Buying a home could mean dealing with a homeowners’ association. HOA’s manage, maintain, and regulate everything that is outside of the home — Such as the structure of the building, the lobby areas, the landscaping, and the communal pool.
The Homeowners pay for these services in the form of monthly HOA fees. Payment and membership of the HOA is usually mandatory for as long as you own a home in the subdivision. But unlike the membership of other community organizations, you can’t resign if you’re unhappy with the way the organization is run.
This begs the question, how can you tell if the HOA is doing a good job? If your HOA displays these seven characteristics, it probably makes the grade…
1) CLEAR GOALS AND VISION
Some HOA leaders believe that their only job is to maintain the community facilities. And for some communities, this may be an adequate goal. However, some homeowners look to the HOA to enhance the value of their homes, and therefore want clearer, more aspirational goals — which could really make a difference in the value and visual appeal of the community.
So ask the HOA board a few pertinent questions:
- Do they think the community facilities should be limited to what already exists, or are they making a conscious effort to improve and upgrade them?
- Do they hold homeowners to high standards regarding the use and appearance of their private property, or do they let violations pass?
If you’re a homebuyer, buying into a community whose HOA matches your own ideals and aspirations will save a lot of headaches down the road.
2) CLEAR HOUSE RULES
The Covenants, Conditions, and Restrictions (CC&R’s) set out everything a homeowner can and cannot do within that community. Unfortunately, CC&R’s are useless if the HOA board interprets the rules loosely or enforces them in a haphazard way.
The key document to ask for here is the house rules. House rules are very specific rules that determine how board discussions are handled and motions are brought to the floor. Various proprietary rules are available; the House and Senate, for example, use Robert’s Rules of Order to guide parliamentary procedure. Many HOA boards follow the same rules at their own meetings.
The best boards run structured, business-like meetings that give transparency to every decision the board makes. If the board has and uses House rules, there’s a fairly good chance that the CC&R will be applied objectively and fairly throughout the community.
3) GOOD PROCEDURES FOR SAFEGUARDING MONEY
Homeowners’ associations are at high risk when it comes to losing their money. There are two reasons for this:
- HOA’s are volunteer organizations that may not receive financial training, and
- HOA’s usually have large sums of money in their bank accounts
The best HOA’s put checks and balances in place to safeguard against the risk of financial mismanagement. They employ a second set of eyes – someone not on the board – to collect the dues, pay the bills, and review checks and invoices to make sure the HOAs financial affairs are in good order. Often the second pair of eyes is a professional property manager.
4) FUNDS SET ASIDE FOR A RAINY DAY
Nothing creates greater conflict in a community than a large special assessment. Who wants to be hit with an unexpected bill for several thousand dollars because the clubhouse roof has fallen in? A well-run HOA commissions ongoing reserve studies to identify how much money is needed to meet repair and replacement costs over the long-term. A sufficient amount should be set aside from periodic dues to meet these repair costs when they arise. Ask to see the reserve studies and read the HOA’s financial statements. By comparing the reserve fund with the amount recommended in the reserve study, you can tell whether the HOA has enough money set aside for major repairs.
5) HOMEOWNERS CAN CHALLENGE POLICY
HOAs are responsible for drafting the CC&R document and the various policies that govern the community. If those policies are draconian, homeowners may be in for a rough ride. Some states obligate HOA boards to provide alternative dispute resolution hearings for homeowners who don’t agree with an HOA policy; others don’t. Irrespective of where you live, check that the HOA has a forum for hearing homeowner complaints and a history of acting on the wishes of the majority of homeowners. The HOA’s governing documents should also allow for the removal of a renegade board member, usually by board or community vote.
6) GOOD COMMUNICATION
This is your community and you have every right to know what’s going on in it. Do your research. Figure out how the HOA board communicates with homeowners. The options are numerous and include newsletters, websites, annual reports and e-mails. Check for flyers advertising community meetings. If homeowners are invited to attend committee meetings, it’s a good sign that their input is heard and valued.
7) THE COMMUNITY LOOKS GOOD
If the community looks good, it usually means that something positive has impacted the community. Of course, the opposite is also true. If you’re thinking about buying into a community, take an objective look at its appearance. Is the structure of the building in good repair? Are the trees pruned, the beds weeded and the landscaping well maintained? Is the pool clean? Are any of the homes in the community eyesores? Your answers to these questions reflect on whether the HOA is performing its duties properly and requiring homeowners to do the same. The proof, as they say, is in the pudding.