If you’ve lived in a community managed by a Home Owner’s Association (HOA), you know that HOAs can be both the source of and the solution for many community issues. If you are planning on buying a home governed by an HOA, or you currently live in a HOA-governed community, it’s imperative that you are able to spot a good HOA (and a bad one!) in order to protect your financial investment in your home.
Home Owner’s Association:
an organization in a subdivision, planned community or condominium that makes and enforces rules for the properties within its jurisdiction.
Fiduciary Duties and Evaluating an HOA
There is one guideline that governs all HOA: a successful HOA upholds its fiduciary duty to protect and improve the property values of the community. While there is no doubt that you will want to get an expert’s opinion on the strength of your potential future HOA, you can take the first steps toward protecting your financial investment in a community by evaluating whether or not the HOA is doing its best to maintain its fiduciary duties.
Features of a Good HOA
A good HOA…
- Makes available HOA rules, regulations, and covenants and restrictions to potential buyers and current homeowners. In most areas, this is a legal requirement.
- Maintains a healthy reserve. “Reserves” are the funds that an HOA has on hand at any given time to handle capital improvements and repairs. A broker or a real estate legal professional can help you determine whether or not an HOA’s reserves are appropriate, but it’s important to know that both too low or too high of a reserve can be a bad thing.
- Has a board that represents the diversity and size of the community. If there are, for instance, 85 homes in your community and only two board members, you should questions the ability of the board to represent the best interests of homeowners. And diversity can mean many things, but one thing that’s important is to have a board full of members from different fields. A contractor and a banker and homemaker walk into a board meeting… it’s not the beginning of a joke — it’s the beginning of a great HOA board!
- Has a track record of resolving homeowner issues in a timely fashion. Long-standing legal battles with residents and in-fighting can seriously jeopardize the financial stability of an HOA.
- Maintains the property – both grounds and structures – that it is responsible for and makes sure owners maintain what they are supposed to. As simple as this may seem, some buyers ignore blatant signs that an HOA isn’t functioning as well as it should. Check out the community’s common areas: unkempt landscaping, peeling paint, crumbling brick, and even garbage might be signs that the HOA is in trouble.
- Has up-to-date and non-discriminatory policies. This may seem obvious, but in the past, HOAs notoriously excluded certain categories of people, based on race/ethnicity, religion, and sexual orientation. These measures are illegal today, but unfortunately it is not uncommon to find older HOAs that have not updated their policies. While they may not actually enforce discriminatory policies any longer, it is important that these illegal aspects are removed from HOA policies. If they remain on the books, it may open up the HOA to discrimination lawsuits.
Community-Specific HOA Regulations
Beyond the general operations of any HOA, the specifics of HOA regulations differ from community to community. Owners and potential owners should make sure they are aware of what is required of them in order to avoid purchasing a home in a community that does not fit with their lifestyle or to avoid unknowingly breaking rules and incurring fines.
How Chang Legal Can Assist You With HOAs
When you are examining an HOA’s documents for the first time, it may help to consult a real estate legal professional who is well-versed in the language of HOA documents.
The attorneys at Chang Legal are familiar with all aspects of Home Owner’s Associations: we create the legal documentation for HOAs, we guide HOAs in selecting the legal clauses that are important to them, and we help evaluate responsibility when problems between homeowners or homeowners and HOAs occur. And that means if you are considering purchasing a home in a HOA-governed community or if you have questions about your current HOA, we have the knowledge and experience to assist you. Learn more about the support we can offer you by emailing Chang Legal at contactus@changlegal.com or by calling 847-907-4971.