Explain an HOA please (contingency, foreclosure, sales, monthly fee)

[L0ve]

This may seem like a dumb question, but what exactly is an HOA exactly, compared to a condo association?

I currently live in the country on acreage and we are looking at homes to move to closer to the city. I know that with condos there is a monthly fee, and that includes landscaping, mowing, outdoor maintenance, etc.

Do all neighborhoods with an HOA require a monthly or yearly fee? How is an HOA different from what a condo association provides? Do all HOA neighborhoods with single family free-standing homes charge a fee? Do they provide the same services as condo living?

I see some HOA neighborhoods also offer community centers and amenities like tennis courts and pools, similar to condos, and some don't.

What are the differences, in general? Thanks!

[Lacerta]

On a condo, you only own the portion of the building inside your walls (and a percentage of the land the building sits on, but not a specific piece of ground, in most cases). So the HOA maintains everything outside, including not only the landscaping, but also the roofs, siding, painting, etc.

In a normal subdivision, there is a lot more variety. If there is a pool or clubhouse, the HOA fees maintain those. They also usually maintain any "common areas", which are typically grassy "make it look nice" areas along the road fronts. But they also may maintain some exteriors in some cases. We manage about 150 rental properties. Some have no HOAs at all, some only charge $100/year and only maintain a few common areas, others charge as much as $600/year and include snow removal, mowing and weeding. And everything in between. In most cases, though, they don't do anything within your property lines for you.

They also often have a board that keeps an eye on the subdivision. They say things like "you can't paint your house bright orange" or "you can't park that ugly trailer in front of your house for 6 months" or "you can't keep chickens in your backyard". There are good HOAs and bad HOAs in my opinion, usually determined by how overzealous the people in charge are. Some of them fine you if you let your lawn get 2" long. Others don't care what you do as long as you aren't bothering the neighbors and don't let the property become unsightly.

Oftentimes, even if there was an HOA to begin with, if the subdivision is older and doesn't have amenities like a pool, the HOA has been allowed to expire, and they no longer charge fees or maintain anything.

My HOA charges around $200/year (it changes a little from year to year based on what expenses we had for the year) and just carries insurance on and maintains the common areas in my subdivision.

[L0ve]

Ok, thanks so much.

The HOA I am looking at charges almost 1 k per year, which seems really high. That is why I was wondering if some free-standing home HOAs also provide lawn care, like condos.

I know a few around where I live now do provide neighborhood security patrols.

[UNC4Me]

Originally Posted by Bmachina

Ok, thanks so much.

The HOA I am looking at charges almost 1 k per year, which seems really high. That is why I was wondering if some free-standing home HOAs also provide lawn care, like condos.

I know a few around where I live now do provide neighborhood security patrols.

Your best bet is to request a copy of the Community Covenants and Restrictions (CC&Rs) for any property you are considering. They will spell out in detail how the HOA is governed, what services are provided via the HOA dues and any restrictions that are placed on the property owners. Reading this document throughly will ensure you know exactly what to expect should you purchase in that community.

[rational1]

> The HOA I am looking at charges almost 1 k per year, which seems really high

Whether this is high or not depends on what it covers. Are there recreational facilities? Does it cover front-yard care? Etc. etc.

ALWAYS know the answer to these questions AND read the CC&Rs. Make sure the rules and lilmitations are OK with you. Find out about the financial stability of the HOA. If necessary make provision of this information a contingency in your offer.

[399083453]

Originally Posted by Bmachina

but what exactly is an HOA exactly, compared to a condo association?

If you are familiar with condo associations, an HOA is basically the same thing. They own stuff and, have regulations, and people to run it.

[IC_deLight]

Originally Posted by Bmachina

This may seem like a dumb question, but what exactly is an HOA exactly, compared to a condo association?

A condominium is a statutory form of property ownership. HOA-burdened property is not. The law regulating either is particular to the state that the property is located in. Generally the state will have a "condominium act". The state may or may not have an act that is specific to HOA-burdened property.

