What is an HOA? – A homeowners’ association (HOA) is an organization to which all of the owners of lots or units in a planned community belong. The HOA is created by a declaration recorded in the public records of the appropriate governmental unit. The HOA’s purpose is to own, manage, maintain or improve the property within the planned community that does not belong to the individual homeowners. You are automatically a member of the HOA when you purchase a home, lot or unit in the planned community. You cannot “opt out” of the HOA and must pay the dues and assessments the HOA requires. The HOA has three critical documents: (a) the “Articles of Incorporation” for the HOA, which establishes the HOA as a legal entity; (b) the “Bylaws,” which are the governing documents of the HOA and set out the procedures for electing a Board of Directors and other internal operations of the HOA; and (c) the “Declaration of Covenants, Conditions and Restrictions” (the CC&Rs), the enabling document which is recorded with the county recorder and empowers the HOA to control many aspects of how the property in the HOA is used and developed. When you buy a home in an HOA, you are agreeing to conform to the CC&Rs (whether you know it or not), and the HOA can enforce the terms of the CC&Rs in the same way as any other contractual agreement is enforced.
Buying a Home in an HOA – First, decide if an HOA is for you. If an HOA is not for you, firmly let your realtor know that viewing HOA homes is a waste of your time. Second, if you decide an HOA is for you, determine what kinds of limitations you don’t want and tell your realtor so she/he can determine in advance which HOAs aren’t for you. Third, while house hunting ask questions about the specific HOAs that have homes on your “might buy” list and, if that HOA has a website, review it to find out more about the neighborhood in which you might live. Get a copy of the Seller’s Notice of HOA Information and read it before you enter into a Purchase Contract. Also, make your purchase of the home contingent on your approval of the Bylaws and CC&RS. You are legally entitled to a copy of these documents after you have a Purchase Contract in place.
Read the Bylaws and CC&Rs carefully to see if there is some provision you cannot live with!
Don’t think that you will be able to either persuade the HOA Board to make any exception to its CC&RS just for you or that you will be able to do something the CC&RS prohibit without any consequences.
Selling a Home in an HOA – If your HOA has a website, make sure it is listed on your realtor’s description of your house so that prospective buyers can find out more about your HOA. If your HOA’s website is outdated, ask that your Board have it updated as a selling tool for your HOA. It is your duty to provide a prospective buyer with a Seller’s Notice of HOA Information before a Purchase Contract is entered into. Your realtor should have copies of this form available for your HOA. The Seller’s Notice includes information about the HOA’s dues, assessments, and management, including contact information. Even if your Realtor or your HOA’s Management Company prepares the Seller’s Notice, check it carefully because you are the one responsible if there are omissions or mistakes. It is also your duty to provide your buyer with copies of the HOA important documents, particularly the CC&Rs, before closing.