Housing
What A Homeowners Association Can Actually Enforce
An HOA derives its authority from recorded covenants that bind the property itself, which is why its rules survive changes of ownership and can be enforced through liens.
A homeowners association is not a landlord or a club. Its power comes from covenants recorded against the land, which attach to the property rather than to any particular owner.
Where the authority comes from
The declaration of covenants, conditions and restrictions is recorded when a development is created and runs with the land from that point forward.
Buying inside the development means taking title subject to those covenants. Agreement is implied by the purchase; there is no separate decision to join.
The bylaws and rules sit beneath the declaration, and where they conflict, the recorded declaration generally controls. Rules can typically be amended more easily than the declaration.
Assessments are an obligation, not a bill for services
Regular assessments fund maintenance of common areas, shared insurance, reserves and administration. They are owed whether or not an owner uses any of it.
Special assessments arise when a large expense exceeds reserves, commonly a roof, a road or structural repair, and can be substantial relative to the regular charge.
Underfunded reserves are the mechanism behind most large special assessments, which is why reserve studies and financial statements matter more to a buyer than the current monthly figure.
Enforcement runs through the property
Unpaid assessments generally become a lien against the unit. Depending on the state, that lien can eventually be foreclosed even where the amount is modest relative to the home's value.
Associations may also levy fines for rule violations and, in many states, may suspend access to amenities, though procedures and limits are set by state law.
The remedies available, the notice required and the caps on fines vary substantially between states and have been the subject of repeated legislative revision.
The limits on association power
Associations are bound by their own documents and by state statutes governing common interest communities, which typically impose procedural requirements before enforcement.
Federal and state law also constrain certain restrictions, and a number of states have specifically protected things like solar installations, flags or antennas from covenant restrictions.
Boards are made up of owner volunteers and can act inconsistently, which is why records of prior enforcement are relevant to whether a rule is being applied fairly.
What a buyer should read before closing
Most states require disclosure of association documents to a buyer, often with a defined review period, and the scope of that requirement differs by state.
The documents worth reading are the declaration, the current budget, the reserve study, recent meeting minutes and any record of pending litigation or planned assessments.
Minutes in particular reveal problems before they appear in the budget, since a discussion of a failing roof precedes the assessment that pays for it.
Questions readers ask
Should I invest my house deposit?
Money needed within a few years is usually kept in cash, because a fall could coincide with the purchase. The trade-off is that cash may not keep pace with prices.
How much do I need beyond the deposit?
Transaction taxes, legal fees, surveys, moving and immediate repairs all follow. The amounts differ enormously by country, so build the target from local figures.