A condominium will have one or more "common areas" for which ownership is actually shared among the individual unit owners. Typically they share an undivided percentage ownership interest in "common areas". These common areas may include structural components of a building, grounds, or amenities such as pools, etc. You do not have an enforceable right to use these amenities, etc. The condo corporation manages the use and and exclude people from use and enjoyment whenever the board deems unit owners to not be in "good standing".

For HOAs, however, the individual homeowners typically have no shared ownership of anything. All they get is a shared liability for the debts of the HOA corporation. When you hear the term "common areas" regarding HOA-burdened property, do not be misled by the marketing hype. Such areas are nearly universally owned by the HOA corporation - not any homeowner. In other words there is no common ownership at all. Accordingly when valuing the home, do not include any of the property owned by the HOA in your valuation calculations. If anything it is a detriment because you have financial liability for maintenance and taxes as well as any capital improvements that the HOA board would like to make to the HOA property. Your home will be security for the debts of the HOA corporation.

Typically an HOA corporation is an involuntary membership corporation (they aren't really "associations" - that is a marketing gimmick). The property you would purchase will be burdened with a number of restrictive covenants - one of which will require you to be a member of the HOA corporation.

"Membership" is a euphemism. Your house will be security for whatever debt the HOA corporation racks up. You will have perpetual liens on your property that can never be paid off. You will be required to pay assessments to cover the HOA's debts under threat of foreclosure on your property. These things are rarely adequately disclosed to any prospective purchaser.

The HOA corporation might be controlled by a developer or perhaps by other homeowners. Oftentimes the HOA corporation is actually largely controlled by an HOA management company under the pretext of representing the board of directors of the HOA corporation.

Inevitably these HOA boards decide they have authority to "fine" you for what they claim are "violations" of rules, restrictive covenants, etc. They are not a court nor have they any license to practice law yet they will proclaim individuals to be "in violation" as part of the control and command scheme that is prevalent with HOA-burdened property. Management companies charge fees for sending out "violation" letters so they are incentivized to flood neighborhood with claims of "violations".

You might want to learn more about HOA and the industry behind them here:
theHOAprimer

If you are looking at newer homes, the subdivision may still be under developer control. Oftentimes the developer will claim that some particular amenity "will be built" as a representation to lure you into purchasing a home. If it isn't there when you purchase, don't count on any remedy if the amenity is not built.

The language of the restrictive covenants is largely irrelevant in that they can be changed without your consent. It seems that inevitably the changes proposed are always intended to impose more restrictions on you and the use and enjoyment of your property.

Do you want to have to grovel to various "committees" or "board" to get "permission" to build improvements, paint, or even repair structures on your property?

Do you want to have to pay fees to private corporations that have zero ownership interest in your property in order to allow you to make improvements, paint, repair structures, or even sell your property?

You'll also find that real estate sales folks will try to paint HOAs as the epitome of democracy. In reality you have no right to vote, no open elections, no open meetings, and no open records in most states. Where such language appears in statutes there is usually no remedy or a big exception which prevents you from having an enforceable right.

Originally Posted by Bmachina

I currently live in the country on acreage and we are looking at homes to move to closer to the city. I know that with condos there is a monthly fee, and that includes landscaping, mowing, outdoor maintenance, etc.

Do all neighborhoods with an HOA require a monthly or yearly fee?

Payment of the fee depends upon the particulars and nature of the project. Condominiums generally require a monthly fee. HOA-burdened property might have fees monthly, quarterly, or annually depending upon the specifics of that subdivision. You have little control over the amount or timing of that fee or many other fees.

Originally Posted by Bmachina

How is an HOA different from what a condo association provides? Do all HOA neighborhoods with single family free-standing homes charge a fee? Do they provide the same services as condo living?

