Everything You Need to Know about HOAs (Homeowner Associations)

If you live in or are moving into a residential area, your property may be part of a homeowner's association (HOA). If so, it's essential to know how HOAs operate and how you can expect your HOA to serve you and your neighbors. Here is a brief overview of what every homeowner should know about HOAs.

What is an HOA?

An HOA is an organization that establishes rules and regulations for homeowners in its neighborhood. While some HOAs have voluntary membership, most communities with HOAs require anyone who moves in to become a member. So it's critical to know before purchasing a property whether it is part of an HOA and, if so, how that HOA's rules will affect you as a homeowner.

What are the pros and cons of living in a neighborhood with an HOA?

Whether or not HOAs are beneficial for communities is a debatable issue, and an HOA that fits the needs of one homeowner might be a bother to another. Before deciding whether to join an HOA, consider the following pros and cons:

Pros:

• HOAs handle the upkeep of any common areas and make sure that the neighborhood is aesthetically pleasing. Some HOAs may even take care of your yard work for you.
• HOA fees may cover expenses like gas and electric, water, refuse collection, and building repairs.
• HOA regulations can place bans on nuisances like loud parties or aggressive pets.
• Some HOAs provide access to private community amenities like pools, walking trails, sporting grounds, and playgrounds.
• HOAs provide a sense of community and often host social events like picnics, barbecues, and movie nights. This makes it easier for you to form close friendships with your neighbors.
• If you have a conflict with a neighbor, an HOA can serve as a middleman to help you negotiate with them.
• When it comes time to sell your home, its attachment to an HOA could result in a higher profit for you.

Cons:

• HOA membership costs money, and depending on the neighborhood, monthly dues may be expensive. It’s also worth noting that every resident needs to pay the same flat price, even those who don’t take advantage of all the HOA’s benefits.
• HOA guidelines for homes' exteriors can be restrictive, and it can be frustrating not to have complete control over how you decorate the outside of your own house.
• If you violate an HOA rule, you may need to pay a fine.
• As with any rule-making organization, there’s a chance that an HOA may be run poorly, which can result in neighborhood conflict or mismanagement of funds.
• If the HOA imposes an unfair restriction, battling them in court will likely be difficult and expensive, even if you are in the right.

What does an HOA do?

An HOA’s job is to ensure that the properties in a neighborhood maintain their value. While the specific responsibilities of an HOA may vary from one community to another, the main goal any HOA aims to achieve is a neat, tidy, and peaceful area where all residents feel that their needs are being met.

Does every neighborhood have an HOA?

While HOAs do not govern every neighborhood, they are widespread. 58% of American homeowners, or 40 million homes, are part of an HOA. The more recently a community was established, the more likely it is to have an HOA.

What are HOA fees, and how much do they cost?

HOA fees are the dues that each member must pay every month. The average homeowner can expect to pay approximately $250 a month, or $3000 a year.

Be aware that your dues may change throughout your residence in an HOA community. Each year, an HOA determines an annual budget to ensure that all its duties can be carried out, and that budget may increase or (in rare cases) decrease from one year to the next. The higher the annual budget is, the more homeowners must pay each month.

What do HOA fees cover?

While each HOA may allocate their fees differently, the most common services covered by HOA fees include:

• The upkeep of common areas used by all residents, such as recreational areas, lobbies, and elevators
• Landscaping and other outdoor work to keep the neighborhood looking nice
• Utilities like gas, plumbing, and garbage removal
• Structural repairs to buildings

Are HOA fees negotiable?

In most cases, HOA fees are non-negotiable, but a few tricks may enable homeowners to save some money.

If you are about to buy an HOA home in a buyer’s market, you might be able to convince the seller to cover a few months of HOA fees for you, but this may only work if they are desperate to sell.

You may also be able to lower fees for the whole neighborhood if you manage to convince your HOA board that some of your community expenses are unnecessary or not being utilized properly.

Are HOA fees tax deductible?

