Homeowner Association Guide: Pros and Cons of HOAs

A homeowner association (often abbreviated to HOA) is a community association that manages a specific neighborhood, helping to form local regulations and allocate funds to maintain shared spaces. In communities with HOAs, homeowners automatically become members of the association when buying local property and must pay monthly or yearly dues. The HOA’s elected [board of directors](https://www.masterclass.com/articles/board-of-directors-explained) uses these funds to make neighborhood improvements and maintain shared facilities. Many types of residential communities can have HOAs, including single-family home developments, planned communities, [townhouse](https://www.masterclass.com/articles/what-is-a-townhouse-explained) subdivisions, and condominium complexes (though these are sometimes called condo associations). Homeowners’ associations are different from property owners associations (POAs), which may include anyone with an interest in the community’s property and isn’t only limited to homeowners. A homeowner association is responsible for a few basic tasks: - __Listening to homeowners__: Homeowners’ associations must listen to everyone in the community to serve the neighborhood’s common interests, often through letters, HOA meetings, or local polls. - __Forming rules__: The main tools that HOAs have at their disposal are CC&Rs (short for covenants, conditions, and restrictions), which they can create and enforce to keep the community following particular standards of home design, curb upkeep, and conduct. - __Collecting and allocating funds__: HOAs collect dues from community members, which they then use to fund community projects. HOAs can either source vendors or operate through an HOA property management company, which will offer HOA management services to help them coordinate vendors for construction or upkeep. A homeowners’ association can have many potential benefits: - __May increase the value of homes__. The foremost advantage of homeowners’ association rules is that they can secure favorable property values of homes in the neighborhood in many ways, especially by specifying and enforcing home design and maintenance rules. In addition, HOA rules help maintain the curb appeal of all homes in the neighborhood. - __Can provide community amenities__. HOA communities collect regular dues from all homeowners in the neighborhood, which they can use to improve the community in several ways. For example, these fees can help with building or maintaining common areas (such as clubhouses, swimming pools, or tennis courts), coordinating local cleanup or landscaping, or paying for snow removal. - __Can help resolve disputes__. When disputes arise between neighbors—for instance, parking or cleanup disputes—the HOA management can step in to listen to the issue and design a new regulation to help resolve the conflict and prevent future incidents. A homeowners’ association can have a few potential disadvantages: - __Can create excess restrictions__. Ideally, HOAs design their CC&Rs according to the common interests of the homeowners. However, every HOA is free to make rules according to their preference, meaning certain HOAs may develop rules that homeowners may find particularly restrictive—from limiting paint colors to requiring a particular lawn-mowing schedule. In areas with strict HOAs, homeowners can feel stifled by narrow design parameters or stringent upkeep policies. - __Monthly or annual fees__. HOAs collect yearly or monthly HOA fees to fund their community projects and build up a reserve fund. These HOA fees usually range from $200 to $500 per month. In addition, HOAs are free to schedule what are called “special assessments,” or extra fees to pay for larger projects that the HOA’s reserve fund won’t cover. Depending on state laws, some HOAs have the power to foreclose and can place a lien on a homeowner’s property if they don’t pay their dues. (When [buying a home](https://www.masterclass.com/articles/questions-to-ask-when-buying-a-house), you can ask to see the HOA’s [financial statements](https://www.masterclass.com/articles/financial-statements-guide) to see their history of fees, so you know what to expect.) - __Can have more power than homeowners__. Homebuyers are automatically required to agree to the HOA’s governing documents and bylaws and abide by the HOA’s rules. Therefore, if homeowners disagree with certain rules, they have few avenues to dispute the HOA board members. However, in severe cases, they may run for a position on the board or pursue a legal route to make a change. - __Often ignores renters__. While some HOAs may allow renters to participate in HOA meetings or use community amenities, others do not consider renters to be a part of the association because they are not homeowners. Thus, renters must appeal to property managers or owners to voice their opinions. All you need is a [MasterClass Annual Membership](https://www.masterclass.com) and our exclusive video lessons from prolific entrepreneur Robert Reffkin, the founder and CEO of the real estate technology company Compass. With Robert’s help, you’ll learn all about the intricacies of buying a home, from securing a mortgage to hiring an agent to tips for putting your own place on the market. Homeowners’ associations are volunteer organizations within a community that can have a significant impact on local homeowners.