Do not equate subdivisions having restrictive covenants with subdivisions that are burdened by HOAs. HOA-burdened subdivisions have restrictive covenants that obligate one to be an involuntary member of the HOA corporation and create perpetual liens on your property that can never be paid off. However, a subdivision may have restrictive covenants without having an HOA corporation.

If there is an involuntary membership HOA corporation then there will be fees. The fees will be used to provoke and pay for litigation, to pay for insurance for the HOA board, to pay for insurance for the HOA corporation, to pay taxes on any HOA-owned property, to pay maintenance on HOA-owned property, to pay for capital improvements, to pay various vendors of the HOA corporation.

Be wary that some neighborhoods with "free standing homes" may in fact be condominium projects. Such condominiums are referred to as "site built condos". Although the home may be built on what appears to be a "lot", in fact the home will be on "common area" having shared ownership by all the members of the condominium. These are designed to appear to be single family home neighborhoods to the unsuspecting purchaser.

Providing services is almost an equivocal statement. The amenities and "services" will vary from subdivision to subdivision. Be very wary of subdivision where you are forced to purchase "services" from vendors dictated by the developer or HOA board members. This happens frequently with economically unregulated services such as internet, cable, telephone, and propane among others. In these neighborhoods you will be forced to pay for such services at whatever price the vendor dictates. Keep in mind that you are not the intended beneficiary of the "master plan" in those "master planned communities".

Originally Posted by Bmachina

I see some HOA neighborhoods also offer community centers and amenities like tennis courts and pools, similar to condos, and some don't.

What are the differences, in general? Thanks!

The difference will be in ownership of the amenity and the amount of assessments. The HOA corporation (rather than the homeowners) will own such amenities. The assessments will be higher to pay for maintenance, repair, management, taxes, and capital improvements relating to those amenities. You will have a liability to pay for these things but you will not have any ownership interest in them at all. By "liability" I mean that you will have little control over the assessments and special assessments dictated by the board - and if you do not pay what the board, management company, and HOA attorney demand they will foreclose on your property.

In many states, these vendors try to entangle those assessment payments with vendor junk fees in an effort to extort money from you for benefit of the vendors, not the HOA. These vendors will use the HOA's power of foreclosure and a fee pyramiding scheme to extort money that will go directly to the vendors, not the HOA corporation. It's quite a racket in many states.

Do not get caught up with the appearance of the house. You can't see the legal entanglement and if you could you might want to work hard at finding non-HOA housing. Non-HOA housing is getting harder to find since virtually all new housing in the last 20-30 years has been forced to be HOA or other involuntary membership burdened housing by various governmental policies.

[almost3am]

I have been in a condo association, new built neighborhood HOA and now we have a cheap voluntary "HOA" in our hood...$25 a year. It covers maintenance of the three signs in and out of our hood (minimal) and the rest of the cash goes to social events...block parties, egg hunts, deck crawls. I view my current HOA as a really cool social club to meet neighbors.

I sat on the board of my condo association and the people were great and we did some good stuff for our buildings. There were those that didn't want to have anything to do with us , which was fine, but I feel it is good to be engaged to know the board. It helps you have some level of control and knowledge.

The 2nd place (the new HOA) was more restrictive, which I didn't love, but I stayed in contact with the board and things went fine.

[MikeJaquish]

Originally Posted by Bmachina

Ok, thanks so much.

The HOA I am looking at charges almost 1 k per year, which seems really high. That is why I was wondering if some free-standing home HOAs also provide lawn care, like condos.

I know a few around where I live now do provide neighborhood security patrols.

Sounds like there are a fair amount of amenities.
Pool, Tennis, tot lots, trails, green space, clubhouse?

Some detached home neighborhoods include lawn maintenance in their dues. Some limit it to front yards.

[L0ve]

Thank you all for the info. Ic_Dlight, that was very detailed, thanks!

Mike, I see you are in Cary, The Renaissance development just south of Raleigh is what I have been looking at. Not sure if you are familiar with that at all.