While some costs associated with homeownership are tax-deductible, HOA fees are unfortunately not one of them. The only exception to this rule is if you are renting out your property, in which case HOA fees are considered a business expense.

Do I have to pay HOA fees?

Paying HOA fees is mandatory, and failure to do so on time comes with all sorts of repercussions. As with any monthly fee, it's essential to make sure that you make all of your monthly payments on time.

What happens if I don't pay my HOA fees?

If you fail to pay your fees on time, you’ll likely receive a notice from the HOA. This notice will typically include the amount owed, including late fees, and what will happen if you do not pay soon. The longer you go without paying after receiving this notice, the more likely you will face strict punishments.

Can an HOA put a lien on my house?

One of the penalties an HOA can incur for delinquent payments is placing a lien on your house. HOA liens can make it challenging to sell your home or take out another mortgage, and they may even lead to foreclosure.

Can not paying my HOA dues affect my credit or send me to collections?

Overdue HOA payments negatively affect your credit score, especially if they result in a lien being placed on your home. The more payments you miss, the worse the impact on your credit will be. If the HOA feels that the problem is bad enough, they may even call collections on you.

How are HOAs managed?

An HOA is run by a board of directors consisting of homeowners in the community. Board members are elected by fellow HOA members according to a process dictated by local and state laws. New elections are usually held every few years to provide new people with opportunities to serve.

An HOA board's primary responsibilities are fairly enforcing rules, managing finances, and maintaining common areas. While board members are in charge of the documents that set rules for the community, other homeowners have the opportunity to voice their opinions at board meetings.

Because HOA board members are volunteers, they will typically require assistance from an HOA management company. The management company provides guidance and oversight and handles any duties that are too much for the board to take care of on their own.

When do HOA meetings occur?

HOA meetings fall into five different categories, some of which occur more frequently than others:

• Board Meetings: These are the most commonly held HOA meetings, occurring quarterly or monthly depending on the community. All HOA members are welcome to attend these meetings and will be notified in advance before a meeting takes place.
• Annual Meetings: These meetings cover the most important issues in a community and occur once a year. They are also usually open to all HOA members.
• Executive Sessions: These meetings are held to discuss sensitive or private topics and may only be attended by board members. Executive sessions usually take place immediately after regular board meetings, but the board may hold them at any time an issue needs to be discussed confidentially.
• Committee Meetings: Some HOA boards are divided into smaller committees handling specific areas such as landscaping, security, or newsletter publication. How frequently these meetings are held and who can attend them may vary from one committee to another.
• Special Meetings: These unscheduled meetings are held when unexpected issues arise in the community and need to be addressed immediately. While special meetings are typically called for by board members, some HOAs may allow other homeowners to request a special meeting.

How do I find out who is on my HOA board or manages my neighborhood HOA?

If you are unsure of who is on your HOA board or what management company they work with, you can usually find this information by searching “[county name] [state name] HOA search.” You can find a list of HOAs for different counties in Texas here.

What are the rules for living in a neighborhood with an HOA?

While each HOA has different regulations, these are the most common rules you can expect:

• Restrictions on exterior decor, such as lawn length, paint colors, trees and garden plants, and decorations like flags or holiday lights
• Parking limitations, such as the number of vehicles allowed in a driveway, whether or not guests can park on the street, and requirements to park in a garage
• Cleanliness and upkeep mandates, such as orders to pick up trash, keep driveways and sidewalks clear of snow, and attend to repairs quickly
• Business restrictions, such as bans on operating home businesses, renting out property, or parking company vehicles in the neighborhood
• Limits on the number of people who can be in a house at a given time as residents or guests

What happens if I don't follow the HOA rules?

Penalties for breaking HOA rules can vary in severity. Some homeowners receive a warning letter asking that they abide by the rules in the future. Other times HOAs will be more aggressive about rule enforcement. For example, if a home’s yard is unkempt, the HOA may send a landscaper to take care of the problem without the homeowner’s permission and then charge the homeowner for the cost of labor.

