erect in the communities. HOAs are concerned with the cleanliness and appearance of a community, they strive for uniform appearance in terms of structures that are erected.

To foster cohesive atmosphere in a community, HOAs build facilities such as parking lots, reservation and recreational centers, swimming pools and other facilities. HOAs also ensure prompt collection of trash in the community and removal of snow when due.

The pros of homeowners associations include;

  • Enforcing community rules on properties and residents in a subdivision or condominium.
  • Ensuring cohesive environment and orderly arrangement of structures.
  • Protection of properties in a community.
  • Provision of social facilities and amenities that foster good appearance of the community.
  • Adequate self-governance.

Cons of HOAs include;

  • Payment of association fees or annual dues by members.
  • Mandatory membership of residents in most states.
  • Imposition of restrictive rules and regulations of properties, their structures and landscape.
  • Lack of professional management in certain cases.
  • Inefficient operations.
  • Obsession on the presentation and outlook of a community.

Disadvantages of an HOA

The high rate of association fees and annual dues that members of HOAs pay is one of the major disadvantages of an HOA. also, some restrictions, rules and regulations set by the association are excessive and unreasonable to many potential home buyers. Hence, many buyers can refrain from communities where an HOA is present or where the HOA rules and restrictions are unfavorable.

The concept of self-governance of HOAs does not work out well in practise, this is why inefficient operations are attributed to HOAs. The reason is that not all members of the board are knowledgeable or professionals in the fields, many board members are just volunteers who showed interest in steering the leadership of the association. The decisions made by board members might not be optimal and this may result in conflicts among the members.

References for “Homeowners Association – HOA”



https://www.tripsavvy.com › … › Arizona › More to Explore › Essentials


https://www.thebalance.com › Personal Finance › Home Buying › Buyer Disclosures

Was this article helpful?