The Good News
It is very common for purchasers of single family homes or condominiums to also become mandatory members of a homeowners’ association. For the most part this membership confers a number of benefits. Examples:
-- For a condo association, the homeowner’s association (HOA) takes care of the exterior of the buildings, the landscaping obligations (including mowing and watering the lawn area) and the maintenance of roads and trails.
-- For single family detached homes, the HOA will maintain park areas, which can include expansive lawn and forested areas. The HOA will also maintain the street lighting which keeps the area safe at night.
Members of HOAs for both condominium and single family home associations pay monthly or annual dues for these services.
The Not So Good News
The following are some of the things that can go wrong:
-- HOA dues, especially for condominiums, can dramatically increase over the years. This increase can be especially troubling because prospective home purchasers calculate their budget based on their estimated mortgage payment and HOA dues. If the HOA dues increase rapidly, some homeowners may face foreclosure because they can no longer pay both their mortgage and HOA dues.
-- Members of the governing body of the HOA are often perceived as favoring some homeowners over other homeowners. Disputes and even neighborhood feuds may ensue, fracturing the peace of the community.
-- The governing body of condominium HOA should also budget a sinking fund, included in the HOA dues, to pay for the eventual need to replace roofs, siding, sidewalks and other big ticket items that must be paid for in the future. If inadequate funds are set aside for these projects, HOA members may eventually be subject to ‘special assessment,’ which are one time financial demands made upon homeowners in addition to their monthly dues. Special assessments can be in the range of tens of thousands of dollars.
The Potentially Very Bad News – An Example
In the State of Oregon hundreds of person purchased homes in an area ringing an attractive golf course. The homeowners say that the lots they bought were advertised as being in a golf course community. They interpreted the covenants, conditions and restrictions (CCR), recorded in 1992, as guaranteeing that a golf course would continue on the property.
But the owners of the golf course saw things differently. When they proposed to build another subdivision on the golf course, the homeowners filed in 2016 suit to stop the construction of over 300 new homes on the championship golf course. The case went to trial in 2017, and the homeowners lost. While the homeowners are appealing the court’s decision, the golf club owners have filed a counterclaim against them for $524,860 for attorney fees incurred in fighting the case in court.
Bottom line – Before purchasing a home or condominium with a HOA, make sure you do plenty of research on the financial stability of the HOA, and carefully examine the CCRs to determine what rights and responsibilities you have with respect to the properties and amenities surrounding the homes.