Then there are the cases when homeowners are fined for breaking the rules. While some fines are nothing more than a minor hassle, others are quite expensive, especially if a lawsuit ensues. Homeowners have been sued for everything from unauthorized swingsets to unapproved swimming pools to out-of-season Christmas lights.

As a general rule, it’s always in your best interest to adhere to HOA policies and take any questions or complaints to your community’s next board meeting.

How do I get a copy of the rules for my HOA?

The easiest way to receive a copy of your HOA's rules is to simply ask a board member. If you don't have a relationship with anyone on your HOA board, there are other methods you can use to find this information.

First, check to see if your HOA has a website. Sometimes a simple online search is all it takes to locate the rules. Otherwise, contacting the management company employed by your HOA or your title company or realtor may enable you to acquire a list of rules.

If none of the above methods work, your county assessor or recorder can help you find the information you need, as all HOA rules must be documented in county records.

Can my neighborhood change the HOA rules after I've purchased a house within it?

The governing documents of most HOAs usually allow the board to alter existing rules or create new ones, although certain conditions may be required before these adjustments can be made. Some HOAs’ documents may demand that all homeowners be notified before a rule change is made. Others may even require that all HOA members have the opportunity to vote on rules.

How can I find out if an HOA rule is legally enforceable?

HOA board members are human, and sometimes they might make mistakes. This means that some rules set by HOAs may not be legally enforceable. While it is not always easy to determine the legality of an HOA policy, all rules must meet the following requirements:

• Rules must be enforced consistently and hold all homeowners to equal standards.
• Rules must be enacted correctly, and penalties may not be incurred if a rule has not been broken.
• Rules must not violate any national, state, or local laws. Notable laws that must be adhered to include freedom of speech, freedom of religion, the right to bear arms, and no discrimination based on factors such as race, gender, age, or sexual orientation.

My neighborhood doesn't have any amenities. Why do I still have an HOA fee?

If your neighborhood lacks noticeable community perks like parks, pools, or tennis courts, you may be wondering what the point is in having an HOA, but your neighborhood still has parts used by all residents that require upkeep. Common areas include sidewalks, roads, streetlights, entrance signs, and utility lines.

Can an HOA force me out of my home?

Even if you have not missed a single mortgage payment, delinquency on HOA fees may result in foreclosure in some cases. The laws dictating when an HOA can initiate a foreclosure and the steps they must take beforehand may differ from one state to another.

Texas is fairly strict in its foreclosure policies. An HOA must send the homeowner a “Default and Intent to Accelerate” notice before proceeding with the foreclosure process. The homeowner then has 21 days to pay any outstanding fees or reach an agreement with the HOA before receiving a “Notice of Acceleration and Posting for Foreclosure.” The home will then be scheduled to be sold at the next monthly foreclosure auction.

Will I incur any additional HOA fees when selling my home?

Before selling a home that is part of an HOA, it’s important to be aware that you’ll need to pay a one-time transfer fee, usually costing upwards of $200. Some HOAs may also take an additional enhancement fee out of the home sale profit. This will usually be somewhere between 0.5% and 1% of the home's selling price.

You may also need to pay for an HOA resale certificate detailing information on the HOA, the seller, and the property to the buyer. The cost of this certificate can range anywhere from approximately $200–700, or it may be included in closing costs. Be sure to inquire before selling about whether you’ll need to pay for the certificate out of pocket and, if so, how much.

Can I sell my home if I owe back HOA fees?

As with other types of liens, a lien arising from overdue HOA fees does not prevent a homeowner from selling their property. However, it is best to pay off the lien before selling, if possible, as buyers are less likely to show interest in a property that has a lien on it.

Need to sell a home with overdue HOA fees owed or HOA liens?

If you have an HOA lien on your home or past due HOA fees piling up and want to sell, consider selling to AMI. We buy homes in all conditions, including homes with liens on them. Contact us today for a no-obligation cash offer.